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April 11, 2008 at 01:08 PM
Speakers here turned what was supposed to be a debate about life settlements into a debate about the meaning of the term “stranger-owned life insurance.”
The panelists appeared here during a session at a life insurance conference organized by LIMRA International, Windsor, Conn.; LOMA, Atlanta; the Society of Actuaries, Schaumburg, Ill.; and the American Counsel of Life Insurers, Washington.
Michael Lovendusky, an ACLI vice president, talked about the STOLI definition included in the Viatical Settlements Model Act developed by the National Association of Insurance Commissioners, Kansas City, Mo. One point he emphasized was the section that restricts life insurance policy owners’ ability to sell policies within 5 years after buying the policies.
“The NAIC definition doesn’t outlaw any transaction,” Lovendusky said. “It just makes you wait 5 years” before settling.
Douglas Head, executive vice president of the Life Insurance Settlement Association, Orlando, Fla., said LISA believes the NAIC definition casts too wide a net and may block legitimate settlement transactions. He also questioned the meaning of specific phrases and terms in the NAIC definition.
“We say we can harpoon the monster–identify what’s wrong–without hurting the consumer,” Head said.
Panelists also talked about the STOLI definition developed by the National Conference of Insurance Legislators, Troy, N.Y.
The NCOIL definition uses different language and restricts policy sales for 2 years after purchase.
“This definition is based on a 100-year-old insurable interest law,” Lovendusky said.
