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Feature: Ohio department shelves demand for detailed data on settlements

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The Ohio Department of Insurance has withdrawn its call for detailed information about life settlement deals completed by brokers doing business in the state.

The action was in response to complaints from a number of brokers that the demand for information about their completed deals, known as a data call, was onerous and overreached the DOI’s authority. Some settlement producers also argued that providing the requested information could subject them to lawsuits by clients for revealing confidential data.

“After due consideration, the industry has raised some issues that we believe we should consider,” the state DOI said in an e-mail to settlement brokers issued just days before the regulation was to go into effect March 1. “We will meet with industry representatives and discuss those issues and formulate a data call with the industry’s input.”

Brokers had protested that the data call, issued in January 2009, would have demanded a burdensome amount of information and even covered settlement deals completed outside of Ohio.

The Ohio DOI sent the form, a “self-audit data call” to settlement brokers in January, asking for more than 90 data elements about their completed settlement contracts, including the name and addresses of the insured, date of birth, whether chronically or terminally ill, and life expectancy, along with information about the original life policy, including the time elapsed between the purchase of the policy and its sale.

It also asked about the settlement provider, the source of life expectancy projections, the agent writing the original policy, investors in the settlement, and the company financing each deal.

A number of brokers at the recent Life Settlement Summit in Orlando, Fla., complained bitterly about Ohio’s demand, although some reported the state had given them a 30-day extension to comply before it announced its decision to withdraw the data call. Some participants at the conference, sponsored by National Underwriter, Cincinnati, Ohio, and its parent, Summit Business Media Inc., expressed fear they could lose their license in Ohio if they failed to meet the demand.

“You have to break a law to comply with the law,” said one speaker, Rob Haynie, managing director of Life Insurance Settlements Inc., Fort Lauderdale, Fla. He argued that complying with the state’s call for data could violate the Health Insurance Portability and Accountability Act, which prohibits the disclosure of confidential health information about customers.

Another speaker, Kathleen A. Birrane, general counsel for Maple Life Financial Inc., Bethesda, Md., noted that companies submitting the data also had to provide an affidavit attesting to its accuracy.

“There’s a lot of concern among providers” about the data call, Birrane said. “Not everyone’s clear on the terms used.”

Birrane said, however, she thought the state’s DOI had the right to ask for any information that it wanted, even for transactions completed outside the state. “Ohio can’t punish an act that was done in Texas, but it could say, ‘We don’t like the way you did business in Texas, so you can’t do business in Ohio,” she said.

Another attorney speaking at the conference, Boris Ziser, a partner of Strook & Strook & Lavan L.L.P., Miami, agreed the state could ask for what it thinks is appropriate to help it protect the state’s citizens. He faulted the state’s regulators, however, for not providing enough guidance to settlement brokers in completing the form.

He also wondered whether the state DOI could find another way to get the information it sought, in view of the possibility that answering some of the questions could put brokers in breach of their license in other states. “I think this is a disincentive to doing business in the state that could hurt Ohio consumers,” he said.

In a separate interview, Haynie of Life Insurance Settlements said, “It is in our best interest not to be put in position to be sued by clients whose private information could be given.”

He also expressed concern that information sent to the state might become available to groups that opposed life settlements. Opponents might then “twist it to their advantage” to help write laws not only in Ohio but also in other states that could limit the right of insureds to sell their policies, he argued.

Ohio’s call for settlement data was intended to gather information that would help protect consumers in Ohio, according to a spokeswoman for the state’s DOI. The demand was authorized under market-conduct provisions of chapter 3905 of the Ohio insurance law. Information supplied in response to the call would have been reviewed by the DOI’s market regulation division, the spokeswoman said.

Responding to Ohio’s suspension of its data call, Doug Head, executive director of the Life Insurance Settlement Association, Orlando, called the decision “correct.”

“There were a lot of issues raised by our members, a lot of concern that we didn’t even understand some of the questions,” Head said in an interview. For instance, he said, Ohio regulates the industry under the name viatical settlements, while some states regulate such deals under the name life settlements. “So how do you correctly report a transaction, and what do you do about confidential information? HIPAA is another issue in play. How do you properly comply and relay this information to Ohio about a resident of another state?”


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