There was extensive back and forth about the merits, or lack of them, of life settlements during Senate Committee on Aging hearings in Washington, D.C., on April 29, 2009.
Among comments heard:
o There’s a disturbing ambiguity in information from the industry about who earns what from settlement deals, and how much value individuals selling their policies actually get.
o The settlement industry is stifling state legislation that would provide effective regulation of the business.
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o The industry must be regulated at the federal level.
o State regulation is providing perfectly adequate oversight of the settlement business, with many adopting model regulations by the National Association of Insurance Commissioners and the National Conference of Insurance Regulators.
o The opposition of life insurance companies to life settlements ignores the needs of older policy holders.
o Tax rules over life settlement proceeds need clarification.
Michael McRaith, Director of Insurance, Illinois Department of Financial and Professional Regulation, questioned whether the compensation of the individual owning a policy is minimized to enhance the compensation of others involved in a life settlement.
“There’s no transparency about who’s getting paid what for a policy whose premiums may be paid by a policyholder for decades,” McRaith said.
Senator Herbert Kohl (D-Wisc.), chair of the committee, asked McRaith if effective state regulation was a long way off.
“All I see is nothing but a patchwork of state laws,” McRaith replied. “Bad actors in the business will drive a truck right through it.”