California Enacts Settlement Law

–Prohibits life insurance companies from acting to restrict agents from informing clients that life settlements are an alternative to surrendering or cashing in their policy.

–Allows individuals to cancel a settlement 30 days after signing the agreement or 15 days after receiving the proceeds, whichever is sooner.

A similar bill was advanced in the state legislature in 2008. Schwarzenegger vetoed that bill, saying it did not include the required right disclosures.

The law is based on model life settlement legislation developed by the National Conference of Insurance Legislators, Troy, N.Y., according to the Life Insurance Settlements Association, Orlando, Fla.

In a statement, LISA is calling the new California law “a major victory for American seniors seeking to avoid lapse or surrender of their current life insurance policies.”

“Senate Bill 98 provides a strong regulatory framework for the ever-growing life insurance settlement industry in California,” LISA says.

Coventry First L.L.C., Fort Washington, Pa., says S.B. 98 is “one of the strongest laws in the nation to regulate life settlements, ensuring that California’s life insurance policy owners are able to obtain the best value for life insurance policies that are likely to be lapsed or surrendered.”

“Legislation to curb STOLI transactions and establish new consumer protections has now been enacted in 26 states and is pending in 13 others,” John Mangan, a vice president at the American Council of Life Insurers, Washington, says in a statement. “We are grateful to the governor and the California Legislature for their efforts to protect seniors from these fraudulent investment schemes.”