Settlement Expert Proposes Consumer Safeguards

MIAMI–A life settlement broker talked here at the Life Settlement Summit about several consumer-focused reforms the industry might consider.

Cynthia Poveda, vice president of Crump Secondary Markets, noted that states regulating life settlements could encompass about 90% of the U.S. population by the end of this year. Typical state requirements for settlements include disclosures to sellers of compensation paid and bids received, provisions assuring sellers’ rights to rescind agreements within a specific time and bans on stranger-originated life insurance.

Much of the regulation seen is well-intended but can have unintended consequences, said Poveda, whose company is a unit of Crump Life Insurance Services, Cleveland. For instance, legitimate policies that had been premium financed could be seen as STOLI under some states’ definition of that term, she observed.

“Lost in all that is the consumer,” she said, arguing that state laws can impose excessive limitations on consumers’ right to dispose of their property as they wish.

Life settlements “may not be right for everyone,” she said. “But people should have a choice.”

Consumers do need protection of their confidential medical information, she said. She warned that this can be jeopardized in the bid solicitation process. As information on applicants for a settlement is distributed, brokers must take care to use secure, preferably encrypted case files.

Who constitutes an eligible buyer is another area needing attention, Poveda said. “Who are they?” she asked. “What are they doing with the information? You need to deal with licensed brokers.”

Poveda also maintained that there are too many intermediaries in the market, between agents, brokers, providers and funders. Some brokers find they are dealing with a funder who won’t even disclose who his client is, she noted.