A group of state lawmakers is proposing imposing a requirement on life insurers to tell policy owners that life settlements are an alternative to surrendering their policies.
The Life Insurance and Financial Planning Committee of the National Conference of Insurance Legislators (NCOIL), Troy, N.Y., is drafting model state legislation to require life insurers to list life settlements as one of the options policy owners have when considering cashing in or lapsing their policies
Georgia state Sen. Ralph Hudgens (R.), the committee chair, says he has asked another committee member, Kentucky state Rep. Ronald Crimm (R.), to draft the model bill.
Kentucky is among one of the states that have legislation requiring insurers to tell consumers about all their options when considering cashing in or terminating a life policy. States with similar requirements include California, New Hampshire, Maine, Florida and Washington.
Several other states have similar legislation in some stage of development, Crimm says.
The model bill would require life insurers at the time a policy is sold to advise insureds about all of the alternatives that would be available to them if they ever decided to give up their policies, Hudgens and Crimm say.
Hudgens, who incidentally is running for election as Georgia’s Commissioner of Insurance, says he expects the model to be introduced during NCOIL’s annual meeting in Austin, Texas, in November.
Many older life policyholders are unaware of the life settlement market, according to a recent study by the Insurance Studies Institute, Keystone, Colo.
There are other options to owners who are having problems meeting their premium payments, Crimm points out. Aside from selling their policy to investors, they can also borrow money to pay the premiums or opt to cash in their policies, he points out.
Settlements are “a recognized option and should be included in the policy language, because it is legitimate,” he says. “We’ll see if the rest of the committee agrees with me. I would be surprised if they don’t.”
Crimm, who once owned his own insurance agency in Louisville, says he has never sold a settlement. But he says he became riled when one insurer, whom he declines to identify, told its agents in Kentucky some years ago that they could not participate in a settlement transaction.