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Life Health > Life Insurance

Why the New NCOIL Life Insurance Model Makes Sense

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Could it be that the very nature of the life settlement market is about to change? At the very least, a lot more consumers than ever before could soon become aware of the settlement option.

At the recent annual meeting of the National Conference of Insurance Legislators (NCOIL), members of the group approved the Life Insurance Consumer Disclosure Model Act, based on a 2010 Kentucky law and sponsored by Kentucky state Rep. Ron Crimm.

Essentially, the model deals with one of the biggest challenges insurance agents face when approaching the topic of life settlements: that they are prohibited, either by a carrier or a broker-dealer, from engaging in such a transaction with clients. And of agents who don’t expect to be involved in a life settlement transaction, 23 percent say it’s because they’re prohibited, according to the 2010 Agent Media Life Settlement Market Study.

The model would require that life insurance carriers notify clients of their options if they are having trouble paying their life insurance premium. In addition to such common alternatives as accelerated death benefits and conversion to long term care, selling the policy benefits to a life settlement company is among the eight options listed in the model. Policyholders would also receive warning that not all options may be available, and urges them to contact a financial advisor, insurance agent, broker, or attorney for more information.

Not only might this help producers combat the prohibition challenge, which admittedly has shrunk in recent years – it would also go a long way to promoting awareness of the settlement option. In the 2010 market study, 14 percent of agents said their biggest challenge was that clients didn’t know anything about life settlements.

The model isn’t without its opponents – the ACLI, for one, which calls it a “one-size-fits-all approach that may confuse consumers. They may not be giving consumers enough credit, however. Sure, it’s always in the policyholder’s best interest to check with a professional before making any moves, and the model urges people to do just that. But when all involved are aware of all the options, it can make for a more satisfied consumer, and a healthier industry.

What are your thoughts on the new NCOIL model? Will it help or hurt the life settlement industry – or have no affect at all? What about life insurance? And do you think, as the ACLI stated, that the model will only serve to confuse consumers?


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