New York insurance regulators have issued a ruling that could affect life settlements involving conversions of term life insurance policies.
In the ruling, officials at the New York State Insurance Department Office of General Counsel look at a case involving a term life insurance policy that gave the insured the right to convert to a permanent life insurance policy.
New York state has a law that discourages consumers from buying life insurance policies solely to sell them through the life settlement market by restricting life settlement transactions during the first 2 years that a policy is in effect.
The woman who owned the policy converted it, then set about selling the permanent life policy to a life settlement provider.
The life insurer that issued the policy, John Hancock Life Insurance Company, Boston, tried to block the transaction. The insurer said that the converted policy would be a “new policy” for life settlement purposes and that insurable interest requirements would apply, officials say in the New York department opinion.
An insurer “may not deny [the consumer's] request to convert her convertible term policy on the basis that she intends to settle the converted policy,” officials say in the opinion.
An insurer may not deny a conversion request to block a life settlement transaction