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State Lawmakers Question Insurer Life Policy Buyout Offers

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What You Need to Know

  • NCOIL represents state lawmakers with an interest in insurance legislation.
  • The group recently held a summer national meeting in Jersey City, New Jersey.
  • One hot topic discussed finding ways to ease the life insurance agent licensing process.

Some U.S. life insurers have tried to shed life insurance policy guarantee risk by using temporary cash incentives to persuade the holders to surrender their policies.

A group for state insurance lawmakers said Saturday that state insurance regulators should try to block insurers’ efforts to make temporary life insurance policy buyout offers.

The National Council of Insurance Legislators adopted a resolution that classified life insurer moves to add temporary increases to life policies’ cash surrender value amounts as violations of the Standard Nonforfeiture Law for Life Insurance.

The law determines what longtime life insurance policyholders get when they give up, or surrender, their policies.

NCOIL made the move at a summer national meeting in Jersey City, New Jersey. The group put a copy of the resolution on page 181 of a meeting document packet.

What It Means

Life insurers may have been offering some of your clients extra cash now to give up access to future streams of guaranteed interest payments.

The NCOIL resolution could decrease the odds that your clients will ask for your help with evaluating those offers.

But the resolution could lead to an increase in the number of clients getting those offers, if some life insurers that had been considering making offers now rush to send out offers before the rules change.

The Players

NCOIL is a Belmar, New Jersey-based group for state legislators with an interest in insurance.

The list of groups representing insurers in connection with their authority to make the short-term cash surrender value enhancement offers includes the American Council of Life Insurers.

Karen Melchert, an ACLI representative, said during an online NCOIL committee meeting in June, that the ACLI believes any discussions of changes in rules for cash surrender value enhancements should start with the Life Actuarial Task Force at the National Association of Insurance Commissioners.

Life settlement companies and their trade group, the Life Insurance Settlement Association, have objected to the policy buyout offers. They see a life insurer’s temporary buyout offer as a kind of life settlement offer that, up until now, has existed outside the scope of the laws and regulations that apply to life settlement companies.

Other NCOIL Meeting Happenings

Also at the NCOIL meeting:

• Dean Cameron, the Idaho insurance director and president of the National Association of Insurance Commissioners, gave a luncheon keynote address at the meeting Friday. He asked state lawmakers to help state regulators defend federal encroachment on state insurance regulators’ turf and to, for example, help state regulators defend insurers’ ability to pay commissions to sellers of fixed annuities.

Representatives from two groups that have been archrivals, Finseca and the National Association of Insurance and Financial Advisors, joined with each other, and the American Council of Life Insurers, to ask for NCOIL backing for a resolution regarding recruit, retention and diversity in the life insurance agent profession.

The resolution, which starts on page 184 in the NCOIL summer meeting packet, calls for state lawmakers to work with state insurance regulators to ease barriers to the entry of new agents, such as in-person exam requirements and requirements that licensing exam candidates take certain types of classes. NCOIL adopted the resolution Saturday.

NCOIL members heard presentations from witnesses who support and oppose efforts to add biopsy gene sequencing benefits mandates to health insurance benefits requirements. State lawmakers noted that added state-level mandates are often ineffective because the employers that still have fully insured plans respond to state-level mandates by adopting self-insured health plans. The self-insured health plans are subject only to federal benefit mandates.

(Image: Diego M. Radzinschi/ALM)