Tag Archives: Life Insurance Consumer Disclosure Model Act

LISA Testifies at NCOIL About Life Companies’ Improper and Illegal Conduct Against Life Settlements

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LISA President, Darwin Bayston, Director of Legislative & Regulatory Affairs, Michael Kreiter, and Coventry’s Michael Freedman together represented LISA and its members at the Fall Meeting of the National Conference of Insurance Legislators (NCOIL) last week in Point Clear, Alabama.  LISA was invited to speak to legislators from across the nation on the life insurers’ anti-consumer and anti-competitive conduct against life settlements.

LISA Testifies at NCOIL About Life Companies’ Improper and Illegal Conduct Against Life Settlements

LISA represented the market well by presenting legislators with specific facts that demonstrate how insurers are interfering with consumers’ access to information and assistance with life settlements and how some companies are impairing life settlement transactions, including violations of law.  LISA’s detailed presentation specifically addressed the following the anti-consumer activities by life insurers:

  • Failure of life companies to pay interest on death claims despite statutory and contractual obligations;
  • Unauthorized changes to ownership data by insurers;
  • Insurers asking illegal questions about life settlements on life insurance applications;
  • Threats to producers and gagging producers related to advising and assisting policyowners with life settlements, including term conversions;
  • Obstruction by insurers in obtaining verification of coverage and other information related to life settlements or life settled policies.

LISA’s presentation to NCOIL is available HERE.

Before LISA spoke, the American Council of Life Insurers (ACLI) submitted a letter on these issues and testified by summarizing that letter.  Neither the letter nor testimony addressed the specific issues raised by LISA, but rather deflected any criticism of the life companies’ conduct.  The letter accused the life settlement industry of not being willing to engage in discussions with the ACLI and asserted that the industry’s presentation of issues was merely an attempt to “discredit life insurers.”  In the ACLI’s testimony, however, they did reiterate an interest in coming together to address the issues in a manner that would recognize the responsibilities each has to its consumer and client constituents.  The ACLI’s letter to NCOIL is attached HERE.

LISA’s presentation was well received.  Several legislators, and at least one regulator in attendance, were very interested to know more about the problem of insurers not paying required interest due on death claims.  As many of you know, most of the largest life companies have paid out billions of dollars in penalties and claims in just the past few months to resolve allegations that carriers were selectively using the Social Security Administration’s Death Master File database to end benefits on annuitants but did not use it to find deceased policyholders or their beneficiaries.  There have also been recent efforts by regulators to investigate small and mid-sized companies for unpaid benefits.  The unpaid interest on death benefits could reopen the entire issue and could be worth billions of dollars to beneficiaries.

LISA leadership will once again reach out to the ACLI and its members to discuss these and other issues of mutual interest and concern.  There are significant benefits to the life insurance and life settlement industries working together towards an environment where consumers’ life insurance needs are met with trust and confidence, and includes an open, free and competitive market for them to exercise options available when policies no longer are needed, wanted or affordable.

While we do not particularly relish continued battles with the life industry, LISA will remain active, vocal and vigilant in protecting our market and the consumers we serve.  The state laws that we worked so hard to enact are there to protect consumers and our market and we will now seek to have those laws enforced against life insurers who violate them.

In addition to providing testimony such as we did at NCOIL, we will be providing regulators and legislators with more detailed information on several of the issues raised in the coming weeks.  Also LISA will be filing formal complaints with regulators against insurers – a course of action the ACLI specifically encouraged in their testimony – over such issues as unpaid interest, illegal questions on applications, interfering with term conversions and other illegal conduct by insurers.

We appreciate the continued support of our members.  Feel free to post your feedback, comments and ideas here.

Baby Boomers Will Drive the Life Settlement Industry Over the Next 15 Years!

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More than 10,000 baby boomers retire each DAY and will do so for the next 20 years. According to Pew Research, many will work past age 65 because of the lack of savings and investments.  Transamerica Retirement Studies reports that 54% workers in their 60’s do not have enough financial wealth to sustain themselves for the rest of their lives.  Further, the Employee Benefit Research Institute indicates that 60% of workers have less than $25,000 of savings and investments.

More than 10,000 baby boomers retire each DAY and will do so for the next 20 years.

For a great many baby boomers, their life insurance policy will be a safety net in retirement.  The dilemma is that most seniors are not aware that their life insurance policy may have a value BEFORE they die beyond the cash value indicated on the annual statement.  They assume if their policy is no longer needed or wanted, or that they cannot afford to continuing paying premiums, the only option is to lapse or surrender the policy back to the issuing life company.  However, there are options available to policyholders other than lapsing or surrendering the policy and we need to make every senior and baby boomer aware of those options.

LISA’s own, Daniel Harris wrote about these options in a LISA blog on Sept 6, 2012, while Wm. Scott Page of the Lifeline Program authored an excellent article describing consumers’ options  in Huff Post Money on October 5, 2012 (link at bottom).  One of the most important options is to sell the policy in the secondary market, otherwise known as a life settlement.  According to a 2010 Report by the U.S. Government Accountability Office, life insurance policies sold as a life settlement received on average seven (7) times more than the policy’s cash surrender value, based on data they analyzed.

Boomers have serious financial needs to live a reasonable lifestyle in retirement.  One of the most important assets they have may be their life insurance policy.  The life settlement industry exists for the purpose of providing a secondary market where unneeded and/or unwanted life policies may be liquefied for the policyholder.  As an association and industry, we need to focus significant efforts on educating consumers on the benefits of considering all the options available for their life insurance policies.

The Association’s 18th Annual Fall Conference will be held November 8-9, 2012 in Orlando.  A nationally-known speaker from Age Wave will address attendees about the aging population and we will hear from a well-known speaker about the implications and impact of the aging U.S. population of Baby Boomers.  Join us in Orlando.  Visit www.lisa.org  for more information on life settlements and LISA’s upcoming conference.

Wm Scott Page article link: http://www.huffingtonpost.com/wm-scott-page/the-life-insurance-indust_b_1937246.html

Consumer Disclosure Act: Call Me, Maybe?

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In November of 2010, the National Conference of Insurance Legislators (NCOIL) adopted its Life Insurance Consumer Life Insurance Settlement Disclosure Model Act (Act).  The Act requires life insurance companies to provide written notice to certain Insureds of alternatives to the lapse or surrender of their life insurance policies.  Those alternatives include the following: (1) accelerated death benefits under the policy, (2)the assignment of the policy, (3) the replacement of the policy, (4) the conversion of the policy from a term policy to a permanent policy, (5) the conversion of the policy to obtain a long-term care health  insurance coverage, (6) the maintenance of the policy through loans using the policy or its cash surrender value as collateral, (7) the maintenance of the policy through a life settlement contract and, finally, (8) the sale of the policy pursuant to a life settlement contract.

While awareness is growing about the benefits of the life settlement option, many consumers who are able to take advantage of the life settlement option still lack knowledge or are misinformed about the industry.

Consumers have a lot to gain as awareness expands.  Advisors are positive about the benefits of the life settlements option and have expressed a motivation to learn more.  As a result, The Life Insurance Settlement Association’s primary goal is to educate advisors and consumers of this highly attractive option.

According to a study conducted by the U.S. Government and Accountability Office in 2010, consumers who chose to sell their policies pursuant to a life settlement transaction received an average of 700 percent more than if that same consumer had sold the policy back to the insurer for the policy’s cash surrender value.  When one considers the value that consumers may possess of which they are unaware and shrinking retirement portfolios, there is no question that the time has arrived to ask questions and learn more about this option.

Legislation, such as the Act, that informs consumers of their rights in the property that they own, should be trumpeted by all consumer organizations and enacted into law in every state where life insurance policies are sold.  Now, more than ever, due to a volatile economy of the past few years, more awareness will bring so much relief to consumer when they need it the most.

Since NCOIL adopted its Act, only a handful of states have enacted the consumer-friendly legislation.  And even some of those states have missed the point of the Act.  For instance, the consumer disclosure law that was enacted in Oregon requires life insurance companies to inform certain consumers that there are options available without mandating that those same insurance companies detail the various options that are actually available to them.  We can and need to  do better!

It is estimated that over 85% of U.S. consumers are now protected by a life settlement law in his/her state.  In many of those states, the need for a life settlement law was drastically overstated and the law passed with fervor.  Now, it is time for those same states to mandate that life insurers inform their consumers of the various options to lapsing or surrendering, which, in many cases, is more profitable to the consumer.