NCOIL Life Insurance and Financial Planning Committee Reviews Life Insurance Consumer Disclosure Model Act

Chaired by Georgia Senator Ralph Hudgens, the National Conference of Insurance Legislators (“NCOIL”) Life Insurance and Financial Planning Committee (“Committee”) held a teleconference on September 13, 2010 to discuss a proposed Model Act that would require life insurers to disclose the availability of life settlement options to policyholders, along with other alternatives to lapsing or surrendering life insurance policies. 

Sponsored by U.S. Representative Ron Crimm (R-KY) and entitled “The Life Insurance Consumer Disclosure Model Act (‘Model Act’),” the proposed legislation would require insureds who are 60 years of age or older, or who are known by insurers to be chronically or terminally ill, to be told about life settlements or other options if they are planning to request an accelerated death benefit.

The meeting agenda is attached, along with a markup of the Model Act that includes interested party comments.   As part of the agenda, representatives of the following organizations provided related testimony: 

• The American Council of Life Insurers (“ACLI”) opposes the Model Act, because it would require insurers to notify consumers about competitors.  In addition, it would increase insurers’ cost of doing business.
• The Connecticut Department of Insurance (“CDI”) is concerned that the Model Act is overly prescriptive, inasmuch as it would usurp the roles of life insurance producers and financial planners.  Notwithstanding, laws prohibiting deceptive and unfair trade practices already are in effect to prevent misleading communications to insureds.
• MetLife supported the positions of the ACLI and the CDI and suggested that state insurance departments should circulate notices and brochures to policyholders about the availability of various life settlement options.  For example, California’s current approach to life settlements requires a one-time notice to an insured that informs him or her of the opportunity to talk with a life insurance producer or financial planner about life settlement options.
• The Institutional Life Markets Association (“ILMA”) underscored its support of the Model Act, noting that similar laws are already effective in Kentucky and several other states.
• The Life Insurance Settlement Association supports the Model Act because it would notify policyholders of their options.
• The Life Settlement Institute also supports the Model Act, which it described as “pro-consumer” and beneficial to policyholders who are unaware of the availability of alternative life settlement options.

The Committee reviewed each section of the Model Act, after which a motion was approved to extend its provisions for required notice to situations in which a loan is sought under a policy. 

Since the Committee did not pass the Model Act, it will either discuss it further via teleconference or at NCOIL’s 2010 Annual Meeting (November 18-21). 

To view various interested party comments on the Model Act, click on the hyperlinks below:

• ACLI
• CDI
• ILMA
• Life Care Funding Group
• Life Insurance Settlement Association
• Life Settlements Institute
• MetLife

Concurrently, the Committee also is considering life insurance-related model legislation known as the “Beneficiaries’ Bill of Rights“ that would require complete and proper disclosure, transparency and accountability relating to retained asset accounts for life insurance death benefits.  It also would provide for beneficiaries to be fully informed of their settlement options.

Should you have any questions or comments please contact Colodny Fass.

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