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Life Insurers Say Life Settlements Help Consumers
NEW YORK, NY, May 5 / MARKET WIRE/
Concurrent with the start of the Life Insurance Settlement
Association's (LISA) 12th bi-annual spring meeting, which
concluded today in New York, the National Association of Insurance
Commissioners (NAIC) on Wednesday held a public hearing, "Premium
Financing of Life Insurance, Life Settlements, and the Relationship
with State Insurable Interest Laws."
The purpose was to receive testimony regarding potential
insurable interest issues in some premium finance programs,
and to explore the connection, if any, between premium-financed
policies and the mainstream life settlement industry.
A life settlement is the sale to a third party of an existing
life insurance policy for more than its cash surrender value
but less than its net death benefit. Such transactions are
usually undertaken for the purposes of estate- or financial
planning.
Concern was expressed by some in the life insurance and life
settlement industries that life policies financed by certain
poorly-structured "non-recourse" premium finance
programs may violate traditional insurable interest requirements.
In his testimony before the NAIC Life Insurance and Annuities
(A) Committee, LISA Board President M. Bryan Freeman, also
president of Habersham Funding, a life settlement provider
company, reiterated the association's, "unequivocal support
for the long-standing concept of insurable interest and the
requirement that a policyholder have an insurable interest
in the insured's life at the time a policy is issued."
"Insurable interest protects insureds, policy owners,
beneficiaries, life insurance companies, life insurance settlement
companies and provides integrity to life insurance products,"
Freeman says. "Questionable premium finance programs
have no direct connection to the legitimate mainstream life
settlement market."
The Life (A) Committee also received testimony from the heads
of several of the largest insurance carriers in the United
States, and by distinguished figures including former Governor
Frank Keating, now the President and CEO of the American Council
of Life Insurers (ACLI), an organization representing 377
members and over 90 percent of the life insurance currently
in force in the United States.
Explaining ACLI's concerns about premium finance programs
that do not respect the traditional concept of insurable interest,
Governor Keating says, "We have no quarrel with traditional,
legitimate viatical settlements or life settlements. We understand
that policyholders who face extraordinary medical expenses
or whose financial protection needs have changed may, after
considering the ramifications, decide to sell their policies
in the secondary market."
"It
is gratifying to hear the President and CEO of the ACLI, as
well as the presidents and CEOs of some of the largest U.S.
insurers express their support for life settlements as a tool
to assist consumers with their financial needs," says
LISA Executive Director Doug Head, noting that comparable
statements in support of life settlements as a legitimate
planning tool were made by the heads of John Hancock, AXA
Equitable and New York Life.
Adding to the wave of support for the life settlement industry,
Greg Serio, former Superintendent of Insurance for the State
of New York, spoke to the LISA membership on Thursday, noting
that life settlements are the next proper evolutionary phase
of the life insurance market, and that life settlements are
good for the public.
Freeman concurred, saying, "Life settlements have been
recognized by virtually every legislative and regulatory body
in the United States, by the NAIC, by the National Council
of Insurance Legislators and, recently, by the Financial Accounting
Standards Board, as creating more value for life insurance
consumers than is available from the insurance carriers themselves.
It would be a serious mistake and harmful to consumers if
regulators chose to limit a life insurance policyholders'
financial options."
Founded in 1995, the Life Insurance Settlement Association
is the oldest and largest trade organization in the industry.
Its goal is to promote the development, integrity and reputation
of the life settlement industry, and to promote a competitive
market for the people it serves. LISA now represents 108 members
with a wide variety of interests in the industry.
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