Viatical Settlement Working Group dies a quiet death in Atlanta
By National Underwriter
By Elizabeth Festa
The NAIC’s Executive Committee terminated the NAIC’s "Viatical Settlement Working Group"(VSWG) at its Summer National Meeting in Atlanta last weekend and removed the charge of the group.
The VSWG was under the umbrella of the NAIC’s Life and Annuities (A) Committee. The Chair of the A Committee, Julie Mix McPeak, said there were lot of issues that the A Committee is working on and had expressed concern about having the time and resources to forge ahead with the working group.
This suits the life settlement industry just fine.
In its time, the VSWG did not have any conference calls or meetings, nor did it communicate with regulators or interested parties for four months. Some argue there is no need for the group to exist any longer except as a springboard from which to criticize the viatical industry, which started as a way to provide AIDS sufferers with life settlements they could use while still alive, taken as a portion of their life insurance policies. The settlement process had created a shadow industry of illegal transactions.
On August 1, with less than two weeks to go before the national NAIC meeting held last weekend in Atlanta, the VSWG send out a memo which was to be the basis of the VSWG meeting scheduled for August 11. This meeting reportedly lasted an hour with the chair of the committee and no action was taken, once again. The VSWG solicited interested parties to submit additional comments, said one of those parties.
Over the course of 20-plus months, there were two brief meetings of the VSWG, three solicitations for comments and no actions taken.
Some support those decisions while others in the life industry had expressed concern about market conduct problems that arose from the existence life settlements, such as the Stranger-Originated Life Insurance (STOLI) issue, as raised by American Council of Life Insurers.
Michael Lovendusky of the ACLI has repeatedly written or testified against the practice. “Senior citizens are purchasing life insurance policies for the sole purpose of selling the death benefits to investors who have no insurable interest in the seniors. The transactions are structured in a way to avoid insurable interest statutes and deceive insurance companies as to the true owners and beneficiaries of the policies,” Lovendusky wrote in an insurance law magazine in 2009, a point he continued to press before the NAIC this weekend. He believes that even existing insurable interest laws are insufficient to defend against STOLI, according to the article.
The NAIC passed the Viatical Settlements Model Act in 2007 and created protections against STOLI.
Of the 32 states that have already taken action on some sort of viaticals model law, none had adopted the straight NAIC model;most have gone with the National Conference of Insurance Legislators (NCOIL) model or a hybrid.
The NAIC model act strengthens consumer protections and introduced restrictions on STOLI.
The Life Insurance Settlement Association (LISA) had opposed the NAIC Model Act --as it said in July 2007 when it renewed its objections to the recent amendments to the NAIC model act, because of concerns the model act failed to address the problem of stranger originated life insurance (STOLI).
The LISA charge had raised concerns about the highly unorthodox process and closed-door tactics which were used to develop and adopt the amendments and has held firm that the model does not stop what the NAIC has already identified as the "improper manufacturing of life insurance.”
“It came as a surprise to those of us in the life settlement industry but we concur that the actions of the Ex Committee should focus on more important issues, issues that can benefit consumers and regulators and clearly there was a sentiment that this was not a high priority,” said Michael Freedman, vice chair of LISA’s external affairs committee and senior vice president, government affairs with life settlement company Coventry, Fort Washington, Penn.
Originally published on LifeHealthPro.com