by Peter N. Katz, JD, CLU, ChFC
Previously in this column, we discussed the difficult position that life insurance producers could find themselves in when their companies restrict them from assisting their clients with a life settlement. These insurance company practices could leave policy owners unaware of the option of a life settlement. We also reported that to help combat this problem, the National Conference of Insurance Legislators (NCOIL) has devised a model disclosure act. The act requires insurers to notify senior insureds, who are about to lapse or surrender a policy, that other options, including a life settlement, exist.
Despite vigorous opposition by the insurance industry, laws similar to the NCOIL Model Disclosure Act have already been passed in four states: Maine, Washington, Oregon, and Kentucky. And others are considering adopting such legislation.
The insurance industry, however, continues to pursue its anti-consumer agenda, not only in continuing to oppose the adoption of the model disclosure act, but also by attempting to render ineffective the laws that have already passed. Most recently, an amendment to the State of Washington law was proposed that would exempt term insurance policies from the disclosure.
Convertible term policies, however, represent some of the best prospects for life settlements and to exempt these policies would seriously hurt consumers. Term insurance is often bought for only a temporary need and when that need passes, the policy may no longer be wanted. Furthermore, it is the nature of term insurance that premiums ultimately increase with age and, as a result, many policies become unaffordable over time. A life settlement can benefit consumers by bringing a salvage value for these policies that would otherwise terminate without value.
Insurers, however, would much prefer to have policy owners stay unaware of this option. The insurers say that the notice requirement would be burdensome, but it’s just a form letter. The real reason is obvious – they would like to keep the life settlement industry from thriving and conceal from consumers the opportunity it provides them.
Anti-consumer Insurer behavior hurts all of us who want to do right for our clients. But sadly, and ultimately to the detriment of the insurance industry’s reputation, they would rather treat consumers like mushrooms and keep them in the dark.
After 5 years in private law practice, Peter N. Katz, JD, CLU, ChFC has spent over 30 years in the life insurance and financial services industry. Known for his Advanced Sales, Legal and Marketing expertise at Connecticut Mutual, Mass Mutual, Sun Life of Canada and Phoenix Life, Peter has also headed product development activities, financial planning support, illustration software development, COLI and nonqualified and qualified benefit planning. Peter has authored numerous articles on life insurance planning and life settlements and has been a speaker at many industry and insurance company meetings. He is a Director and Secretary-Treasurer of the Hartford Chapter of the Society of Financial Service Professionals and a former member of the LIMRA Advanced Sales committee. He currently works as a life settlement broker and as a consultant specializing in life insurance advanced sales illustrations. He can be reached at firstname.lastname@example.org or (860) 673-3642