Life Insurance Settlement Association Supports Disclosure in New Settlement Model Acts
NEW YORK, NY — (MARKET WIRE) — November 29, 2006 — The Life Insurance Settlement Association will meet in conference in New York from November 29 to December 1. This will be the twelfth consecutive year for this conference, and it will occur in New York City at the Crown Plaza Hotel in Times Square. As in previous years, LISA will continue to provide leadership for the industry and to confront the challenges of the day. Industry leaders have shown confidence in LISA by breaking registration records for the conference, which is fast approaching 500 attendees. The conference comes at a time when a number of national organizations are developing new models for life settlement law for the states with the active support and participation of LISA in deliberations on those models. The Life Insurance Settlement Association is strongly committed to the progress of our industry and the Association has, as its mission, the promotion of the development, integrity and reputation of the life settlement industry and to promote a competitive market for the people it serves.
In this context, LISA has long supported the development of appropriate laws and
regulations to ensure that consumers are protected and that the benefits flowing to
consumers are realized by the development of our industry.
Since 1996, the Life Settlement Association has supported laws that constituted the
regulatory framework of the industry. Examples include the seminal law in the State of Florida, which calls for the disclosure of the method and amount of compensation to be paid to brokers in the settlement industry. Such laws were introduced in many states, most recently in 2005, but unfortunately they did not pass. LISA seeks to work with all participants to develop productive and appropriate regulation for the industry which will benefit consumers.
The law of every state as adopted since 2000 has contained language supported by LISA as follows: “Notwithstanding the manner in which the life settlement broker is compensated, a life settlement broker is deemed to represent only the seller, and owes a fiduciary duty to the seller to act according to the seller’s instructions and in the best interest of the seller.” LISA has supported that language for over a decade.
In 2004, following this support, LISA adopted standards which, among other consumer
protections, focused on consumer disclosure including a copy of the disclosures that
are required by applicable state or administrative law and, if state law does not require disclosures, a copy of the LISA Broker Member disclosures, signed by the Owner.
Pursuing its position of support for appropriate regulation, LISA has further developed our approach by supporting the development of a new Model Act in the NAIC. This Model calls for the previous disclosures to be made to policy sellers with more clarity. For example, it clarifies, that Commissioners can act to revoke licenses of Brokers for acts of bad faith with even one seller. And Brokers must separately disclose, and sellers must affirm in writing, that the broker represents only the seller, and not the insurer or the life settlement provider. This disclosure also requires of Brokers a Fiduciary Duty to the seller, including a duty to act according to the seller’s instructions and in the best interest of the seller. In a manner unusual for any financial services industry, recision rights of the sellers are sustained for thirty days after agreement to the contract. Disclosure to a sellers also includes distribution of a brochure describing the process of life settlements and calls for the NAIC devised form for the brochure to be used unless
one another form is developed or approved by the commissioner in a State. Most importantly, the revised model supported by LISA requires the contracting documents to include disclosures that a licensed life settlement broker, or other individual acting as a broker under the licensing terms of state law, shall disclose to a prospective seller:
(a) a full, complete and accurate description of all offers, counter-offers, acceptances and rejections relating to the proposed life settlement contract;
(b) a written disclosure of any affiliations or contractual arrangements between the life settlement broker and any person making an offer in connection with the proposed life settlement contract; and
(c) the amount and method of calculating the broker’s compensation, which term “compensation” includes anything of value paid or given to a life settlement broker for the placement of a policy.
LISA Supports all of these proposals as it has other proposals for constructive regulation of this emerging industry which has brought so much value to consumers.
LISA urges that all participants in the market comply with these proposals in advance of the adoption of any regulation in any state.
