Utah Regulators Weigh Five-Year Waiting Period for Settlements
Utah insurance regulators met last week with representatives of the life settlement and life insurance industries to discuss proposed revisions to the state’s viatical law. Utah officials have not yet decided whether they’ll support a five-year waiting period before new policies can be settled.
Not surprisingly, the proposed waiting period was the most controversial item discussed at the Oct. 17 meeting. The waiting period is supported by the National Association of Insurance Commissioners (NAIC) as a means to thwart stranger-originated life insurance (STOLI) policies. These are policies taken out by people who intend from the start to sell them, primarily to benefit investors who don’t have any relationship with the insured.
“There were a lot of hard feelings between the two industries and it was apparent it will probably remain that way for years to come,” said Brad Tibbitts, director of the life and property casualty divisions for the Utah Insurance Department.
Those attending included Michael Freedman, senior vice president of government affairs for Coventry First, a Fort Washington, Pa., provider; Doug Head, executive director of the Life Insurance Settlement Association; Michael Lovendusky, vice president and associate general counsel for the American Council of Life Insurers; Michael Sonntag, Utah lobbyist for the National Association of Insurance and Financial Advisors; and Brent Scott of Equitable Life and Casualty Insurance in Utah.
Tibbitts said his staff plans to meet in another week or so about the five-year waiting period.
“It’s one of those issues that if it’s going to drag our bill down to the point where they [legislators] throw it out, we’re not going to make a big issue of the five-year thing,” Tibbitts said.
An apparent STOLI scheme prompted about 50 calls to the Utah Insurance Department
earlier this year from Utah residents about offers of free insurance, Tibbitts said.
“We had a rush of phone calls in the spring and summer months on stranger-owned life
insurance,” Tibbitts said. “Some were pretty bad. ‘You sign up for this and we’ll give you $100,000.’ In essence you loan us your name and we’ll give you all this money.”
The state believes several producers were involved in the situation and their names were sent to the department’s market conduct section for review, Tibbitts said.
Other changes to Utah’s viatical law proposed by the state’s insurance department include an expansion of Utah’s rescission period from 15 to 30 days after the insured receives his or her proceeds, and a new financial responsibility requirement for providers, according to Betsy Jerome, senior life analyst for the insurance department. The department also intends to establish a new rule requiring providers to put up a $250,000 surety bond. They’re currently required to put up only a $50,000 bond.
Jerome said the department wants to ensure that death benefits go to the insured person’s beneficiary in cases where the rescission periods on policies are still in effect when the insured person dies. In one family trust case in the state, it took four to five months for a beneficiary to receive death benefits, after the insured died during the rescission period, Jerome said.
Source: Life Settlements WireÂ
