Statement: Life Insurance Finance Association Supports Adoption of Revised NCOIL Life Settlements Model Act

The Life Insurance Finance Association applauds the adopted amendments to The National Conference of Insurance Legislators (NCOIL) Life Settlements Model Act, which was adopted unanimously, reflecting the collaboration of all parties.

“This action was taken only after fully vetting all issues over more than 40 hours of meetings between all interested parties in concert with the NCOIL legislators and staff. The Model was crafted to meet the stated objectives of the legislators,” said Scott Cipinko, executive director, Life Insurance Finance Association (LIFA). “In addition, the adopted changes recognize how the life insurance industry and the secondary markets actually operate.”

Key changes to the NCOIL Model Act include language concerning the use of trusts in connection with the creation of Stranger Initiated Life Insurance (SILI). These changes differ from the National Association of Insurance Commissioners (NAIC) Model Act amendments in that they directly address the creation of these arrangements. In addition, the NAIC Model Act extended the time during which a policy owner is prohibited (with certain limited exceptions) from selling a life-insurance policy in the secondary market from two years to five years, which, according to consumer advocates, including the Center for Economic Justice and the Florida Consumer Action Network, impairs the property rights of consumers rather than actually addressing the creation of these arrangements. The NCOIL Model retains the two-year provision.

Cipinko added that this round of NCOIL amendment adoptions differs from the recent amendments to the NAIC Viatical Settlements Model Act, which was adopted over the objection or abstention of some NAIC member states.

“The adoption of the NCOIL Model Act shows that even if all parties do not agree with all portions of the final act, the process works, and the property rights of the consumers that the Model Act was aimed at protecting were considered. The NCOIL Model Act as adopted, unlike the NAIC Model Act, adequately considers those essential rights,” said Cipinko.
Consumer groups and a number of trade associations representing the life insurance and life-settlements markets collaborated with LIFA to represent the life insurance premium finance industry to fashion amendments to the Model Act.

LIFA believes that the adoption of the NCOIL Model Act by the states will protect consumer property rights. Furthermore, it will prevent abuses in the market referred to as SILI, which the changes were drafted to address. LIFA continues to support the efforts of state policymakers to eliminate such abusive transactions. While LIFA believes premium-finance lenders must be subject to reasonable regulation, it also advocates strongly for the protection of consumer rights.

LIFA will continue to support the rights of all consumers to purchase and sell life-insurance policies and will oppose the NAIC legislation in any state. LIFA also calls upon the state legislatures to adopt the NCOIL Model Act in order to protect consumers.

The Life Insurance Finance Association is a nonprofit, professional trade association and its members are comprised of individuals and companies involved in the life insurance premium finance industry. LIFA was founded to provide an open dialogue between and among life insurers, premium finance lenders, life insurance agents, brokers and insurance regulators, to provide consumer advocacy, and to foster a better understanding among participants in the life insurance and premium finance marketplace, state and federal policy makers, and the general public. For additional information, visit www.lifaorg.org