State By State Regulation: What Does it Mean for Life Settlements?
The news out of New York is no great surprise. The State legislature has passed a law that now regulates the billion-dollar life settlements market. The bill Governor David Paterson signed on November 25, puts regulatory control over the life settlements industry in areas such as patient privacy and medical and financial records protection.
The legislation provides the framework necessary for numerous disclosure provisions, consumer protection, and an added layer of protection for consumers that requires sellers to sign release forms for medical and personal records.
One thing the new law does that both sides of the life settlements debate will applaud is it protects consumers from the practice of stranger-owned life insurance deals, or STOLIs, making it illegal for anyone to sell a policy to a policy holder for the sole purpose of reselling that policy on the life settlements market.
The life settlements industry, for the most part, has worked with New York State Insurance Department to help craft the bill, says a news release from Life Insurance Settlements Association (LISA). In that release, LISA states: “LISA applauds the bill sponsors and the New York State Insurance Department for working with LISA and its members in crafting this legislation.”
But the association has a few issues with the legislation. In particular, a provision in the new law outlines life settlement fraud as a misdemeanor, which carries a penalty of up to one year in prison if convicted. That same act of fraud in the traditional life insurance market carries no such penalty, causing groups such as the Life Insurance Settlement Association to cry foul.
Says the LISA release: “While this bill is a good start to regulating life settlements in New York, there are several provisions which concern LISA and its members, and LISA will continue to work for reforms which will serve the consumers of New York. Of greatest importance is that New York consumers be educated and notified about all of their rights under their life insurance policy, in a timely manner, including the option of a life settlement, whenever they are facing a lapse or surrender of that policy.”
In general, the new law is a level of protection that can improve life settlements business and consumer confidence. Since the life settlements industry for 90 percent of the population is regulated under what is most likely the NCOIL regulatory model, consumers can approach a life settlements arrangement with more certainty. Insurance agents and brokers are required to inform their clients of life settlements options, which could result in a better payout to policy holders. According to LISA figures, policy holders have collected an average 300-500 percent more from a life settlement deal than what would have been received through a policy surrender option.
If you are considering a life settlements arrangement, contact Opulen Capital’s life settlement specialists. Not everyone qualifies for a life settlement, and our team of experts can help you determine if a life settlements agreement will work for your situation. Call us at 1-877-678-5361.
