Life Settlement Industry Opposes Tennessee Rule Proposal

Settlement Industry Opposes Tennessee Rule Proposal, ACLI Supports itPosted November 11, 2010 9:29AM PST

Reported by The Life Settlement Wire
A life settlement industry representative testified yesterday in opposition to rules regulating life settlement transactions proposed by the Tennessee Department of Commerce and Insurance.
A key point of contention is a recommendation to enact a five-year waiting period before new policies can be sold, which the settlement industry contends exceeds the scope of a state law passed last year.
Michael Freedman, senior vice president for government affairs for provider Coventry First, spoke in opposition to the rules, representing the Life Insurance Settlement Association, Life Settlement Institute and Institutional Life Markets Association.
The trade groups say that the amendments exceed the department's authority in several areas, including the advertising and stranger-originated life insurance definitions, the examination of providers and brokers language, the provider and broker reporting requirements and restrictions on settlements within five years of policy issuance.
Michael Lovendusky, vice president of the American Council of Life Insurers, representing major carriers, spoke in support of the five-year waiting period.
"The moratorium, which is based on the NAIC model, targets policies that have the characteristics of STOLI. It does not affect policy owners who (a) purchased life insurance with their own funds or (b) need to settle their policies because of significant changes in their lives, such as health, divorce or the death of the intended beneficiary," said Steven Brostoff, a spokesman for ACLI, in an email.
ACLI believes the proposal fits within the parameters of the law, Brostoff said.
Christopher Garrett, an insurance department spokesman, said in an email that the department has the authority to make rules to clarify a law within its purview.
"The amendments aim to require use of the National Association of Insurance Commissioners' uniform reporting forms for viatical settlement producers and brokers; to provide a uniform brochure for consumer education; and to strengthen regulatory tools aimed at protecting consumers in Tennessee from the practice of Stranger Originated Life Insurance," he said.
The department is giving the public two more weeks to comment and then will file the proposed rules with the Secretary of State's Office, Garrett said.

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