A panel here at the summer meeting of the National Conference of Insurance Legislators rejected a proposed amendment to NCOIL's life settlements model act that could have added a 5-year prohibition on settling life policies.
Instead, the NCOIL subcommittee on life settlements voted to stay with a 2-year prohibition on settling a life contract unless certain conditions are met.
The action puts NCOIL, Troy, N.Y., in direct opposition to the National Association of Insurance Commissioners, Kansas City, Mo., which earlier this year adopted an amendment to a model act that incorporated a 5-year ban with conditions.
The amendments to both NAIC's and NCOIL's models have been taken up in an attempt to stop stranger-originated life insurance.
Kentucky state Rep. Robert Damron, D-Jessamine, Ky., led the charge for a 2-year ban with a letter to the subcommittee, of which he is a member.
Damron said NAIC's "expansive" 5-year ban is "decidedly anti-consumer," whereas the 2-year ban in the NCOIL model "is a principled waiting period tied to the statutory contestability period."
Damron attached to his letter a copy of what he has identified as an Oct. 29, 2006, memorandum from the American Council of Life Insurers, Washington. The memorandum, for the STOLI task force, relates a meeting with North Dakota Commissioner Jim Poolman in which Poolman allegedly defended a certain type of financing program and essentially laid down the law as to what the NAIC would do and what ACLI had to accept.
"According to this document, the ACLI complained in a special meeting with the then chair of the ACLI's Life Committee (Commissioner Jim Poolman, N.D.) that the NAIC Model Act amendments 'failed to address the fundamental concerns with STOLI' because they do not regulate the very scheme that was the impetus of the 2005 NAIC resolution," Damron writes in the letter. "The ACLI told Commissioner Poolman that, because the model act amendments did not stop 'finance programs permitting investor participation prior to or at issuance where the policy does not settle and the policy owner derives some modest percentage of the policy death benefit,' they were ineffective as an anti-STOLI measure.
"NCOIL should therefore adopt a model that addresses STOLI. These amendments should include a series of disclosures and affirmations which will impose greater transparency at the inception of the policy and will enable insurers to investigate and deny applications and applicants that clearly evidence STOLI, but just as clearly protect private property rights and the rights of policy owners to sell their policies to achieve the highest market value, as they see fit."
