Insurance settlement trade group hails Maine’s disclosure law

The Life Insurance Settlement Association today applauded new legislation in Maine which requires that insurance customers be apprised of their rights to sell their policies on the secondary market. The Maine Public Law, which Gov. John Baldacci signed June 12, requires the state’s insurance superintendent, Mila Kofman, to develop an informational brochure in lay terms, and provide it to carriers and producers free of charge. The brochure will inform customers that insurance coverage is part of a larger financial plan, and that there are other alternatives to allowing the policy to lapse. The rule also requires that the insurer notify the insured that there are “alternative transactions” available if the client is older than 60 years old or chronically ill when the client asks for a surrender of the policy or an accelerated death benefit. Insurers must also advise clients of their options if the company sends an initial notice that the policy may lapse. The law also requires that life settlement producers must behave as fiduciaries to individuals who sell their policies and provide descriptions of all offers, counteroffers, acceptances and rejections for any proposed settlement of the policy. Settlement producers must also tell clients if others are compensated either directly or indirectly for the settlement contract, identify those individuals and share the amount of compensation paid to those individuals and the method of calculating that pay. Maine was the second state to approve such a law. Washington was the first, in April. “These new consumer disclosures and consumer protections represent a substantial step forward in ensuring that seniors who are faced with the lapse or surrender of unaffordable or unwanted life insurance policies can sell their policies and are not prevented from doing so by the acts of big insurance companies,” Doug Head, executive director of the Orlando, Fla.-based LISA said in a statement.