LISA has announced passage of a New York state law regulating life settlements. The law is based on the National Conference of Insurance Legislators Life Settlement Model Act and upholds the century-old right of policyholders to sell their policies to third parties.
Provisions of the law require a number of consumer disclosures, protection of policyholders’ privacy, the right to rescind a transaction and other consumer protections. The new rules also require that settlement companies be licensed and overseen by state insurance regulators.
Furthermore, the law forbids stranger-originated life insurance and provides several tools for insurers and life settlement companies to root out such policies. Life insurance companies that issue policies to strangers of the insured will face sanction.
New York’s new law brings to 90 percent the number of states that regulate life settlements. Even before the law was enacted, New York policyholders were receiving an average of 300 to 500 percent more than the surrender value of their policies.