Aims at comprehensive regulation of life settlements
The Life Insurance Settlement Association (LISA) has passed a new law in New York that constitutes absolute regulation of Life Settlements in that state. The new law introduced at the request of the New York State Insurance Department by Senator Neil Breslin (S66009) and Assemblyman Joseph Morelle (A40009), is based on the National Conference of Insurance Legislators (NCOIL) Life Settlement Model Act.
The New York life settlement act maintains the long-standing right of life insurance policyowners to sell their policies when they no longer can afford or otherwise keep them. Owing to the New York’s highest court ‘s decision more than 100 years ago, life insurance policyowners may go to the best market he can find, either to sell it or borrow money on it.
The new law establishes comprehensive transactional requirements to protect New York consumers who choose to enter into a life settlement, including numerous consumer disclosures, privacy protections for policyowners and insureds, rescission rights and other consumer protections. The bill requires licensing of settlement companies and provides for oversight of the licensees by the New York State Insurance Department.
The bill makes the practice of stranger-originated life insurance (STOLI) illegal and provides several tools for insurers and life settlement companies to detect such policies and prevent such policies from being made in violation of the state’s insurable interest laws. The bill clearly reaffirms that STOLI occurs at inception and does not include life settlements. Especially important is that the new law will subject life insurance companies to penalties for engaging in STOLI transactions.
New York teams up with 38 other states that regulate life settlements. With this new law in New York, nearly 90% of the US population live in states with life settlement regulation, most of which are based on the NCOIL model.
LISA applauds the bill sponsors and the New York State Insurance Department for working with LISA and its members in crafting this legislation. Though this bill is a good initiation 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.