SOURCE: Life Insurance Settlement Association

Life Insurance Settlement Association

November 17, 2009 15:16 ET

New York Enacts Comprehensive Law to Regulate Life Settlements

ORLANDO, FL--(Marketwire - November 17, 2009) - The Life Insurance Settlement Association announced the passage of a new law in New York that establishes comprehensive 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 preserves the long-standing right of life insurance policyowners to sell their policies when they no longer can afford or otherwise keep them. As New York's highest court declared 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 manufactured 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 joins 38 other states that regulate life settlements. With this new law in New York, nearly 90% of the United States population live in states with life settlement regulation, most of which are based on the NCOIL model. Even in the absence of regulation, New York consumers have benefited from this market by receiving, on average, 300-500 percent more than the cash surrender value in their policies. Furthermore, New Yorkers have been well protected by the best practices that have been advanced by LISA and its members. Following 24 hours of hearing statewide in 2008, the New York State Insurance Department did not receive a single complaint from those who have sold their policies. This is also true nationwide, as the National Association of Insurance Commissioners has not recorded a single consumer complaint involving life settlements in all of 2009 to date.

A life settlement is the sale of an existing life insurance policy by a policy owner to a third party for more than the policy's cash surrender value, but less than its net death benefit. Since almost 90 percent of life insurance policies lapse or are surrendered back to the insurance company and pay policyowners what has been described as a "grossly inadequate" cash surrender value, life settlements are a valuable alternative to such lapse or surrender. Given the extra payments to consumers, in today's harsh economic times, a life settlement can be an essential option to policyowners, especially seniors, whose cannot afford to keep their policies.

LISA applauds the bill sponsors and the New York State Insurance Department for working with LISA and its members in crafting this legislation. While this bill is a good start 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 which will serve the consumers of New York. Of greatest importance is that New York consumers be educated and notified about all of their rights under their life insurance policy, in a timely manner, including the option of a life settlement, whenever they are facing a lapse or surrender of that policy.

About LISA

Established in 1994, the Life Insurance Settlement Association is the oldest and largest trade organization in the industry. Its goal is to promote the development, integrity, and reputation of the life settlement industry, and to promote a competitive market for the people it serves. LISA now represents over 140 members with a wide variety of interests in the industry. For more about the association, visit

Contact Information

  • Contact:
    Doug Head
    LISA Executive Director
    Email Contact