SOURCE: Life Insurance Settlement Association

May 01, 2008 13:15 ET

LISA Questions NAIFA and AALU Support of Carriers Over Producers and Consumers

ORLANDO, FL--(Marketwire - May 1, 2008) - The two major associations representing insurance producers have enthusiastically endorsed legislation in several states that harms consumers, producers and the insurance industry as a whole. In doing so, both the National Association of Insurance and Financial Advisors (NAIFA) and the American Association of Life Underwriters (AALU) raise serious questions about their independence and ability to serve their members.

Despite ongoing controversy over the legislation, both NAIFA and AALU continue to actively support state bills based on the profoundly flawed National Association of Insurance Commissioners (NAIC) Viatical Settlements Model Act. A recent article in California Broker Magazine [http://www.marketingstrategiesmag.com/Magazine/story/april08/Harris.htm] asserts that this support, which is in direct conflict with the interests of producers, is due to the fact that both organizations are economically beholden to life insurance companies. The article details how AALU's advocacy arm is dominated by carriers and how financial contributions from major insurers prompted NAIFA to reverse its position on key provisions of the NAIC Model and adopt a patently anti-consumer and anti-producer stance.

The legislation advocated by NAIFA and AALU is based on the NAIC Model and was heavily influenced by the American Council of Life Insurers (ACLI). This legislation, introduced under the guise of stopping Stranger Originated Life Insurance (STOLI), is in fact a direct attack by carriers on consumers and the secondary market for life insurance. The proposed reforms not only signal a radical rollback of consumer rights, they impose numerous punitive measures on producers that significantly restrict legitimate business opportunities.

"It seems to me that both NAIFA and AALU have lost their way," said Doug Head, LISA Executive Director. "These groups claim to support the interests of life producers, and yet they are actively working against their members by blindly supporting carrier-sponsored legislation that harms producers and the consumers they serve."

The proposal backed by NAIFA and AALU has been widely criticized as anti-consumer and anti-competitive. Indeed, 11 consumer representatives of the NAIC criticized the NAIC Model as being anti-consumer. The National Conference of Insurance Legislators (NCOIL), after careful examination of the NAIC Model, flatly rejected the NAIC's plan stating that it did not address STOLI and harmed consumers. NCOIL has since developed its own model which provides targeted measures to prevent STOLI without harming the rights of consumers or the ability of producers to serve their clients.

Specific anti-producer provisions of the NAIC Model include onerous financial requirements such as a $250,000 bond requirement for insurance agents who assist clients with settlements, even though E&O insurance is widely accepted as proof of financial responsibility for other insurance market activity. Even more baffling is NAIFA's support of compensation disclosure in settlement transactions, touted as a consumer protection, since such a measure opens the door to full compensation disclosure in all life insurance sales.

"It is astonishing to think that neither NAIFA nor AALU consulted their members before taking a position on such important legislation," said Mr. Head. "Even more disturbing is the fact that both groups have thrown their support behind the NAIC Model, with its clearly anti-consumer and anti-producer provisions."

"We have to question whether life producers can count on NAIFA and AALU to represent their interests. This may explain why the memberships of both groups are shrinking. Now would be a good time for both organizations to re-examine their stated missions and decide whose side they are really on," Mr. Head concluded.

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 173 members with a wide variety of interests in the industry. For more about the Association, visit www.lisassociation.org.

Contact Information

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    Doug Head
    LISA Executive Director
    PH: 407-894-3797
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