SOURCE: Life Insurance Settlement Association

Life Insurance Settlement Association

June 23, 2009 05:00 ET

New Maine Law Protects Property Rights of Life Insurance Policyholders

Various States May Consider Similar Measures That Would Require Life Insurers to Discuss Life Settlements as an Alternative for Seniors Facing the Lapse or Surrender of Their Policies

ORLANDO, FL--(Marketwire - June 23, 2009) - The Life Insurance Settlement Association (LISA) today applauded the adoption of a new law in Maine that requires life insurance companies to advise senior consumers about the valuable option of a life settlement as an alternative to the lapse or surrender of a life insurance policy. The law also prohibits life insurance companies from engaging in anti-consumer conduct related to life settlements. Maine joins Washington State in protecting the property rights of life insurance consumers and ensures that policyowners can seek and obtain a market value for policies that would otherwise be surrendered or lapsed.

"These new laws are terrific developments for senior consumers, and are expected to be adopted in numerous states," said Doug Head, LISA Executive Director. "These measures respond to the documented evidence of carriers trying to block life settlements through threats to insurance agents and providing misleading information to seniors."

Maine Governor John Baldacci recently signed into law Chapter 376 which was authored by State Senator Nancy Sullivan and supported by Maine Superintendent of Insurance Mila Kofman. The Maine law requires insurance companies to send seniors facing the lapse or surrender of their policies a notice advising them of financial alternatives and to include in the notice a brochure that tells those seniors of their rights as a policyowner and describes common products offered by life settlement providers. Maine's new law also prohibits insurers from any conduct that restricts, limits or impairs life settlement transactions.

"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," Head continued.

Life settlements can pay seniors 300-500% more than the cash surrender value of a life insurance policy. Since nearly 90 percent of life policies are lapsed or surrendered, according to a leading international actuarial firm, life settlements are a valuable unrecognized option for seniors.

LISA anticipates that a large number of states will take up similar measures this year and next. In Indiana and Kentucky, where similar legislation is under consideration, both legislators and regulators have begun to look into allegations that insurers are actively impairing policyowners from pursuing life settlements, including issuing false information about life settlements and barring life insurance agents from advising and assisting policyowners with life settlements. LISA recently provided the US Senate Aging Committee with documents detailing insurers' efforts, including possible anti-trust conduct, to impair the secondary market.

"It is deplorable when life insurers attack their own customers in order to maintain their profits. States are taking action to prevent carriers' protectionist conduct and to ensure that the best consumer is the informed consumer," said Head. "LISA will continue to encourage legislative and regulatory actions that protect and inform seniors about their rights under their policies and the true value of life insurance."

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 150 members with a wide variety of interests in the industry. For more about the association, visit http://www.thevoiceoftheindustry.com/.

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