some enhanced cash value endorsements are violations – InsuranceNewsNet

At the 2022 National Council of Insurance Legislators (NCOIL) National Summer Meeting that recently concluded in Jersey City, New Jersey, the organization unanimously passed a resolution identifying certain endorsements to enhanced cash value as violating standard non-confidence (resolution) law.

The resolution was sponsored by Indiana Senator Travis Holdman, former NCOIL Chairman, and co-sponsored by Texas Representative Tom Oliverson, MD, NCOIL Treasurer.

The resolution responds to the fact that some life insurers are ignoring the “regularity” requirement of standard non-lapse law by offering “enhanced cash value endorsements”, which are intended to induce consumers to terminate their policies in exchange for significant increases in cash value. The “fluidity requirement” of standard non-confidence law prohibits large increases in cash values ​​and makes cash surrender benefits illegal which are discontinuous in nature and only available during certain windows of time.

At the 2021 NCOIL Fall Meeting and the 2022 NCOIL Spring Meeting, Senator Holdman raised this issue at the NCOIL-NAIC Dialogue, a meeting where NCOIL legislators talk with insurance commissioners. present (or equivalent) timely and important public insurance policy issues. The issue was discussed in more detail at an interim Zoom meeting of NCOIL’s Life Insurance and Financial Planning Committee in June, where former Illinois insurance executive Nat Shapo at the behalf of the Life Insurance Settlement Association (LISA) and the American Council of Life Insurers (ACLI) presented each organization’s respective views on enhanced cash value endorsements.

Senator Holdman said, “Upholding the rule of law is very important to me, and the scenarios that have been presented to me over the past few months appear to be a flagrant violation of statutory law. In addition to working on this issue with NCOIL, I have communicated with my insurance department and look forward to this resolution being used as a tool to resolve this issue in my home state and across the country.”

The resolution notes that some limited-time, enhanced-cash-value offers mimic life insurance settlements, but the carriers offering them do not abide by consumer protection life insurance settlements laws created by the lawmakers to protect policyholders who are being offered a limited term and big cash incentives to drop their policies.

The resolution also specifies that there are two types of similar products, but only one of which is the target of the resolution. This totally different product – never claimed to be in violation of the insurance code and therefore not objectionable to NCOIL – bears the same name of “enhanced cash value” and is a common endorsement offered at policy issuance, but does not does not consist of a limited duration and enriched offer of cancellation of the policy. Rather, it is a product designed to support the persistence, rather than termination, of company-owned policies due to the tax advantages of treating cash value as an asset.

Rep. Oliverson said, “I am pleased that Senator Holdman has brought this matter to the attention of NCOIL, and I am proud to be a co-sponsor of the resolution. I share Senator Holdman’s passion for respecting rule of law and I’m glad NCOIL has taken a stand on this for states to consider using as a guide.”

“Congratulations to Senator Holdman and Rep. Oliverson, and everyone else involved, for their leadership on this very important issue,” said Commissioner Tom Considine, CEO of NCOIL. “This issue has clearly struck a chord with NCOIL member lawmakers, and I’m glad the organization has taken a stand to ensure the law is upheld and consumers are protected.”

“The process that led to the passage of this resolution has shown NCOIL at its best,” said California Assemblyman Ken Cooley, NCOIL President. “An issue has been identified, thoroughly discussed and dealt with in a fair and diligent manner. I am also proud that the resolution reinforces the importance of legislative oversight in our system of government. In this case, it is essential that legislators exercise a control authority to ensure that regulators approve products authorized by law.”

“A key part of NCOIL’s mission is to ensure consumers are protected,” Cooley continued. “This resolution, and its unanimous support, shows that NCOIL is seeking and addressing issues consistent with this mission.”

A full copy of the resolution appears here: -1.pdf

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