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Life insurance market needs careful regulation, Illinois commissioner.

Illinois insurance director calls for consumer protection, regulation of life settlement market

Citing a newspaper ad that enticed senior citizens to learn about selling their life insurance policies, Illinois Division of Insurance director Michael McRaith urged fellow officials to be mindful of the need to protect consumers against predatory activity.

Life settlements, as they are called, have come under increased scrutiny from state and federal regulators in recent months. In the settlements, life insurance policyholders sell their policies for more than the surrender value but less than the face value. Investors, meanwhile, profit when the former policyholder dies and triggers a payout of the policy.

McRaith, speaking at the Life Insurance Settlement Association’s meeting in New York last week, noted that many seniors “are not as sophisticated as you would envision your clients and consumers.” As such, he continued, it is states’ responsibility to stem disreputable practices within the life settlement marketplace.

The Securities and Exchange Commission has been convening meetings with life settlement industry members to learn more about the industry and assay the need for increased regulation. The federal agency has given no indication of when it would issue new rules about the resale of life insurance.

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Posted: November 16, 2009

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