ORLANDO, Fla., June 27, 2017 (GLOBE NEWSWIRE) -- Florida Gov. Rick Scott signed legislation yesterday that contains a key consumer disclosure requirement to protect Florida consumers who are considering making changes to a life insurance policy.
The Florida state legislature passed HB 1077, a wide-ranging bill designed to combat insurer fraud in the state of Florida, on May 5, 2017, at the close of Florida’s 2017 legislative session. When the House-approved bill was taken up in the Florida Senate, Sen. Jeff Brandes introduced important amendments supported by the Life Insurance Settlement Association (LISA) that require insurers to advise consumers to consult with a professional before making changes to their policy.
The bill was signed by Governor Rick Scott on June 26, 2017, and provisions pertinent to the life settlement industry became effective immediately.
“Consumers have scored a victory in Florida as they will now be in a position to be informed of a range of options available to them if they own a life insurance policy they no longer need or can afford,” said Darwin M. Bayston, CFA, president and chief executive officer of LISA. “This is an important step forward nationwide because Florida has the highest percentage of seniors among its population of any state. Seniors are especially vulnerable to lapsing or surrendering a life insurance policy they otherwise may have been able to sell for five to seven times more than the cash surrender value of that policy offered by their insurance company.”
Specifically, the amended bill requires that “a life insurer shall provide an individual life insurance policyholder with a statement informing him or her that if he or she is considering making changes in the status of his or her policy, he or she should consult with a licensed insurance or financial advisor.” This disclosure requirement must also advise the policyholder “that he or she may contact the department for more information and include a website address or offer location or manner by which the policyholder may contact the department.”
“While life insurers oppose the concept of consumer disclosure, Florida’s legislators agreed about the importance of consumers’ needs for financial advice about options available to them for life policies they no longer need or can afford,” said Brady Cobb, whose firm Cobb Eddy directed the effort of negotiating and passing the legislation.
According to Bayston, there are a number of alternatives to lapsing the policy and surrendering it back to the insurance company that should be considered by financial advisors, including:
- Maintain the policy through loans, using the policy or its cash surrender value as collateral.
- Seek an accelerated death benefit.
- Convert the policy to a long-term care health insurance policy.
- Assign the policy to someone else as a gift or to a non-profit organization as a charitable contribution.
- Sell the policy through a life settlement.
“There is a growing chorus of voices calling for more pro-active and transparent disclosures about consumers’ alternatives to surrendering a policy they no longer need or can afford,” said Bayston. “LISA will continue its efforts to advance legislation and regulation that protects consumers’ rights to know about these alternatives, as well as to promote consumer awareness of the life settlement option in particular.”
LISA plans to work with the Florida Office of Insurance Regulation and the Department of Financial Services to develop additional resources for consumer policyholders who are considering making changes to their policy, as well as helpful resources for professional insurance or financial advisors.
HB 1077 came out of the Florida House of Representatives’ Commerce Committee, Government Operations & Technology Appropriations Subcommittee and Insurance & Banking Subcommittee. It was co-sponsored by Reps. Holly Raschein, Ben Diamond and Cyndi Stevenson.
About the Life Insurance Settlement Association
The Life Insurance Settlement Association (LISA) is the nation’s oldest and largest organization representing participants in the life settlement Industry, with a current membership of more than 90 companies doing business in all 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. The mission of LISA is to promote the development, integrity and reputation of the life settlement industry, to advance the highest standards of practice and professional development for the industry, and to educate consumers and advisors about a life settlement as an alternative to lapse or surrender of a life insurance policy. For more information, visit www.lisa.org.