Life Settlements Attract Further Regulation

12/8/2009

One occasionally controversial aspect of the life insurance industry has been the practice of life settlements, where elderly people are able to sell their policies to investors.

Consumer advocates have long warned that life settlements aren't for everyone, and critics maintain that in some cases, elderly people can be taken advantage of by unscrupulous agents.

With these concerns in mind, New York state lawmakers recently approved reforms aimed at protecting consumers who do choose to participate in such transactions. According to State Senator Neil Breslin, a Democrat who sponsored the reform bill, one important provision provides greater protection for consumers' medical and financial information.

The legislation, which was recently signed by Governor David Paterson, also bans "stranger-originated life insurance," where seniors, especially older and less healthy ones, are targeted by investors they do not know to participate in life settlement schemes.

Other states have also been cracking down on abuses in this niche of the life insurance industry. For example, officials in Minnesota recently fined one agent $250,000 and revoked his license for altering beneficiary forms after the death of a client, among other violations.

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