New York State
Eric R. Dinallo Superintendent of Insurance 25 Beaver Street New York, N.Y. 10004
|ISSUED 11/03/2008||FOR IMMEDIATE RELEASE|
Insurance Department to Conduct Hearings Starting Thursday, Nov. 6 on Long Island and Later in New York City, Albany And Rochester
Television personality Larry King and a Rochester area landscaper lead very different lives, but both men see themselves as victims in schemes using life settlement contracts, transactions involving the sale of a person's life insurance to unknown investors. Getting quick cash by selling your life insurance may look like an easy option for people who are financially squeezed, but consumers may be unaware of the sometimes large downside risks of doing so.
The New York State Insurance Department on Thursday, Nov. 6 will begin a series of hearings to gather citizen input on the pros and cons of life settlements. Life settlement arrangements involve transactions where individuals sell their insurance to receive cash payments. The payments are typically worth more than the surrender value of life insurance policies, but less than the death benefits.
"Life settlements are complex financial transactions. There may be a good reason for an individual to sell his or her policy. There have also been reports of abuse. These hearings are designed to obtain public input, particularly from senior citizen groups, consumer organizations and individuals who have experience being solicited or who have entered into life settlement transactions," Insurance Superintendent Eric Dinallo said.
The hearings will begin on Long Island and then continue in New York City, Albany and Rochester. The public input sought by the Insurance Department will be used to develop a bill that will address life settlement transactions.
"In these times of economic uncertainty, there is strong pressure on people pressed for cash to sell valuable assets such as their life insurance policies. And there are some people who see buying life settlements as good investments because they eventually will receive the death benefit from the life insurance policies. In either case, consumers must be fully aware of what they are getting into and the issues involved in a life settlement," Dinallo said.
Those issues include transparency and the absence of disclosure requirements on sales commissions and other fees. For example, a person selling his or her life insurance policy may have no idea how much money goes to the brokers and middlemen involved in the transaction. Fees and commissions are largely unknown because the life settlement business is unregulated in New York and most other states.
The Larry King case attracted public attention last year when King said he purchased two insurance policies on his life totaling $15 million. He reportedly received more than $1 million when the life insurance policies were sold to unknown investors. However, King later claimed he was never informed of the consequences of what he was doing.
The consequences people face when buying or selling their life insurance policies in life settlements potentially include:
A troubling aspect of these transactions is that investors buying life settlements have no vested interest in the policyholder's well-being since they profit only with the death of the policyholder.
In the case of the Rochester landscaper, the man said he was persuaded to invest in a life settlement using the entire amount of his retirement savings, $20,000. He said he was misled and only learned afterward that he had to come up with additional payments, including one for $1,600, to preserve his initial investment.
Since 2005, the New York State Insurance Department has received more than 60 complaints from people involved in life settlement transactions. These include allegations of abuse and misrepresentation in both the purchase and sale of insurance policies tied to life settlements. These complaints include:
The Department plans to introduce a bill addressing life settlements to the Legislature in 2009. The life settlement business is estimated nationwide to be a $15 billion a year business and growing.
The four public hearings will allow consumers and other interested parties to testify. Any person wishing to testify may sign up at the Department's website, www.ins.state.ny.us. Persons without Internet access may contact the Insurance Department's Public Affairs Bureau at (212) 480-5262.
Written comments for the hearing record may be submitted via the Department's website, www.ins.state.ny.us; by mail to Life Settlement Hearings, Public Affairs Bureau, New York State Insurance Department, 25 Beaver Street, New York, New York 10004; or by e-mail to PublicHearingsComments@ins.state.ny.us with the subject line "Life Settlement Hearings."
Comments will be accepted by the Department for up to 15 business days after the last public hearing. Individuals need not attend the public hearings to submit testimony.
The public hearings are scheduled between 10 a.m. and 5 p.m. on the following dates:
|Thursday, Nov. 6:||SUNY College at Old Westbury|
Multi-Purpose Room A, Student Union Bldg.
223 Storehill Rd.
Old Westbury, New York 11568
|Friday, Nov. 7:||New York State Insurance
25 Beaver St.
New York, NY
|Thursday, Nov. 13:||Convention Center,|
Meeting Room #7
Empire State Plaza
Albany, NY 12242
|Friday, Nov. 14:||Central Library of Rochester & Monroe County|
115 South Ave.
Rochester, NY 14604
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