Chris Orestis discusses Life Insurance Consumer Disclosure legislation before the NCOIL Life Insurance and Financial Services Committee 

(July 9, 2010)— Life Care Funding Group’s president, Chris Orestis testified in Boston on Friday, July 9^th about the important role that Consumer Disclosure Legislation in states such as Maine, Washington, Oregon and Kentucky can have as a model for other states to consider in the coming legislative year.  The legislation enacted in these four states has become an important precedent as it compels life insurance companies to disclose to policy owners at the time they would lapse or surrender a policy that they have other options to consider to receive higher market value for their policy.

Also appearing on the panel was Michael Friedman, Senior Vice President of Government Affairs for Coventry First and Michael Lovendusky, Associate General Counsel for the American Council of Life Insurers (ACLI).  Mr. Friedman spoke in support of the legislative precedent and the need to support state efforts as they consider legislative action to ensure policy owners are informed of all of their financial options.  Mr. Lovendusky speaking on behalf of the life insurance industry emphasized the industry’s staunch opposition to consumer disclosure, stating for the record that the idea is “abhorrent” to the industry.

Mr. Orestis discussed his company’s commitment since its inception in 2007 to working with seniors and their families to provide them with as much information and access to financial resources as possible.  He pointed to the law passed in Maine requiring insurance companies to disclose to policy owners that they have other options instead of lapsing or surrendering a life insurance policy they no longer can afford regardless of its death benefit amount as an example of what should be done around the country.

“We are living in a time when we must be doing all we can to get as much information as possible into the hands of seniors”, testified Chris Orestis.  “When a senior and their family is informed that an asset (life insurance policy) they are about to throw away has unrealized value for them, and it is a potential solution to a health care crisis they are confronting, the consumer wins when they are able to access the most appropriate form of long term care and the state wins when a citizen is able to extend their ability to cover the costs of long term care for as long as possible before accessing Medicaid”, concluded Orestis before the NCOIL committee.   

To obtain the complete transcript of Chris Orestis’ testimony before the Life Insurance and Financial Services Committee of NCOIL, Click Below:  

Remarks NCOIL.doc (30.00 kb)

UPDATE 7/12/10--

The National Conference of Insurance Legislators (NCOIL) plans to begin drafting a new model act requiring insurers to tell consumers of their options, including life settlements, if they plan to get rid of their policies.

Georgia state Sen. Ralph Hudgens said he reported to NCOIL's executive committee on Sunday that he was asking Kentucky Rep. Ron Crimm to craft a life insurance options model bill in the next few weeks by melding similar laws that already have passed in Maine, Washington and Kentucky.

Hudgens, who heads the Life Insurance & Financial Planning Committee of NCOIL, said this model legislation would be separate from the model act on life settlements that was adopted by NCOIL in 2007. Once the draft is complete, it will be sent to interested parties for comment, he said.

Hudgens said he expects the model act will be taken up at NCOIL's November meeting in Austin and adopted.

This past Friday we received a call from a woman who had just learned about the Life Care Funding option from the assisted living center where her husband had recently moved.  Her husband is 79 with advancing Alzheimer’s and they moved him into a care facility two months ago.  Covering the costs have been a stretch for her and her adult children and the facility told her that if they have a life insurance policy they could get money for it now through a life insurance settlement by contacting Life Care Funding Group. 

The good news is that they have been carrying a $100,000 life insurance policy for the last 25 years.  The bad news was that because of the financial strains they are under, she stopped paying the premiums two months ago and the policy was going to lapse (cancel) that next Monday.  She had called the insurance company and asked them what her options are and they told her she had two: pay the back premiums to keep the policy in-force (active), or let it lapse on Monday.   

They never told her she had a third option, sell the policy in the open market through a life settlement and receive as much as 40% of the death benefit right now in a lump sum payment.  After receiving premium payments for 25 years, the best option for the insurance company would be for the family to let the policy go now that her husband has Alzheimer’s and is facing a shortened life expectancy.  In that case, they keep every penny paid to them in premiums and never have to pay anything to the family! 

But fortunately for this family, we spoke to them before the policy lapsed and the insurance company received the premium payment in time to keep the policy in-force (the insurance company was hoping they would not see that check arrive in an overnight packet).  We are now working with the family to take their policy out to the life settlement market to receive multiple bids for the policy.  Based on their husband’s health, the potential for them to receive anywhere from $20,000-$40,000 is very real.  That amount of money will get back the premium payments made over the years, and will make all the difference in the world to their ability to provide the best possible housing and care for their loved one. 

Too few people know about the life settlement option. We hear from families every day who have let a policy lapse, or are about too, and they lose out on their opportunity to receive money that could help their loved ones during a time of crisis.  As the country debates health care reform and contemplates the imminent long term care funding crisis, the life insurance industry must stop suppressing the legal rights of policy owners.  Two states have passed laws (ME and WA) requiring life insurance companies to inform citizens of their legal right to a life settlement.  Let’s hope the other 48 states start listening and do the same.

To read more about the legal rights of a life insurance policy owner, click below:

Legal Rights of Policy Owners.doc (31.00 kb)

The right of a policy owner to engage in a Life Settlement is guaranteed by the landmark Supreme Court decision; Grigbsy v. Russell establishing that life insurance possessed all the ordinary characteristics of property, and therefore represented an asset that a policy owner could transfer without limitation.  Life insurance is personal property and the owner is protected by all the same inalienable rights that any owner of real estate, stocks or any other assets enjoy. 

As seniors look for assets they can use to offset lack of savings or losses in equity; the Life Settlement market has grown rapidly, with $13 billion in transactions completed in 2008.   90 million senior citizens own more than $500 billion worth of life insurance, of which over $100 billion was owned by seniors eligible for Life Insurance Settlements.  The Wharton Business School issued a study about Life Settlements where they observed, “Life insurance policies are typically assignable, which means that a policyholder is free to transfer their ownership of the policy to another person.  A policyholder’s right to assign their policy to someone other than the insurance carrier has existed for some time.”  The study also went on to observe that a Life Settlement “gives the policyholder the economic freedom to choose between a number of buyers and, in so doing, to receive the fair market price for their policy.” 

Among the legal rights of a life insurance policy owner are:

 · Sell the policy to another party  · Name the policy beneficiary  · Change the beneficiary designation  · Assign the policy as collateral for a loan  · Borrow against the policy

A number of insurance industry organizations such as the National Association of Insurance Commissioners (NAIC), National Council of Insurance Legislators (NCOIL), American Council of Life Insurers (ACLI), National Association of Insurance and Financial Advisors (NAIFA), American Association of Life Underwriters (AALU) and the Life Insurance Settlement Association (LISA) support the legal rights of a policy owner to liquidate a life insurance policy through a Life Settlement.

Read the Grigsby v. Russell decision issued by Justice Oliver Wendell Holmes in 1911: Supreme Court Ruling on Life Insurance as Transferable Property.doc (42.00 kb)

The oldest man in the United States died this past weekend at the age of 112 years and 204 days.  George Francis was residing at a nursing home in Sacramento, CA at the time and he is survived by 18 grandchildren, 33 great-grandchildren and 16 great-great grandchildren.  He lived through three centuries as he was born in 1896.  Mr. Francis was not the oldest person in the world, nor was he the oldest person in the United States.  Those distinctions belong to a 115 year old woman living in Portugal and a 114 year old woman living in Los Angeles.   

As we come to another New Year, it is always interesting to read about Centenarians and consider the thought of living that long.  But it is also important to consider the demographic and financial realities of the fact that people are living longer than ever before and life expectancies will continue to rise. In fact, average life expectancy from age 65 increased from 77.7 to 84 years for males and 79.7 to 87 years for females in the 60 year period from 1940-2000.  Life expectancy going forward into 2040 should add another 3 years on average for both males and females. The age group of 85+ is the fastest growing segment, and they are experiencing the highest gains in life expectancy on a percentage basis.  Further, the population of Centenarians (age 100+) more than doubled from 37,306 in 1990 to 88,289 in 2004. 

Important to note with all of the life expectancy gains is that the population of 65+ living in a nursing home accounts for 1,557,800 or 4.5% of the total cohort population.  Most people that move into an assisted living or nursing home are a surviving spouse, and to that end, the number of seniors surviving a deceased spouse triples when moving from the age segment 65-74 to 85+. 

With people living longer than ever it is absolutely critical to be planning for the costs of senior housing and long term care.  The reality is that a family could be covering those expenses for many years into the future with no way of knowing for exactly how long.   

To read about the life of George Francis and other Centenarians, click here. 

Post Script (1/3/09): on January 2nd the world's oldest person, Maria de Jesus of Portugal, died.  Gertrude Baines, age 114 and currently living in a nursing home in California, is now the oldest living person in the world.  To read about these Centenarians, click here.