LISA Criticizes Support NAIFA and AALU Give to Questionable Legislation

Both associations have endorsed legislation in several states that harms consumers, producers, and the insurance industry as a whole, in LISA’s view. By giving their support, NAIFA and the AALU raise questions about their independence and ability to serve their members.

The bills in question are based on the National Association of Insurance Commissioners’ (NAIC) Viatical Settlements Model Act, which LISA believes is “seriously flawed.” The legislation is also heavily influenced by the American Council of Life Insurers (ACLI). Introduced with the stated purpose of stopping Stranger Originated Life Insurance (STOLI), the bills are a “direct attack” by carriers on consumers and the secondary market for life insurance, according to LISA.

The proposed reforms undercut consumer rights and impose punitive measures on producers that restrict legitimate business opportunities. For example, according to LISA, anti-producer provisions of the NAIC Model include burdensome financial requirements, such as a $250,000 bond requirement for insurance agents who assist clients with settlements, even though E&O insurance is accepted as proof of financial responsibility for other insurance market activity.

“It seems to me that both NAIFA and AALU have lost their way,” noted Doug Head, LISA executive director. “These groups claim to support the interests of life producers, and yet they are actively working against their members by blindly supporting carrier-sponsored legislation that harms producers and the consumers they serve.”

Eleven consumer representatives of the NAIC criticized the NAIC Model as being anti-consumer. And after examining the NAIC Model, the National Conference of Insurance Legislators (NCOIL) rejected the NAIC’s plan, saying that it did not address STOLI and harmed consumers. NCOIL has since developed its own model, which provides targeted measures to prevent STOLI without interfering with the rights of consumers or the ability of producers to serve their clients.

“We have to question whether life producers can count on NAIFA and AALU to represent their interests. This may explain why the memberships of both groups are shrinking,” Head said, adding that both organizations should re-examine their stated missions and “decide whose side they are really on.”