States Support Life Insurance Law Caught Up in N.D. Conflict

Article

N.H. commissioner weighs in on North Dakota insurance legislation
Received by Newsfinder from AP
Oct 16, 2007 19:34 Eastern Time
Editors Note NH angle in 4th graf.
By DALE WETZEL
Associated Press Writer

BISMARCK, N.D. (AP) _ A national insurance group is looking into conflict-of-interest allegations against North Dakota’s former insurance commissioner for his role in writing a new law that restricts the resale of life insurance policies.

However, a letter signed by the top officers of the National Association of Insurance Commissioners defends the law itself, and says it will support efforts to persuade state legislatures to adopt it.

The law addresses “many important consumer protection issues in the secondary market for life insurance,” the letter says. “The NAIC stands strongly behind these vital consumer protections and remains committed to supporting state efforts to enact the (law).”

It was signed by the organization’s president, Alabama Insurance Commissioner Walter Bell; its president-elect, Sandy Praeger; its vice president; Roger Sevigny; and its secretary-treasurer, Jane Cline. Praeger, Sevigny and Cline are the insurance commissioners of Kansas, New Hampshire and West Virginia.

Former North Dakota Insurance Commissioner Jim Poolman had a leading role in drafting the measure, which the NAIC is offering as a model law for state legislatures to consider. Poolman resigned his job Aug. 31 to become an insurance industry consultant.

The NAIC letter was in response to a separate letter, sent last month by a group of consumer advocates, that urged the association to reopen debate on the new life-insurance law and to strengthen the association’s conflict-of-interest policy.

Poolman’s resignation was only the latest example of a state insurance regulator going to work for the industry, and his decision may have violated the NAIC’s existing conflict-of-interest rules, the consumer advocates’ letter said.

It also questioned whether the bill’s final language was influenced by $40,000 in campaign contributions Poolman and the North Dakota Republican Party received from a partner in InsCap Management LLC and his wife.

InsCap, which is based in New York City, helps wealthy individuals finance the purchase of large life insurance policies. Poolman has denied there was any influence.

“The NAIC is aware that allegations have been made concerning conflicts of interest related to revisions to the model (law),” the commissioners’ letter said. “The NAIC is addressing the allegations through appropriate channels, and evaluating the available facts concerning these issues.”

One of the consumer advocates, Don Morrison, who is director of the North Dakota Center for the Public Good in Bismarck, said the commissioners’ letter was encouraging.

“They’ve just said that they’re going to investigate this,” Morrison said. “I think they’re taking it seriously.”

Poolman’s resignation has drawn more attention to the “revolving-door” issue of state insurance regulators taking jobs in the industry, Morrison said.

“I really think there is a recognition that there’s a problem, and it’s probably been pushed higher on the agenda than it would have been if (Poolman’s resignation) not happened,” he said.

An NAIC spokesman did not respond Tuesday to requests for comment about the letter. Poolman said the commissioners’ support of the law itself demonstrated that it was properly drafted.

“To make an allegation against me discounts the thought process of 50 other insurance commissioners who voted for that particular product,” Poolman said.

The legislation restricts the resale of life insurance policies, and imposes new financial disclosure requirements on companies and brokers that are in the “life settlement” and “viatical settlement” business.

Poolman successfully lobbied the North Dakota Legislature to approve the bill earlier this year. No other state has followed suit, but Poolman said he expects the measure will be debated in legislatures across the country.

Companies that help arrange the resale of life insurance
policies oppose more regulation of their industry and are using
whatever tactics they can to stir opposition to the NAIC proposal,
Poolman said. “It will be controversial in every state, and it will be
controversial because many of the life settlement companies don’t
want further regulation,” Poolman said. “They don’t want to tell
consumers how much money they’re making off of them.”