Advocates call for more disclosure of life insurance benefits

[private]Advocates for terminally ill patients told a legislative study committee that Georgia should require life insurance companies to disclose more information about the “living benefits” and other options that are available to their policyholders.

Several witnesses told the House committee chaired by Rep. Carl Rogers (R-Gainesville) that their insurance carriers were reluctant to inform them that there were alternatives to simply letting a life insurance policy lapse because they couldn’t afford to keep paying the premiums.

For example, a policyholder could execute a life settlement contract in which they sell the policy value to a broker or investor in return for an immediate cash payout. The investor then becomes the new policyholder who pays the premiums and receives the death benefit when the original policyholder dies.

Policyholders might also be able to choose the option of accelerated death benefits or the conversion of their life policy to long-term care coverage.

“Very few people realize that there’s a life benefit (in their policies),” said Ted Harada, who has amyotrophic lateral sclerosis (ALS), a terminal disease. “And no one’s there to tell you. They’re (insurance carriers) more than happy to keep you in the dark.”

“Many people abandon their life insurance policy without knowing there are other benefits,” said Bryan Freeman of Habersham Funding, a life settlement firm. “Virtually no consumers understand the living benefits that are in them.”

“Disclosure to consumers is desperately needed,” said Christi Estes of Newnan, who said she had problems dealing with life insurance companies when her husband Rob was diagnosed with brain cancer. “It’s wrong for consumers to have to go through what we went through.”

Rogers is sponsoring a bill, HB 193, that would require life insurers to provide written notice to older policyholders that they have alternatives such as life settlements to surrendering a policy.

The committee members were told that insurance agents and financial advisers are sometimes prohibited by corporate rules or policies from even discussing the concept of a life settlement with their clients.

Brad Carver, a lobbyist for the National Association of Insurance and Financial Advisers (NAIFA), said his organization supports the proposed disclosure bill.

Financial advisers should be able to “openly and transparently talk to their clients and give them the best advice possible,” Carver said. “At the end of the day, we want to protect consumers – that’s why these disclosures are so important.”

State Insurance Commissioner Ralph Hudgens has not attended either of the two hearings held by Rogers’ committee and has not taken a position on the bill.

“We don’t have an official position, but we’re certainly listening,” said Trey Sivley, director of the division of insurance and financial oversight for the insurance department. “At some point, the commissioner will weigh in.”

Representatives of the life insurance industry have not testified at either hearing but have been invited by Rogers to appear at the next study committee meeting, which has not yet been scheduled.

“We haven’t really heard from the life insurance companies,” Rogers said. “Maybe they’ll be in agreement, maybe they won’t.”

© 2015 by The Georgia Report


Tags: Brad Carver , Bryan Freeman , Carl Rogers , financial advisers , life insurance , life settlements , Ralph Hudgens , Trey Sivley