TALLAHASSEE — Consumer advocates are hailing a new Florida law requiring life insurance companies to inform policyholders of their right to consult with a professional before agreeing to changes in their policies.
“Policyowners considering changes to their life insurance policy will now be in a position to receive additional information about their options from a licensed insurance or financial advisor, as well as from the Florida Department of Financial Services,” Michael Kreiter, director of legislative and regulatory affairs for the Life Insurance Settlement Association, told the Florida Record.
Florida Gov. Rick Scott signed legislation June 26 that requires insurance companies to inform life insurance policyholders that they can consult with a financial adviser or the state to determine whether the policy can be sold at a higher value.
“Every year, millions of dollars of life insurance face value is lapsed or surrendered by policyholders who may not have realized their policy held value,” Kreiter said.
He said the new law will benefit those consumers.
“This notice will provide the Office of Insurance Regulation and the DFS the opportunity to develop additional information regarding options available to policyholders if they face lapse or surrender,” he said.
According to a 2010 report on the life settlement industry by the Government Accountability Office, policyholders can earn an average of seven times the cash surrender value of the policy if the policy is sold.
“We hope that financial advisers and insurance agents already provide policyholders with information when they are considering a change to their policy,” Kreiter said. “Unfortunately, we have found that is generally not the case, or at least the information agents/advisors are providing is limited, at best.”
The Life Insurance Settlement Association is working on similar legislation in other states, including in Rhode Island, where a measure mirroring the new Florida law was passed by the House earlier this week.
“We will obviously continue to seek consumer disclosure language in other states as opportunities arise,” Kreiter said. “We also hope to continue working with state insurance departments and the (National Association of Insurance Commissioner to develop consumer-oriented information to inform consumers of their options should they face lapse or surrender of their policy.”
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