Assembly Speaker Sheldon Silver and Insurance Committee Chair Joseph Morelle announced today that the Assembly passed legislation, as part of an extraordinary session, which would put in place a regulatory framework for the life settlement business, including consumer protections (Extraordinary Session Assembly Bill A.9).

At the height of the AIDS epidemic in the 1980s, many individuals who were seriously ill sold their life insurance policies to help pay for medical needs or to improve the quality of the remainder of their life. In response, New York State Insurance Law was changed to regulate these transactions.

The market has since expanded into what is now referred to as the life settlement business, and owners of life insurance policies who are not suffering from life-threatening illnesses are selling their policies to obtain a monetary benefit. This legislation brings the life settlement business under a regulatory umbrella.

The legislation includes provisions that:

• Require life settlement providers, brokers and intermediaries to register and undergo licensure process through the Superintendent of the New York State Insurance Department;
• Provide for the regulation of life settlement contracts, advertising and trade practices;
• Establish consumer privacy protections for medical, financial and personal information;
• Prohibit "Stranger Originated Life Insurance," an arrangement in which third parties facilitate the purchase of life insurance policies intended to benefit individuals who have no insurable interest in the policy;
• Define a "fraudulent life settlement act" in Insurance Law; and
• Provide a private right of action to consumers for certain defined prohibited practices.

"Too many elderly citizens have fallen victim to scams where they are convinced to sell their life insurance policy to a third party who would profit from their death," said Silver (D-Manhattan). "This legislation will require uniform licensing procedures for life settlement brokers and help prevent consumers from falling victim to fraud."

"With the growth of the life settlement business, it's crucial that we have safeguards in place to protect our most vulnerable citizens," said Morelle (D-Irondequoit). "By placing this market under the authority of the Insurance Department, we will be able to better monitor brokers and intermediaries, and increase transparency in this business."

Silver also noted, "The Assembly continues to work with Governor Paterson and the Senate to agree on a deficit reduction plan to close this year's $3 billion budget gap."