Agree, yet disagree.

On behalf of the Life Insurance Finance Association, I would like to agree yet disagree with Bruce Ferguson's assessment of the work on the NAIC Viatical Settlements Model Act. (See "NAIC 2006 Models Could Spark Debate in Legislatures" on page 14.)

The Life Insurance Finance Association represents the Life Insurance Premium Finance Industry, and other life insurance, financial planning and loan professionals who support that industry. Life insurance premium loans enable consumers to purchase and maintain valuable life insurance coverage for their family and business needs. We are not in the viatical or life settlements market, but were involved in the drafting as premium finance became the focus of the work of the regulators, rather than the real issue: insurable interest.

We agree with and worked directly with the ACLI and the NAIC to close the loophole on stranger-initiated life insurance. We are very concerned about these transactions, and our members work with insurers to ensure that insurable interest exists and that the fraudulent transaction is never funded. The impetus for LIFA's formation was the need for life insurance premium finance professionals actively to promote and embrace standards for "best business practices" and assist policymakers, insurance carriers and the public in understanding and differentiating legitimate premium finance transactions from schemes merely cloaked as premium finance transactions that violate insurable interest, anti-rebating, anti-inducement or other insurance laws.

After the New York Department of Insurance Office of General Counsel's Opinion, LIFA met with the General Counsel and staff and were requested to help identify legitimate premium finance transactions. In response to this and other requests, LIFA released the Statement of Best Practices for the Life Insurance Premium Finance Industry.

We were working to find a common ground with the ACLI and the life insurance producer trade associations which were working through or with the ACLI in connection with the work on the NAIC model. We believe that these trade associations and LIFA, as well as the Life Insurance Settlement Association, really do want to end the sale of stranger-initiated life insurance. However, we urged all parties not to adopt the NAIC draft, as it failed to address or stop the sale of stranger-initiated life insurance. We also urged our life insurance colleagues in the other trade associations and those that they represent to review the issues in connection with the movement of the ownership of a trust. Such programs may place undue financial hardships on insurance producers while putting their licenses at risk. In addition, the Model, as it currently stands will have the unintended impact of including the insured in a scheme such that they may unknowingly be aiding and abetting a fraud on the insurer. We strongly believe that this Model will actually embolden those that create these stranger-initiated life-insurance programs by allowing a loophole to legalize the now illegal activity by sidestepping the issue of insurable interest.

Scott J. Cipinko

Executive Director

Life Insurance Finance Association