The Institutional Longevity Markets Association, Inc. (ILMA) is a trade association comprised of a number of the world’s leading institutional investors and intermediaries in the mortality and longevity marketplace, formed to encourage the prudent and competitive development of a suite of evolving mortality and longevity related financial businesses, including the businesses of life settlements and premium finance.
Life insurance is one of the most important financial assets a consumer owns. As such, the prudent regulation of the life settlement and longevity marketplace is critically important to a consumer’s ability to acquire such assets and to realize all of the economic opportunities associated therewith.
To help bring consensus among the various life insurance companies, life settlement providers, brokers, banks, financial institutions and other participants in the life settlement and longevity markets and to facilitate the promulgation of appropriate regulation and the development of industry “best practices,” ILMA has formulated the following guiding principles to be considered when conducting business in this marketplace.
Consumers are entitled to transparency when engaging in life settlement and premium finance transactions. Accordingly, a consumer’s representative should disclose all bids received and provide full disclosure of all fees and commissions payable to such representative. Industry participants should not engage in premium finance transactions designed to conceal the nature of a transaction from life insurance companies. When a consumer applies for a life settlement or premium finance program, an advisor should emphasize the consumer’s obligation to complete the application truthfully and accurately.
Life settlements and premium finance loans are not appropriate for everyone. Industry participants should advise consumers applying for life settlements or premium finance loans to seek competent, professional advice to fully understand the risks involved and to determine whether a transaction is right for them.
Consumers should have the ability to choose how to finance their life insurance policy and whether to hold the policy to maturity, surrender it for cash surrender value or settle it in the secondary market. Regulations that unnecessarily restrict such choices are anti-consumer and should not be supported.
Life settlements and premium finance loans are complex financial transactions. Consumer representatives such as agents, brokers, and other advisors should be mindful of the fiduciary duty they owe to consumers who participate in such transactions, including helping consumers understand the value of a policy and how best to realize this value. The nature and scope of this fiduciary duty should be explained and
defined at the start of the professional relationship.
Industry participants should support laws designed to deter transactions that seek to evade insurable interest laws and principles.
No person should pay, directly or indirectly, an inducement to any prospective policy owner or insured for taking out a life insurance policy. Offers of “rebates,” “free insurance” and similar questionable incentives should be prohibited.
Industry participants should develop and implement procedures
designed to appropriately safeguard the identity of insureds engaging in life settlement and premium finance transactions. These participants should make every effort to prevent the inappropriate disclosure of confidential information relating to an insured or to a particular transaction.
With these Guiding Principles as a basis, ILMA looks forward to engaging in a dialogue with the leaders of the life settlement and premium finance businesses to promote common interests and objectives and to develop industry “best practices.” ILMA also looks forward to working with legislators and regulators to help design appropriate and consumer-oriented regulation.