Coventry Applauds Victory for Life Insurance Consumers

PHILADELPHIA, Nov. 19, 2010 /PRNewswire/ -- Coventry, the creator of the secondary market for life insurance in the U.S., applauds the New York Court of Appeals decision in Kramer v. Phoenix Life Insurance Company as a significant victory for life insurance consumers and the secondary market for life insurance.  

"There are two prongs to this decision, one of which will resonate broadly," said Alan Buerger, CEO of Coventry.  "In its opinion, the high court's statement about intent is a win for life insurance consumers because it should prevent insurers from attempting to invalidate policies based on an insurer's assertion that a policy was taken out with intent to resell at some time in the future."

Life settlements are a valuable alternative for life insurance policyowners who are faced with the lapse or surrender of their policies.  According to a July 2010 report on life settlements issued by the United States Government Accountability Office, policyowners who sold their policies from 2006-2009 received $5.56 billion more than they would have if they merely surrendered their policies.  

In the Kramer v. Phoenix decision, New York's highest court also rejected life insurance companies' attempt to undermine 150 years of property rights in life insurance, specifically saying "no" to whether New York insurable interest law "prohibit[s] an insured from procuring a policy on his own life and immediately transferring the policy ... if the insured did not ever intend to provide insurance protection for a person with an insurable interest in the insured's life."  The Court noted in its opinion the New York life settlement act, which Coventry helped spearhead. That law prohibits the immediate sale of a life policy and establishes a two-year waiting period for the sale of life insurance policies. It is also illegal under the act to "pre-arrange" the sale of a policy to a third party before the policy is issued.  

"The Court has stated that the insured can take out a policy for whatever reason he wants – like any other property – and that insurers cannot second-guess consumers' choices," explained Buerger.  "We hope that this decision will spell the end of carriers' cynical actions to undermine the well-regulated secondary market."  

Today, 40 states have life settlement laws in effect, covering 86 percent of the US population, which prevent abuses with a slew of consumer protections, such as the two year prohibition on settlements.  According to the National Association of Insurance Commissioners, there have been less than 20 consumer complaints involving life settlements over the past four years reported to state insurance regulators. Six states have already mandated that life insurance companies tell seniors who are considering the lapse or surrender of their policies of the option of a life settlement, among other alternatives.  The National Conference of Insurance Legislators is expected to approve a model law for all other states to adopt at its 2010 Annual Meeting in Austin this week.

About Coventry

Coventry created the secondary market for life insurance in the U.S. By uniquely bridging insurance and capital markets, the company pioneered the life settlement industry and opened a new class of longevity-based assets for institutional investors worldwide. Today, Coventry is a global financial services firm leading the development of a robust longevity market. Coventry has more than 250 employees and is based in Philadelphia with offices around the world, including New York, London, Hong Kong, Tokyo and Sydney.

SOURCE Coventry