Q1 - Vol. 3, No. 2, February 2006      Life Settlement News

 

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Advertising Compliance:  How Important Is It for Life Settlements?

 

by Tom Offutt, J.D.

Compliance officer

 

Similar to advertising compliance for traditional insurance products, advertising for viatical and life settlements has its own set of guidelines as set forth by the most recent version of the NAIC Viatical Settlement Model Act.  The Act contains a separate section on advertising that many of the twenty-seven states with life settlement regulation adopted in some form or other when enacting their viatical and life settlement laws.

 

When it comes to traditional insurance advertising, most compliance departments rely on the Unfair Trade Practices Model Act or specific state insurance advertising statutes or regulations to steer their advertising.  In the case of viatical and life settlement advertising most compliance departments follow the NAIC Viatical Settlement Model act. On reviewing the act, section 11 of the model covers six pages of advertising standards and is likely one of the most comprehensive of any type of insurance advertising guidelines in use.

Where agents have an opportunity to submit advertising materials to their company compliance department for approval they should take advantage of this review. Advertising review is required to protect all parties; especially the consumer. Compliance departments often support marketing departments.  Taken together, they form an important team in assisting agents to help their client’s have a better understanding of the products they offer. 

Where most insurance compliance departments generate disclosures from many sources – federal and state regulation, consumer complaints, litigation, company experience, and recent market conduct exams, viatical and life settlement companies’ compliance departments often rely on relevant sections of the Model Act in dealing with advertising.

 

Advertising is defined in Section 2 of the Model Act as follows:

 

“Advertising” means any written, electronic, or printed communication or any communication by means of recorded telephone messages or transmitted on radio, television, the Internet or similar communications media, including film strips, motion pictures and videos, published, disseminated, circulated or placed before the public, directly or indirectly, for the purpose of creating an interest in or inducing a person to sell a life insurance policy pursuant to a viatical settlement contract.”

What sort of materials need review for advertising compliance?  Just about everything from business cards, letterhead and any advertising for distribution to consumers.  Advertising guidelines are essential to assure that product descriptions are presented in a manner that prevents, unfair, deceptive or misleading advertising and is conducive to accurate presentation and description of viatical settlements through the media and material used by viatical settlement licensees.  Depending on an applicable state statute or regulation, states consider viatical advertising either discretionary with the commissioner (i.e. advertising review as the commissioner deems appropriate) or subject to commissioner review and prior approval before actual use, which is stipulated by regulation or statute.

It is strongly suggested that those individuals that engage regularly in the business of viatical and life settlements become familiar with the advertising section in the Viatical Settlement Model Act and their state statutes, if in a regulated jurisdiction.  State Insurance departments often offer free information on advertising to insurance and financial professionals on their websites and can be contacted to obtain specific information on advertising for viatical and life settlements as a provider, broker or producer in each state where regulation applies.

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Tom Offutt has more than 19 years experience in the insurance compliance and regulatory field. He began his career with a major personal lines carrier and prior to his joining Advanced Settlements, served as regulatory manager for a U.S. aviation and health insurer. Tom brings considerable corporate legal and regulatory experience to the firm, and is a member of the Association of Insurance Compliance Professionals. He received his law degree from the University of Baltimore Law School.
 

 

 

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