InKnowVision Blog

My Day at Club Fed

November 5th, 2007

I spent a day last week at the Federal Reserve Bank in Chicago and, no, this was not a field trip. I was asked to participate in a panel discussion at a meeting of government regulators. This was for the Midwest banking, securities and insurance regulators and the subject of the panel was Life Settlements. The panel was made up of myself, as a practitioner, Nicholas Ross, V. P. producer relations of Ash Brokerage, a major insurance brokerage operation, and Michael Freedman, government affairs representative (lobbyist) of Coventry, a leading life settlement company. The moderator was Jim Mumford, First Deputy Commissioner of the Iowa Insurance Division. There were around 75 attendees from my estimation.

While we covered a lot of ground from life settlements 101 to some of the current abuses taking place, several things became clear to me. First, many of these regulators were very unclear about what life settlements are and how they really work. There is very little opportunity for any of them to become educated in this area. Second, most didn’t seem too concerned about “traditional” life settlements whereby a policy insured sells his or her policy to an independent third party buyer for more than the cash value. There is concern over how the consumer knows he’s gotten a fair price but there is also a belief that market forces will help correct that. Another worry is advisor compensation and disclosure.  All of this leads to the subject of transparency and disclosure which probably should be regulated somehow.

The big worry though was in the so called “stranger originated” life settlements. There are Apparently BIG organizations that are out there soliciting senior citizens to purchase life insurance policies that they then expect to sell for an almost immediate profit. Some of these schemes are so well cloaked as to be undetectable by regulators and insurance companies and there is deep concern that someone somewhere is being swindled.

What regulators tend to do under these circumstances is overreact and pass legislation that “throws out the baby with the bath water.” Conscientious planners and good citizens lose when this happens. These regulators listened well, asked good questions, were appreciative and seemed open to ideas about how to approach a new and burgeoning industry. Mostly, this was great fun and hopefully we made progress at least in keeping the regulators informed and knowledgeable.

Unfortunately, my speaker’s gift was not a large ingot of gold bullion, but lunch was sure good and the Fed is a pretty grand facility.

Randy Fox

Entry Filed under: Estate Planning