Insurable Interest On NCOIL Agenda
By Jim Connolly
State legislators will tackle the issues of insurable interest of life
insurance, the affordability of prescription drugs and broker disclosure when
they meet March 3-6 for the spring meeting of the National Conference of
Insurance Legislators in Hilton Head, S.C.
An NCOIL resolution opposes efforts to expand states’ insurable interest laws
to allow third parties to make such life insurance purchases. The resolution
is being introduced by Rep. Larry Taylor, R-Galveston, Texas.
The resolution urges other states "not to do what Texas
did," says Rep. Craig Eiland, D-Galveston, Texas.
The definition of insurable interest was expanded in Texas and now there are investor-owned
life insurance products being sold, he says. "The big picture
deterioration of insurable interest is a concern," he adds.
"The biggest concern is expanding insurable interest in a way that
undermines the central concept of the connection between the beneficiary and
the insured. [In third-party purchases] the owner and the beneficiary have no
relationship," Linda Lanam, a vice president
with the American Council of Life Insurers, Washington, explains.
Insurers are concerned about "the law of unintended consequences"
and the effect that it may have on the life insurance product, she adds.
Currently, North Carolina and Tennessee have adopted language that broadens the
definition of insurable interest, and Texas
already had language that was sufficiently broad to allow the use of
investor-owned life insurance. Virginia,
on the other hand, has narrowed language defining insurable interest.
Lanam says that since most of the investor-owned
life insurance transactions are private placements, it is difficult to track
them and how they have affected life insurance markets in the states where
they are permitted.
At press time, LILAC Capital, Nashville,
a proponent of investor-owned life insurance, could not be reached for
Resolutions addressing the availability of prescription drugs are being
sponsored by state Representative Brian Kennedy, D-Hopkinton, Westerly, R.I.
One resolution encourages Congress and the Bush administration to address the
"significant price disparity in the international trade of brand-name
prescription drugs by creating a safe, legitimate program for drug
importation that includes both the current U.S. personal use policy and a
retail/wholesale component or by negotiating trade agreements with other
personal use policy permits an individual to import for personal use a 90-day
supply of prescription drugs through mail-order pharmacies and other venues.
A separate resolution on the same issue encourages the Canadian Minister of
Health to continue to allow the importation of medications by U.S. consumers and not to "take actions
that may have serious health implications for individuals accessing
medications from Canada."
States including Rhode Island have passed
laws that enable consumers to continue to import medications from Canada.
Kennedy says he and other legislators in his state constantly hear complaints
over the cost of prescription drugs. Rhode Island allows nonresident
licensing of pharmacies and that licensing has been extended to Canadian
pharmacies, he says, adding there is the possibility it may be extended
further to include Ireland, the United Kingdom and Europe.
The reason this option is important, Kennedy asserts, is because "there
are Americans who now must decide whether to buy food and gas or prescription
He says the argument that drugs imported from abroad are not safe is a faulty
one because pharmaceutical companies send prescription drugs over the border
to begin with.
The resolutions seek to address opposition to importation from the Bush
administration as well as the possibility that the Canadian government may
establish guidelines that would require Americans to have a doctor’s visit in
Canada before receiving
prescriptions from Canada,
Ultimately, according to Kennedy, legislation passed in Rhode Island and other states that permits
importation of prescription drugs could end up in the courts. The Food and
Drug Administration has indicated that such a practice is not permitted.
However, Kennedy says, "there is not a lot of confidence in the FDA
In addition to these issues, legislators also will discuss broker
compensation and fiduciary responsibility and what legislation, if any,
should be introduced in state legislatures, says Susan Nolan, executive
director of NCOIL, Troy, N.Y.