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California Prohibits Sale of Second-Hand Life Insurance by Unlicensed PartiesA bill signed into law by Gov. Arnold Schwarzenegger this week makes it unlawful for unlicensed vendors to provide second-hand life insurance policies, or life settlements, and also prohibits individuals from buying life insurance policies for investors.
With senate bill 98—which also prohibits the sale of an existing life insurance policy to a third party for two years after it’s issued if the selling price is more than the cash surrender value but less than the death benefit of the policy—California becomes the 34th state to regulate the life settlement market, which has become a rapidly growing market estimated at $13 billion in 2006 and expected to grow more than tenfold in the coming decade.
There does not seem to have been much resistance from major bodies responsible for selling life settlements, including the Coventry Group, which sees the law as ensuring California consuers can obtain the best value policies. In addition, the Association of California Life and Health Insurance Companies said that the law was a necessary step toward reducing predatory practices against seniors.
The law also contains other provisions, including that insurers may not restrict lawful transfers of policy ownership, and that individuals may cancel a settlement 30 days after signing, or 15 days after receiving the proceeds from said settlement, whichever comes first.
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