by John Darer CLU ChFC MSSC CEFT RSP CLTC
The National Association of Insurance Commissioners provides expertise, data, and analysis for insurance commissioners to effectively regulate the insurance industry and protect consumers.
NAIC Warns of Unlicensed Legitimate Companies Selling Unregulated Non-Insurance Products
In a June 13, 2023 update, the NAIC warns that
"Legitimate companies that are not licensed by the state to sell insurance might lead consumers to think they are selling “insurance” while evading state insurance regulations"
The NAIC uses as an example "a company selling a health sharing plan might call the plan insurance when it is actually an unregulated, non-insurance product".
Factored Structured Settlement Receivables Are An Unregulated Non-Insurance Product Sold by Legitimate Companies as "Secondary Market Annuities"
Factored structured settlement receivables have been marketed to investors, including seniors, injury victims, trial lawyers and fiduciaries as "secondary market annuities", even by people they trust.
The NAIC, in its Statutory Issue Paper No. 160, which was finalized April 6, 2019 made it clear that acquired structured settlement payment rights are not annuities or insurance products.
80% of the US states have adopted the 2017 Revisions to the Life & Health Guaranty Associations Model Act (#520), which expressly excludes acquired structured settlement payment rights from insolvency schemes. The application of the exclusion expressly includes acquired structured settlement payment rights that were acquried prior to the effetcive date that the investor's state adopts the 2017 Revisions to the Model Act.
The NAIC cautionary statement shows an increasing awareness of what is going on in the structured settlement secondary and tertiary markets. The introduction of HB845 in North Carolina, if enacted, puts the regulation of structured settlement factoring under the auspices of the North Carolina Insurance Department effective 2024.