‘Living Benefits’ Insurers Licensed

In a move to regulate a relatively new field of insurance, the state Insurance Department has begun licensing companies that provide “living benefits” for terminally ill life insurance policyholders.

Under “viatical settlement contracts,” the terminally ill get to use a portion of their life insurance proceeds while they are still alive.

Policyholders receive 55% to 90% of the face value of their policies up front in exchange for naming as the policy’s beneficiary the company that writes the contract.

AIDS activists say regulation is welcome in a business where consumers are especially vulnerable. A majority of those seeking living benefits contracts are infected with the virus that causes AIDS.

Jacques Chambers, insurance specialist for AIDS Project Los Angeles, said that when viatical settlement contracts first began to be offered several years ago, some companies discouraged consumers from shopping around and pressured them to make immediate decisions and accept unfairly small amounts. Chambers said he knew of one person who received less than 30% of his policy’s face amount despite having only six months to live.

The Insurance Department in January, 1992, adopted licensing procedures requiring companies to provide information about their plan of operation, financial status, past experience in the field and methods of obtaining medical information about prospective customers.

Insurance Commissioner John Garamendi this week issued the first three licenses, to American Life Resources Corp. of Florida, Neuma Inc. of Illinois and Living Benefits Inc. of New Mexico. He said 16 additional viatical settlement companies doing business in California have applied for licenses.