NCOIL Adopts Resolution Identifying Certain Enhanced Cash Surrender Value Endorsements as Violating the Standard Nonforfeiture Law


For Immediate Release
July 28, 2022
Contact: Pat Gilbert
(732) 201-4133

Resolution Calls Upon State Regulators to Enforce “Smoothness” Requirement of Standard Nonforfeiture Law by Withholding Approval of, and Rescinding Any Previous Approval Of, Certain Enhanced Cash Surrender Value Endorsements

Belmar, NJ – During the recently concluded 2022 National Council of Insurance Legislators (NCOIL) Summer National Meeting in Jersey City, NJ, the organization unanimously adopted a Resolution Identifying Certain Enhanced Cash Surrender Value Endorsements As Violating The Standard Nonforfeiture Law (Resolution). The Resolution was sponsored by Indiana Senator Travis Holdman, former NCOIL President, and co-sponsored by Texas Representative Tom Oliverson, M.D., NCOIL Treasurer.

The Resolution is in response to certain life insurers disregarding the Standard Nonforfeiture Law’s “smoothness” requirement by offering “enhanced cash surrender value endorsements”, which aim to incentivize consumers to terminate their policies in exchange for large increases in cash surrender value. The Standard Nonforfeiture Law’s “smoothness requirement” prohibits sharp increases in cash values and makes illegal cash surrender benefits that are discontinuous in nature and available only during certain windows of time.

At both the 2021 NCOIL Fall Meeting and 2022 NCOIL Spring Meeting, Sen. Holdman had raised this issue during the NCOIL-NAIC Dialogue, a meeting during which NCOIL legislators discuss with attending Insurance Commissioners (or equivalent) timely and important insurance public policy issues. The issue was further discussed during an interim Zoom meeting of the NCOIL Life Insurance & Financial Planning Committee in June, during which former Illinois Insurance Director Nat Shapo, on behalf of the Life Insurance Settlement Association (LISA), and the American Council of Life Insurers (ACLI) offered each organization’s respective views on enhanced cash surrender value endorsements.

Sen. Holdman stated, “Upholding the rule of law is very important to me, and the scenarios that were presented to me throughout the past several months seem to be a clear violation of statutory law. In addition to working on this issue with NCOIL, I’ve been communicating with my insurance department, and I look forward to this Resolution being used as a tool to resolve this issue in my home state and across the country.”

The Resolution notes that certain limited time, enhanced cash surrender value offers mimic life settlements, but the carriers offering them do not follow the consumer protection life settlement statutes created by legislators to protect policyholders offered limited time, big cash incentives to give up their policies.

The Resolution also makes clear that that there are two similar types of products, but only one of which is the target of the Resolution. That wholly different product—never asserted to be in violation of the insurance code and thus not objectionable to NCOIL—has the same “enhanced cash surrender value” name, and is a common rider offered at policy issuance, but doesn’t consist of a limited time, spiked offer to terminate the policy. Instead, it’s a product designed to support the persistence, rather than the termination, of corporate owned policies due to the tax benefits of treating the surrender value as an asset.

Rep. Oliverson said, “I’m glad that Senator Holdman brought this issue to NCOIL’s attention, and I’m proud to serve as co-sponsor of the Resolution. I share Senator Holdman’s passion for upholding the rule of law and I’m pleased that NCOIL took a position on this for states to consider using as guidance.”

“Kudos to Senator Holdman and Representative Oliverson, and everyone else involved, for their leadership on this very important issue,” stated Commissioner Tom Considine, NCOIL CEO. “This issue clearly struck a chord with the member legislators of NCOIL, and I am pleased that the organization took a stand to ensure that the law is followed and that consumers are protected.”

“The process that led to the adoption of this Resolution displayed NCOIL at its best,” stated California Assemblyman Ken Cooley, NCOIL President. “An issue was identified, thoroughly discussed, and dealt with in a fair and diligent manner. I’m also proud that the Resolution reinforces the importance of legislative oversight in our system of government. In this instance, it is critical that legislators exercise oversight authority to ensure that regulators are approving products authorized by statute.”

“A key part of NCOIL’s mission is to ensure that consumers are protected,” Cooley continued. “This Resolution, and its unanimous support, shows that NCOIL seeks out and addresses issues consistent with that mission.”

A full copy of the Resolution appears here


NCOIL is a national legislative organization with the nation’s 50 states as members, represented principally by legislators serving on their states’ insurance and financial institutions committees. NCOIL writes Model Laws in insurance and financial services, works to preserve the State jurisdiction over insurance as established by the McCarran-Ferguson Act over seventy years ago, and to serve as an educational forum for public policymakers and interested parties. Founded in 1969, NCOIL works to assert the prerogative of legislators in making State policy when it comes to insurance and educate State legislators on current and longstanding insurance issues.