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FIRMA Follow Up: Best Practice Standards for Life Insurance

Thursday, May 16, 2013

As mentioned from the main platform of the Fiduciary & Investment Risk Management Association (FIRMA) annual conference, trustees of life insurance trusts have struggled with the management of trust-owned life insurance (TOLI).  This is not surprising given the lack of standards for the prudent selection and proper management of life insurance as an asset.  In response, best-practice standards were announced at FIRMA so ILIT trustees can follow a standard process for life insurance like those already used for most all the other types of assets that trustees routinely manage. 

These Best Practices Standard for Life Insurance Stewards were finalized for public comment by seventeen industry leaders at West Point this past April.  In attendance were representatives of nearly every profession who has clients who own life insurance, including: the largest trust and estates law firm; largest third-party administrator of TOLI for institutional fiduciaries; the largest association of financial planners; one of the leading financial planning schools; and, most of the largest independent distributors of life insurance. 

Such best-practice standards are particularly welcome in the current environment where customer complaints are on the rise and life insurance agents, brokers and/or consultants are increasingly offering TOLI reviews.  Because some TOLI review providers actually violate rules of the chief regulatory body of the financial services industry and guidance from the chief actuarial body of the life insurance industry, these standards will help trustees discern those providers who support Prudent Investor principles from those who do not. 

 “Finally … this is excellent and long overdue … a welcomed structure” said a FIRMA Board Member about these standards from the fiduciary’s perspective.  In addition, the CEO of The American College “strongly commends this dialogue” from the life insurance perspective and is “praying something positive comes from it!”.  To review simply click here to download and review the West Point Draft of these Best Practice Standards for Life Insurance Stewards.

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