The National Association of Insurance Commissioners said anoutside law firm it hired to look into allegations of conflict ofinterest by its members has given it a clean bill of health.

Bryan Cave, LLC based in Kansas City, Mo., conducted an internalinvestigation into the approval process related to the adoption ofthe Viatical Settlements Model Act by the NAIC, which found thatthe process used by the group passed muster, the organizationsaid.

While some approved of the findings, at least one consumerrepresentative and an industry representative questioned theobjectiveness of the investigation.

The NAIC said “the model was accorded open debate and unbiasedconsideration and that the adoption of the model act by the NAIC'sLife Insurance and Annuities “A” Committee was unbiased and notsubject to undue or improper influence.”

“We were confident going into the review that the modelamendments had been subjected to thorough and open debate, and wehave been looking forward to confirmation of those facts. We cannow focus on getting this model introduced and adopted by thestates,” said NAIC President and Kansas Insurance CommissionerSandy Praeger in a statement.

The law firm interviewed all 12 members of the “A” Committeewhich was developing the model, according to Scott Holeman, an NAICspokesperson.

Bryan Cave attorneys “reviewed the process to see if it was (1)open and deliberative, and (2) that members made decisions based oninformation received from all sides,” Mr. Holeman added. But, atpress time it had not been confirmed what other “relevantdocuments” in addition to meeting minutes had been used in thereview.

The conflict issue followed a letter last September fromconsumer representatives criticizing the closeness of somecommissioners to the life insurance premium finance industry,including former North Dakota Commissioner Jim Poolman.

In particular, the letter cited questions regarding Mr.Poolman's oversight of the development of the Viatical SettlementsModel act as well as concerns about his hope to find a job in theindustry. Additionally, attachments to the letter raised concernsover industry campaign contributions made while Mr. Poolman waschairman of the “A” Committee overseeing the process.

Trade groups contacted by National Underwriter said they had notbeen interviewed during the internal investigation.

Lynn McCreary, a Bryan Cave partner who headed up theinvestigation, could not immediately be reached for comment.

In a statement, Mr. Poolman, now running his own consultingbusiness based out of Bismarck, N.D., said, “I am glad this wholeepisode is over, and I am not surprised with the results.”

He added: “I have always known there were no conflicts ofinterest. This is something just ginned up by those in the viaticalsettlement industry who don't want to be further regulated. I amdisappointed by their tactics, but it comes with the territory.There was a lot of hard work and effort put into this legislationby many, and I am glad that I and the process have beenvindicated.”

Life settlement and life financing representatives see themodel's development and the ensuing investigation differently.

The partner chosen to head up the investigation is a former MetLife employee, said Doug Head, executive director of the LifeInsurance Settlement Association, Orlando, Fla. Among her othercredentials, Ms. McCreary's biography said that she was previouslyvice president of MetMor Financial, a mortgage subsidiary of MetLife, New York.

Mr. Head questioned whether someone who came out of the lifeinsurance industry could look impartially at the issue.

He also noted that in the NAIC's record of model acts, pre-2004there are 30-35 pages of records on the viatical model, butpost-2004, there is one line describing work that is being done onthe model.

So, he said, “I don't think it adds an ounce of credibility tothe model on the table now.” And, Mr. Head continued, “we're goingto scoff at it” when the model is proposed in statelegislatures.

Since “I don't understand what the process is” and how adetermination was made, it is difficult to comment on it, saidScott Cipinko, executive director of the Life Insurance FinanceAssociation, Atlanta. Those involved in the development of themodel should have been asked to comment, he added.

“This confirms what we have maintained since the model wasadopted. The NAIC allowed for extensive discussion and debate andgave all sides the opportunity to have their voices heard,” saidBruce Ferguson, senior vice president-state relations with theAmerican Council of Life Insurers, Washington.

“The NAIC's careful deliberations produced a ViaticalSettlements Model Act that would address the most prevalent form ofSTOLI, which is a transaction initiated by third-party investorslacking insurable interest for the purpose of settling the policyin the secondary market.”

Gary Sanders, senior counsel for law and government relationswith the National Association of Insurance and Financial Advisors,Falls Church, Va., said that while he cannot speak for theinvestigation's conclusions because NAIFA was not included in theinvestigation, “our perception was that the process [of the model'sactual development] was thorough and went on for quite some time.It seemed like everyone was heard.”

Birny Birnbaum, executive director of the Center for EconomicJustice, Austin, Texas, said he was glad that the NAIC was able to“clear the air over allegations made against Jim Poolman.” He notedthat Poolman was involved in pro-consumer issues for manyyears.

And he added that although he opposes the NAIC model, when it israised in state legislatures, he will be able to discuss the modelitself.

A conflict-of-interest policy needs to be developed, Mr.Birnbaum said. Such a policy could require commissioners whoparticipate in leadership positions at the NAIC or as committeeheads to sign an agreement in which they agreed not to acceptindustry positions tied to issues that they had worked on. Failureto comply with the signed agreement would result in a monetarypenalty, he added.

Bill Newton, executive director of Florida Consumer ActionNetwork, Tampa, Fla., said that even if nothing illegal was doneduring the development of the viatical model, there is still anissue of perception and “an appearance that there was a bias. Andthat was a problem.”

“If he [Mr. Poolman] had taken the donation and recused himself,it would have left the process clean,” Mr. Newton added.