April 18, 2014

Insurance: Cleaning House - Miami-Dade- Feb. 2004

David Villano | 2/1/2004
In the mid-1980s, when the AIDS crisis was at its height, insurance brokers offering terminally ill patients cash upfront for their life insurance death benefits began flocking to Miami. But the "viatical" industry, attracted by the area's large population of seniors and HIV patients, was plagued by fraud and unscrupulous practices.

One of the main reasons: The amount investors pay for policies largely depends on the life expectancy of policyholders, a patently unpredictable factor.

Here's an example of how the policies work: Through a broker, an investor pays the holder of a life insurance policy $50,000 upfront for an insurance policy with a death benefit of $100,000. The investor continues to pay the premiums, so the longer the policyholder lives, the smaller the return and the longer it takes to collect.

Now with a new name -- "life-settlements" -- and a target client base that extends beyond terminally ill patients, viaticals are finding support among mainstream institutional investors such as AIG, Berkshire Hathaway and GE Capital. The financial service professionals are promising credibility and accountability.

"We're now seeing a house-cleaning that was borne from the sins of a decade ago," says Gary Brecka, president and managing principal of Miami Beach-based Life Asset Group, a year-old firm that brokers policies. Like others entering the field, Brecka is a licensed securities broker who sees life insurance policies as estate-planning vehicles.

Brecka and other upstarts promote strict guidelines and support tightened state oversight. Firms such as his broker policies only to institutional buyers, not individual investors, who are the source of most fraud complaints. Only a small amount of his firm's business involves terminally ill patients, a highly speculative market segment fertile with abuse. Many policyholders taking Brecka up on his offer are young and healthy.

But unlicensed brokers still plague the industry, and the Florida Office of Insurance Regulation routinely receives complaints from investors who say they were misled about the life expectancy of a policyholder.

Bob Lotane, a spokesman with the Office of Insurance Regulation, says while recent legislation has added protection for policyholders and investors, the nature of the business -- essentially speculating on when people will die -- is bound to produce complaints.

Brecka disagrees: "This industry has grown phenomenally over the last few years. As awareness grows, people will see it as a mainstream estate-planning tool just like any other."


IN THE NEWS

Aventura -- Two of south Florida's best-known developers, Jorge Perez's The Related Group of Florida and Edward Easton's The Easton Group, have teamed up to build Aventura Marina, a 378-unit luxury waterfront condominium community. Ground-breaking will be early this year.

Miami -- Miami will host the Travel Industry Association of America's annual tourism convention -- known as the Pow Wow -- in 2009. The May 16-20 event is expected to attract close to 6,000 travel agents and tour operators who will book about $3 billion worth of business. As a result, local officials say, south Florida should receive about $300 million in increased tourism-related bookings in the two to three years following the conference. Miami hosted the Pow Wow in 1999.

With the opening of an office in Dallas, Miami-based law firm Greenberg Traurig has joined the ranks of only a small number of firms nationwide to employ more than 1,000 lawyers. The firm opened in Miami in 1967.

Spanish-language broadcaster Radio Unica Communications Corp. (OTCBB-UNCAQ) has laid off 76 people, all in Miami, as it prepares to be acquired by New York's MultiCultural Broadcasting Corp. The Miami-based chain of 15 AM radio stations filed for Chapter 11 bankruptcy protection in October. Analysts expect no disruption in service at the stations following the $150-million sale.

Miami-Dade -- County and Miami city officials are exploring financing options for a $325-million baseball-only stadium for the Florida Marlins. County commissioners have pledged up to $73 million in tax revenue, a move criticized by some municipal leaders. Some officials have proposed asking voters to approve a half-penny sales tax for the stadium.

Miami-Dade will receive $2.26 million in grants from the Department of Homeland Security to beef up security at the Port of Miami and along the Miami River.

Florida International University has received a $3-million grant from the Kauffman Foundation to improve entrepreneurial studies at the university. FIU's Global Entrepreneurial Center, where much of the funds will be directed, is geared toward improving entrepreneurship within disciplines and departments throughout the university.

The Miami-Dade County School District, the state's largest, was the only district in Florida to miss the voter-mandated cap for class sizes in two of the three grade categories. While the district met class-reduction targets within kindergarten through third grade, class sizes remained above the limit for fourth through eighth grades and for ninth through 12th grades. The state may force the district to hire teachers and to spend more on classroom construction.

Healthcare
FOR-PROFITS TAKE OVER HEALTHY KIDS PROGRAM

MIAMI-DADE -- Two for-profit health plans, Amerigroup and Staywell, will take over the county's Healthy Kids program from Jackson Memorial Medical Center, raising concerns that the program's neediest patients will not have access to Jackson's renowned clinics and specialists. Officials of the state-funded Healthy Kids program, which assists about 25,000 needy children in Miami-Dade, say cost was the principal factor, with the two companies submitting lower bids than the non-profit Jackson Health Plan.

In other news, the Miami-Dade County inspector general's office has uncovered more than $85 million in outstanding bills at Jackson Memorial Medical Center from patients who should not have been admitted for care -- uninsured, non-county residents not experiencing a medical emergency. Many of the patients were foreign nationals who traveled to Miami-Dade seeking high-quality care without the means to pay for it, the county report says.

Tags: Miami-Dade

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