ERROLD F. MOODY JR.

October 17, 2005

Mr. John Garamendi

Insurance Commissioner

300 Capitol Mall, Ste 1700

Sacramento, CA 95814

RE: Life Settlement Fraud

Dear Mr. Garamendi,

As a Life Analyst I review all areas of life insurance. Recently, I became aware of rampant violations of ethical conduct by agents and absolute fraud by consumers. In one case, a prominent plastic surgeon in LA was approved for a $30 million dollar policy. He did not need insurance but had been enticed by the agent to buy it, hold it for the two year incontestability period and then sell it on the open market as a life settlement (he is age 52). The consumer would then reap substantial gain. He called me because he was feeling "uneasy" and needed another opinion since the premiums of $650,000 annually required he put up collateral on two properties. I quickly terminated the deal since his age precluded a sale of the policy (one needs to be generally over age 70 and/or in ill health). The agent had simply had him look at many life settlement sites to show how easy the subsequent sale would be and how much money he could make (actually the agent).

Just this morning a planning client of mine, age 77, is taking a physical for a $2,000,000 policy (he does not need life insurance at all) which the agents told him he should buy so they could sell it after two years. My client had contacted an attorney who said it was legal. I disagree since the consumer has to lie in regards to the reason for the purchase. He apparently is willing to do this.

This is going to be a massive fraud upon the industry and will raise costs for everyone. It violates the very reasons one buy insurance and turns it into a commodity to be sold by agents who are bent on commissions. This is NOT a legal purchase since there never is any intent to provide benefits for any beneficiary save for the first two years.

Put a stop to this now. It is not simply a disgrace in California- it is happening nationally. It violates all ethical conduct by agents but will expand exponentially if nothing is done. Life agents have a bad enough name without this being added to it. But they will deserve all the bad print if it continues.

Very Truly

Errold F. Moody Jr.