Texas state regulators hoped to tighten rules for one particular investment that has cost Texans hundreds of millions of dollars.

But the Legislature is not going to come through for consumers.

As readers of the Fort Worth Star-Telegram Dave Lieber Watchdog column first learned, not one lawmaker has introduced a bill that would clarify state law on the life settlement industry and determine whether the investments — essentially bets on when a stranger will die — are securities.

Both the Texas Department of Insurance and the Texas State Securities Board requested a law to tighten consumer protections, as other states have done. But the agencies couldn’t find any takers among legislators.

In his pre-session report to lawmakers, outgoing state Insurance Commissioner Mike Geeslin wrote that the life settlement industry “has produced a substantial amount of harm to Texas investors, resulting in at least five receiverships and bankruptcies involving several hundred million dollars in investor funds.”

He asked lawmakers to “consider clarification of authority over the investment side of the life settlement industry,” which he said was a billion-dollar industry in 2008.

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Regulators want to end confusion between the Insurance Department and the Securities Board over regulation. Life settlements are considered insurance-related because the companies that sell them are licensed by insurance regulators. But some life settlement investments are also considered securities.

Texas’ most prominent life settlement company, Life Partners of Waco, faces a U.S. Securities and Exchange Commission investigation into how it estimates life expectancies of insured people.

The publicly traded company also faces a slew of lawsuits from shareholders and disgruntled customers. One shareholder’s lawsuit, filed last month in federal court in Waco, says the company used unrealistic life expectancy data. That information was the basis for reports that were deceptive and fraudulent, the lawsuit alleges. (The company has not publicly responded to the suit.)

State Sen. John Carona, R-Dallas, chairs the Senate’s Business and Commerce Committee, which would have reviewed any bills about life settlements. Through a staffer, he answered my question about the lack of a bill.

“There is currently pending litigation in the field as well as federal SEC activity. At this time, we are monitoring these events but do not feel we have enough information to file and pass legislation. And it is difficult to conduct thorough research at this stage of the session.”

That is somewhat surprising not only to regulators but also to others watching the industry. Scott Skelton, a Lufkin lawyer who is seeking Life Partners customers for a potential class-action lawsuit, said: “If the SEC is investigating it and other states are regulating it, you’d think Texas would want to regulate it as well. But you never know what’s going on in the Legislature. They’ve got a lot of fish to fry this session.”

Life Partners, founded in 1991, claims $2.8 billion in transactions. The company has won two major court rulings in the past 15 years that its products are not securities and not under SEC supervision.

The company matches people who can no longer afford or don’t want to continue paying their life insurance premiums — or people who bought policies to resell them — with investors who pay a fee to buy fractional interests in the insurance and pay the premiums. They receive the benefits when insured people die.

The investments go bad when people live beyond life expectancy estimates.

Analyses completed in recent weeks of Life Partners’ financial records on file with the state show that the company has an abysmal record of predicting life expectancies.

The Wall Street Journal reported that of 297 policyholders, 283 outlived the life expectancy estimate given to investors. The Life Settlement Reports, an industry newsletter, reported that for 262 deaths reported by the company, life expectancy was double the company’s estimates.

The reason, apparently, is that the company’s estimator, a Reno, Nev., doctor, handled up to 200 life expectancy reports a week. He worked only part time.

One estimate was that he spent an average of nine minutes studying a person’s medical history. Others in the industry may take an hour or more.

Life Partners has not been charged with any wrongdoing in Texas. Company spokeswoman Andrea Atwell declined to comment for this column, except to say that at the Waco offices, “It’s business as usual.”

Forrest Roan, an Austin lawyer who represents insurance companies before state regulators, praised lawmakers for not rushing to make changes. “When you’re talking about lawsuits and investigations, you ought to wait because when you enact a law, you need to have all the facts at hand,” he said. “You don’t want to run out and put something on the books just to be doing it.”

State regulators aren’t so patient.

A spokesman for the State Securities Board says that in the last two years, the agency has tried to help 2,200 people who invested about $219 million in life settlements.

“Many are elderly or retired,” spokesman Robert Elder says. “When all is said and done, many of these victims will have lost all or a substantial portion of their money.

“The amount of fraud is staggering, and the need for legislation is clear.”

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Dave Lieber, The Watchdog columnist for The Fort Worth Star-Telegram, is the founder of Watchdog Nation. The new edition of his book, Dave Lieber’s Watchdog Nation: Bite Back When Businesses and Scammers Do You Wrong, is available in hardcover, as a CD audio book, ebook and hey, what else do you need. Visit our store. Now revised and expanded, the book won two national book awards in 2009 for social change. Twitter @DaveLieber