Strong Anti-Stoli Legislation Advances In Three States
Washington, D.C. (June 3, 2009)--The battle to deter a financial abuse of senior citizens advanced recently as three state legislatures approved bills aimed at a fraudulent transaction called stranger-originated life insurance (STOLI).</font>
Vermont, Nevada and Minnesota each passed carefully-crafted statutes that would reduce the economic incentive for these transactions. The bills approved in Vermont and Nevada feature a targeted five-year moratorium on the settlement of life insurance policies that have the characteristics of STOLI. The moratorium only applies to STOLI policies and would not affect policy owners who purchased life insurance in good faith.
The Vermont bill, H.222, was signed into law June 1 by Gov. Jim Douglas (R). The Nevada bill, S.B. 426, was signed into law on May 29 by Gov. Jim Gibbons (R).
The Minnesota bill, S.F. 166, was signed into law on May 11 by Gov. Tim Pawlenty (R). Its main feature is a four-year moratorium on the settlement of STOLI-related policies.
In STOLI transactions, financial speculators such as hedge funds or their representatives induce senior citizens to purchase life insurance they otherwise would not buy solely to transfer the death benefits to the speculators. The speculators pay the premiums and hope to profit when the seniors die. The sooner the seniors die, the higher the profit. These schemes are designed to evade state insurable interest statutes which say that life insurance should only be purchased by those who would suffer financially by the death of the insured, and not by speculators who would profit by it.
“STOLI transactions are fraudulent, and the seniors caught up in these schemes face unexpected taxes, loss of privacy and legal liability. The speculators promoting STOLI may induce the seniors to lie on policy applications, and sign their names to the lie, just so the speculators can reap huge profits,” said Frank Keating, president and CEO of the American Council of Life Insurers (ACLI).
“Especially in these difficult economic times when many seniors may be vulnerable to the come-ons of these speculators, it is gratifying to see that states like Vermont, Nevada and Minnesota are stepping up to provide seniors a high level of protection,” said Cliff F. Wilson, CLU, ChFC, LUTCF, CLF, president of the National Association of Insurance and Financial Advisors (NAIFA).
Vermont’s H. 222 ranks among the strongest bills in the nation, and ACLI and NAIFA appreciate all those who helped make it happen: Insurance Commissioner Paulette Thabault, House Commerce and Economic Development Chairman Warren Kitzmiller (D-Montpelier) and Senate Finance Committee Chairman Ann Cummings (D-Montpelier).
Nevada’s S.B. 426 is also an excellent bill that will put Nevada in the front ranks of states protecting seniors from STOLI abuse. ACLI and NAIFA thank Insurance Commissioner Scott J. Kipper, who proposed the legislation and braved strong opposition from STOLI promoters to see it through to passage Sen. Maggie Carlton (D-Las Vegas), who chairs the Senate Commerce and Labor Committee, was the legislative leader of the legislation and her outstanding efforts were indispensable.
ACLI and NAIFA also appreciate strong support for anti-STOLI legislation in Minnesota. The four-year moratorium, combined with other features of S.F. 166, will help prevent STOLI from taking place. Sen. Linda Scheid (DFL-46) and Rep. Kate Knuth (DFL-50B) deserve special thanks for their leadership.
“The legislative battle against this senior abuse began in earnest just three years ago. In that short time, 21 legislatures have enacted laws to respond to the threat STOLI poses to seniors and the insurance marketplace. The bills approved in Vermont, Nevada and Minnesota show that lawmakers increasingly understand that half-way measures are insufficient to stop STOLI,” Keating said.
“The great benefit of a five-year moratorium on the settlement of STOLI policies is that it is self-executing. It deters STOLI without forcing states to expend significant new resources on enforcement. With states across the nation facing budget constraints, the five-year moratorium offers a cost-effective way to protect seniors from STOLI abuse,” Wilson said.
The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 340 member companies account for 93 percent of the life insurance industry’s total assets in the United States, 94 percent of life insurance premiums and 94 percent of annuity considerations. In addition to life insurance and annuities, ACLI member companies offer pensions, including 401(k)s, long-term care insurance, disability income insurance and other retirement and financial protection products, as well as reinsurance. ACLI's public Web site can be accessed at www.acli.com.
About NAIFA: Founded in 1890 as the National Association of Life Underwriters, the National Association of Insurance and Financial Advisors comprises nearly 800 state and local associations representing the business interests of 60,000 members nationwide. Members focus their practices on one or more of the following: life insurance and annuities, health insurance and employee benefits, multiline, and financial advising and investments. NAIFA’s mission is to advocate for a positive legislative and regulatory environment, enhance business and professional skills, and promote the ethical conduct of its members. Visit NAIFA’s website at www.naifa.org.
Contact:
ACLI Jack Dolan (202) 624-2418 [email protected]
NAIFA Lee Allen (703) 770-8112 [email protected]
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