Legislatures in Maine and Kentucky Pass STOLI Laws, Earn Praise from Life Insurance Settlement Association |
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Written by U.S. Insurance News
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Monday, 21 April 2008 |
Kudos to Maine and Kentucky from the Life Insurance Settlement Association (LISA).
The association is praising both states because they recently passed legislation that addresses Stranger Originated Life Insurance (STOLI), an illegal practice that violates state insurable interest laws. In doing so, the states rejected the anti-consumer legislation that some life insurance companies and state regulators are promoting that would take away the property rights of citizens in life insurance, according to LISA.
Kansas may be the next to earn LISA’s praise.
The Kansas legislature recently rejected efforts to rewrite that state’s settlement law using the Model Act of the National Association of Insurance Commissioners (NAIC). The Kansas bill is on its way to the governor of that state.
Along with Kentucky legislation, which the governor of that state signed into law, both the Kansas and Maine bills are based entirely on model legislation developed by the National Conference of Insurance Legislators (NCOIL). The Maine legislature adopted measures that focus on STOLI while still supporting the existing Maine life settlement law.
“The best solutions to the problem of Stranger Originated Life Insurance are to be found in measures that aid in the detection, prevention, and enforcement of improper practices that occur at the origination of the insurance contract,” said Doug Head, executive director of LISA. “Attacking the right of policy owners to assign their policies is the wrong approach. That approach has now been rejected by Kentucky and Maine, among others.”
Head was referring to recent legislation in Arizona.
LISA has opposed the five-year ban on the assignment of life insurance that was adopted at the NAIC.
“The NAIC approach is an indirect attack on STOLI but directly attacks consumers and their property rights in life insurance,” Head said.
The NAIC Model Act has been criticized by the NAIC’s own funded consumer representatives, state legislators, and members of the NAIC for failing to address STOLI and for harming consumers.
Head went on to explain that LISA supports methods that focus on the perpetrators of STOLI who seek to violate state insurable interest laws.
“Laws should enable carriers, agents, and life settlement companies to stop STOLI, but never in the history of the United States has there been an assault on the rights of consumers who have acquired life insurance policies in good faith and want to exercise those rights lawfully,” Head said. “We think most policy makers will understand that this is the right way to deal with this, as have the practical legislators of Kansas and Maine.” |
