|
Chalk up another victory for the National Association of
Insurance and Financial Advisors (NAIFA), which is leading a crusade against Stranger-Originated
Life Insurance (STOLI).
The local chapter of NAIFA successfully educated the
Connecticut General Assembly about the dangers of STOLI, to the point that the
legislature recently passed a law that will help deter STOLI transactions.
The bill, H.B. 5512, was passed by the legislature on May 8
and awaits the signature of Gov. M. Jodi Rell.
“NAIFA-Connecticut worked closely with the legislature to
ensure that lawmakers understood the importance of passing legislation
addressing STOLI,” said Jerry S. Flowers, NAIFA-Connecticut national committeeman.
“We testified at several committee hearings in support of the STOLI
legislation, and our members responded in force each time we activated our grass
roots network on this issue.”
STOLI transactions occur when investors or their
representatives encourage senior citizens to take out life insurance policies
they otherwise would not purchase and then convince them to transfer most of
the policy benefits to the investors, who profit when the seniors die. Seniors
purchase these policies in their own names but agree to arrangements where the
investors, after a period of time (typically the expiration of a two-year
contestability period), get beneficial ownership of the policies. The seniors
receive some form of financial inducement for this, such as an up-front
payment, a portion of the profit when the policy is sold, or a small continuing
interest in the policy death benefit.
H.B. 5512 is modeled after legislation developed by the
National Conference of Insurance Legislators, an association of state lawmakers
responsible for the oversight of insurance issues. The bill defines what
constitutes STOLI, makes transacting STOLI a fraudulent act, and includes data-gathering
and reporting requirements designed to help identify when STOLI transactions
have occurred.
“It’s great to see Connecticut
being added to the growing list of states passing legislation to protect senior
investors from STOLI abuses,” said Jeffrey J. Taggart, NAIFA president. “Insurance
is not, and never was intended to be, a means of wagering on human life, and STOLI
transactions do just that. It is essential that states continue to pass
laws like this to protect the integrity of the insurance industry and its
agents.”
|
