Washington, D.C. (May 30, 2008) — Connecticut Governor M. Jodi Rell (R) has signed legislation that will help protect senior citizens from a growing financial abuse and maintain the integrity and good social purpose of life insurance.
Governor Rell yesterday gave final approval to H. 5512, legislation designed to monitor and deter stranger-originated life insurance (STOLI), transactions in which financial speculators such as hedge funds induce senior citizens to purchase life insurance solely to sell the death benefits to the speculators. Seniors caught up in these schemes can face unexpected taxes, possible legal liability and inability to purchase life insurance in the future for legitimate estate planning purposes.
“Governor Rell and the General Assembly put Connecticut in the forefront of efforts to deter STOLI. Life insurance is for protection of families and businesses. Life insurance policies should never be initiated as an investment vehicle for hedge funds trying to profit off the deaths of people they do not know. H. 5512 is carefully targeted at STOLI. It will not affect the rights of good faith policy owners to sell their policies to third parties if they no longer need or want their insurance,” said Frank Keating, president and CEO of the American Council of Life Insurers (ACLI).
“STOLI violates the essential social purpose of life insurance, which is protection. It was never intended to be used as a vehicle for financial speculation on human life, and NAIFA is glad to see the states take action to try to prevent STOLI”, commented Jeffrey J. Taggart, CLU, ChFC, LUTCF, president of the National Association of Insurance and Financial Advisors (NAIFA). Taggart cautioned, however, that “STOLI is often difficult to uncover and identify, and the states need to take strong action to not only prohibit STOLI but to prevent it and enable regulators to identify STOLI schemes.”
H. 5512 is based on model legislation developed by the National Conference of Insurance Legislators (NCOIL), the national association of state lawmakers with insurance oversight responsibilities. H. 5512 establishes a statutory definition of STOLI and classifies it as a fraudulent act. In addition, it places limits on the ability of premium finance companies to have ownership stakes in the insurance policies they finance. H. 5512 also requires life settlement providers to report data to the Connecticut Insurance Department that will help it monitor the marketplace and identify STOLI. The legislation was approved unanimously by both the House and the Senate.
ACLI and NAIFA thanked Reps. Brian J. O’Connor (D-38th District) and Kevin Witkos (R-17th District), and Sens. Joseph J. Crisco (D-17th District) and Sam Caliguri (16th District) for their leadership on this issue. Insurance Commissioner Thomas R. Sullivan also supported H. 5512.
Since the beginning of 2008, STOLI legislation has been approved in West Virginia, Maine, Indiana, Oklahoma, Kansas, Arizona, Nebraska, Iowa, Hawaii, Ohio and Connecticut.
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About ACLI: The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 353 member companies account for 93 percent of the life insurance industry’s total assets in the United States, 93 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.