Governor's Signature Would Make California 13th State to Approve Anti-STOLI Legislation
Washington, D.C. (Sept. 3, 2008) - The battle against a growing misuse of life insurance that could potentially harm countless senior citizens took a major step forward when the largest state in the nation approved legislation that will help deter abusive transactions.
California Senate Bill 1543, which was approved Aug. 29 by the legislature, targets stranger-originated life insurance (STOLI), a growing national scandal in which financial speculators such as hedge funds help induce senior citizens to purchase life insurance solely to transfer the death benefits to the speculators. The speculators hope to profit by collecting the death benefits when the seniors die, and the sooner they die, the higher the profit.
Seniors caught up in these schemes can face a multitude of potential problems, including unexpected taxes, loss of privacy, loss of eligibility for government entitlement programs and legal liability.
“STOLI is an ugly and twisted transaction that undermines the integrity of the life insurance marketplace. We are very happy the legislature has approved a bill to give the California Insurance Department better tools to detect and crackdown on abusive STOLI transactions. If signed into law, California will be the 13th state to take action to protect its senior citizens from the speculators whose only interest in them is their early death,” said Frank Keating, president and CEO of the American Council of Life Insurers.
S.B. 1543 is based on a model law developed by the National Conference of Insurance Legislators (NCOIL), which is the association of state representatives and senators with insurance oversight responsibilities. S.B. 1543 establishes a statutory definition of STOLI and classifies it as a fraudulent act. It also allows the California Insurance Department to collect information from life settlement providers that will help it monitor the market and identify STOLI.
The legislature rejected an amendment which would have permitted premium financing arrangements that are characteristic of STOLI. The legislature held firm in favor of consumer protection by saying “no” to STOLI financing schemes.
“NAIFA’s membership is very pleased with the California anti-STOLI legislation,” said Jeffrey J. Taggart, CLU, ChFC, LUTCF, president of the National Association of Insurance and Financial Advisors (NAIFA). “Sen. Machado has been a forceful and untiring advocate for legislation deterring STOLI and he deserves the thanks of all California seniors, as well as the professional insurance agent community.”
“It is hard to overstate the importance of California legislation addressing STOLI. As advocates for top-producing life insurance agents, the Association for Advanced Life Underwriting (AALU) supports state legislation to protect agents and clients by trying to prevent stranger-originated life insurance without impairing legitimate uses of life insurance and life settlements. Because of the courage and determination of California legislators, the most populous state will have new tools dedicated to this goal,” added David Stertzer, CEO of AALU.
“A remarkable coalition emerged on behalf of S.B. 1543. We were joined by major consumer groups, such as the American Association of Retired Persons (AARP), as well as leaders in the life settlement industry in support of vital legislation to protect senior citizens from unscrupulous STOLI schemes. We urge Governor Arnold Schwarzenegger to sign S.B. 1543 into law to provide California seniors the peace of mind they deserve,” said Brad Wenger, CEO of the Association of California Life and Health Insurance Companies (ACLHIC).
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About AALU: Founded in 1957, the Association for Advanced Life Underwriting (AALU) is a professional trade association representing 2,000 life insurance agents and financial advisors nationwide. Most members are engaged in complex uses of life insurance such as in business continuation planning, estate planning, charitable planning, retirement planning, deferred compensation and employee benefit planning. The mission of AALU is to promote, preserve and protect advanced life insurance planning for the benefit of its members, their clients, the industry and the general public. AALU's website can be accessed at www.aalu.org.
About ACLHIC: For over 45 years, the Association of California Life and Health Insurance Companies has been the industry's primary voice in Sacramento. Founded in 1962, by Occidental, Pacific Mutual and Cal-West life insurance companies, ACLHIC began as the Association of California Life Insurance Companies (ACLIC) with an Executive Vice President, Lewis Keller; a secretary and a small office in Oakland. In 1995, the association's name was changed to the Association of California Life and Health Insurance Companies (ACLHIC), reflecting the increased attention paid to health and disability insurance issues. From the start, ACLHIC's main goals have been to advance the interests and well-being of the life and health insurance industry before legislative and administrative bodies. Because trust has been established over the years, legislators know the industry appreciates the broader public policy concerns, and the industry can be reassured that policy makers are less likely to impose arbitrary or discriminatory prohibitions. Visit ACLHIC’s website at www.aclhic.com.
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.