The Association for Advanced Life Underwriting (AALU), the American Council of Life Insurers (ACLI), the Association of California Life and Health Insurance Companies (ACLHIC), and the National Association of Insurance and Financial Advisors (NAIFA) issued the following joint statement in response to the veto of SB 1543, legislation to protect consumers through restrictions on stranger-originated life insurance (STOLI):
Washington, D.C. (October 1, 2008) - We are very disappointed by Governor Schwarzenegger’s veto of SB 1543, legislation that was approved overwhelmingly by both the California Assembly and the Senate and endorsed by a broad coalition of consumer and business groups. Supporters of SB 1543 included AARP, life insurance companies, life insurance agents and much of the life settlement industry. The veto leaves California seniors exposed to stranger-originated life insurance (STOLI) fraud.
STOLI is a misuse of life insurance in which hedge funds and other investors induce senior citizens to purchase life insurance solely to transfer the death benefits to the investors, who hope to profit when the seniors die. This transaction serves no social purpose. It is simply a get-rich-quick scheme for hedge funds. The seniors caught up in these schemes can face potential tax liability, loss of privacy and legal concerns.
SB 1543 was targeted solely at STOLI arrangements. It did not affect the rights of any good-faith policy owners to settle their life insurance policies if they decided they no longer needed or wanted the coverage. SB 1543 would have established vitally-needed consumer protections, such as enhancing the ability of the California Department of Insurance to police fraudulent and deceptive practices. The broad support for SB 1543 reflects the careful craftsmanship of the bill’s sponsors. We appreciate the California legislature’s ongoing concerns over the potential damage faced by seniors caught up in STOLI schemes. We hope the legislature will take up this issue again as soon as possible next year.
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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 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 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.