Member Login

Advocacy | Latest STOLI News | NAIFA
Advocacy

Latest STOLI News

Click on the map to open a larger version.

Contact

Gary Sanders
Senior Counsel, Law and Government Relations
(703) 770-8192

Stranger-Originated Life Insurance (STOLI) consists of transactions where investors entice seniors to take out policies, with the intent of all the parties to the transaction being to transfer most of the policy benefits to those investors, who will then profit when the senior citizen dies. The sooner the policyholder dies, the greater the investor’s profit. The seniors purchase the policies in their own names but agree to an arrangement where the investors, after a period of time (usually the expiration of a two-year contestability period) get beneficial ownership of the policy. The seniors receive some financial inducement for this, be it an upfront payment, a portion of the profit when policies are sold or a small continuing interest in the policy death benefit.

NAIFA opposes STOLI transactions. STOLI violates the essential social purpose of life insurance, which is protection. Life insurance developed as a means to protect families from the unexpected death of a breadwinner, or businesses from the financial consequences of the death of an owner or key employee. Life insurance was not intended to be used as a vehicle for financial speculation on human life. In effect, STOLI promotes wagering on human life. STOLI also could potentially expose consumers to unexpected taxes, loss of privacy, and inability to obtain needed life insurance in the future.

NAIFA does not oppose legitimate life settlements. The crucial factor is whether all the rules were followed from the start, including the existence of an insurable interest at the time the policy is issued. In a typical life settlement, the policy was purchased for its intended use—to protect family members or a small business from the risk of a premature death. But after the policy is purchased, something changes in the life of the policy owner that leads him or her to decide that the policy is no longer needed. This could be the death of the intended beneficiary, divorce or the need for immediate cash to due to illness or other loss. In such cases, the policy owner may decide to sell the policy to a third party. NAIFA is NOT trying to enact laws that prevent or restrict such transactions where the policy was acquired in good faith.

More than 25 state legislatures are currently considering legislation that attempts to restrict or prohibit STOLI transactions. In light of the intense amount of state interest in this issue, NAIFA has expanded the information available on its website concerning STOLI. On this site, you will be able to access materials providing current information on the status of STOLI legislation in the states. You will also be able to review the NAIFA policy on STOLI, and read the current and prior issues of STOLI Alert, a joint publication of NAIFA and the American Council of Life Insurers that provides information on recent activity and developments in connection with STOLI.

The latest addition to our expanded coverage is a STOLI Primer developed by NAIFA, AALU and the ACLI. The primer spells out what we see as the problem with STOLI, what we think is the best way to stop STOLI, and responds to some of the myths being spread by proponents of STOLI.

Additional information and materials will be added to this page as they are developed.

 

Back to Top