Life Companies, Agents Strongly Support NAIC Vote on Stranger-Originated Life Insurance
Washington, D.C. (June 4, 2007) – The American Council of Life Insurers (ACLI) and the National Association of Insurance and Financial Advisors (NAIFA) applaud the National Association of Insurance Commissioners for approving changes today to its Viatical Settlement Model Act that place restrictions on stranger-originated life insurance (STOLI) arrangements.
In STOLI arrangements, speculators who have no relationship to insured persons initiate coverage on older people and fund the premium payments for investment purposes and circumvent the intent behind state insurable interest laws.
The amendments approved by the NAIC address STOLI while protecting life insurance taken out to benefit individuals, families, businesses and employees, as well as legitimate life settlements.
"The increasing use of life insurance by speculators promoting STOLI transactions is a clear abuse of life insurance's social purpose. With today's actions, the NAIC sends a clear signal that these transactions will not be tolerated," said ACLI President and CEO Frank Keating.
"Life insurance serves many critical social functions. Most importantly, it protects and provides tremendous benefits to individuals, families, businesses and employees. STOLI perverts the social purpose of life insurance. The life insurance industry applauds the NAIC for voting to restrict STOLI arrangements," said NAIFA CEO David F. Woods. The NAIC voted to deter STOLI by prohibiting the settlement of life insurance policies for five years from policy issuance when the policy is purchased for the purpose of selling it into the secondary market. However, the five-year prohibition would not apply if the insured, a family member or employer put up their own money or collateral to buy the policy. Other legitimate life insurance arrangements are also protected by the amended model.
The life insurance industry will advocate for the new model's enactment in the states.
About ACLI: The American Council of Life Insurers (ACLI) is a Washington, D.C.-based trade association whose 373 member companies account for 93 percent of the life insurance industry’s total assets in the United States, 91 percent of life insurance premiums and 95 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 website 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 800 state and local associations representing the business interests of 225,000 members and their employees 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. NAIFA's website can be accessed at www.naifa.org.
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