Florida Insurers, Agents Oppose Legislative Effort to Promote 'STOLI'

Crabcake Johnny

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TALLAHASSEE, Fla., Feb. 21 -- The American Council of Life Insurers issued the following news release:

Life insurance companies and agents in Florida oppose an effort to amend H.B. 1101, an insurance bill before the House Economic Committee, in a way that would effectively serve as an attack on the state's seniors.

If amendments to H.B 1101 are adopted, hedge funds and other investors would be given a green light to lure Florida seniors into stranger-originated life insurance (STOLI) arrangements. Under these arrangements, these investor groups profit from seniors' early demise.

The scheme works like this: seniors typically aged 55-to-75 years are told that they can get free life insurance for two years; that the senior can keep the policy after two years by repaying the premiums paid on his or her behalf; or, the senior can transfer or sell the policy to another entity with no further obligations. Lured into the scheme, the senior is then exposed to federal tax liability for the value of the two years of premiums paid for the policy. They usually don't know that they likely will be unable to qualify for additional life insurance they may need for legitimate purposes.

Insurance News - Florida Insurers, Agents Oppose Legislative Effort to Promote 'STOLI'
 
So what is to stop the insurer from asking if there is an arrangement to sell the policy at a later date? They can then contest it as fraud for lying on the app, no need to contest due to insurable interest.

Most applications ask this already.
 
It's important to note that there's a large difference between STOLI and a policy holder who later decides to "sell" their policy.

no doubt...legitimate life settlements are a good option for some consumers...things like STOLI have just drawn bad publicity to market.
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So what is to stop the insurer from asking if there is an arrangement to sell the policy at a later date? They can then contest it as fraud for lying on the app, no need to contest due to insurable interest.

Most applications ask this already.

They ask the questions now, but it hasn't deterred consumers and agents from lying.
 
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So what is to stop the insurer from asking if there is an arrangement to sell the policy at a later date? They can then contest it as fraud for lying on the app, no need to contest due to insurable interest.

Most applications ask this already.

The applications currently ask if you have any intent in selling the policy. This is referring to your present state of mind and what you believe you will do with the policy in the future.


There is no way for the insurer to ask this question about what the policy owner plans to do in the future, only what deal he currently has. It would be like an auto loan company asking you "Do you plan on keeping this car until it no longer works or do you plan to sell it in 5 years". No way of knowing what you will actually do and they can't penalize you for deciding to do something different with your asset in the future.
 
Agree. Can I buy a life insurance policy then decide I want to take up rock climbing? Sure.

But what if I knew that I was going to take up rock climbing and that's the only reason I took out the policy. The policy might ask if I "engage" is high risk activities which is present tense. No, I'm not rock climbing....yet.
 
The applications currently ask if you have any intent in selling the policy. This is referring to your present state of mind and what you believe you will do with the policy in the future.


There is no way for the insurer to ask this question about what the policy owner plans to do in the future, only what deal he currently has. It would be like an auto loan company asking you "Do you plan on keeping this car until it no longer works or do you plan to sell it in 5 years". No way of knowing what you will actually do and they can't penalize you for deciding to do something different with your asset in the future.

Something tells me there will be easily found records that show the seniors intention to sell the policy two years later.

Very few seniors are going to buy a policy and hope and pray that you buy it from them in two years and reimburse them for all those premiums and also pay them. They are going to want some kind of contract upfront, which will then make the policy fraud.
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Agree. Can I buy a life insurance policy then decide I want to take up rock climbing? Sure.

But what if I knew that I was going to take up rock climbing and that's the only reason I took out the policy. The policy might ask if I "engage" is high risk activities which is present tense. No, I'm not rock climbing....yet.

They ask if you intend to in the next two or three years, usually. No idea if a policy has ever been contested over it, so no telling how the courts have sided on this, or if settlements were made to avoid court.
 
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