Washington — Insurance industry associations including 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) have issued a joint rebuttal to California Governor Arnold Schwarzenegger’s veto of SB 1543.
The legislation was intended to curb abuses of stranger-originated life insurance (STOLI), 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,” the statement reads. “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. The veto leaves California seniors exposed to (STOLI) fraud.”
Source: American Council of Life Insurers
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