Iowa Approves Anti-fraud Bill

Washington – S.F. 2392, a bill intended to help protect senior citizens from a stranger-originated life insurance (STOLI) policy, has passed the Iowa State Legislature and is now awaiting the Governor’s signature.

In STOLI transactions, investors or their representatives induce seniors to purchase life insurance for the sole purpose of selling the death benefits to the investors. The investors plan to profit when the seniors die, and the sooner the seniors die, the higher the profit. In most cases, the seniors who sign the policy applications must mislead the insurance company about their intention to sell the policy to the investors. Seniors who participate in these schemes may face unexpected taxes and fees, loss of privacy and legal concerns.

S.F. 2392 establishes a limited five-year moratorium on the settlement of STOLI policies, which is a major element of the model developed by the National Association of Insurance Commissioners (NAIC), the association of state insurance regulators. The bill also establishes a legal definition of STOLI and identifies it as a fraudulent act, which are two main features of the model developed by the National Conference of Insurance Legislators (NCOIL), the association representing state legislators with responsibility for insurance.

“The Iowa Legislature is one of the first in the nation to approve legislation aimed at deterring STOLI, which makes use of transactions designed to circumvent the state’s insurable interest laws,” says Frank Keating, president and CEO of the American Council of Life Insurers. “We are now awaiting Governor Chet Culver’s signature on this vital legislation that will protect Iowa seniors from these unscrupulous transactions.”

Source: American Council of Life Insurers