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Task Force To Tackle Insurable Interest Question

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The life insurance industry is stepping up efforts to keep investors from insuring the lives of strangers.[@@]

Industry groups are teaming up to form a task force that will try to keep the new “investor-owned life insurance” program organizers from persuading states to expand the “insurable interest laws” that determine who has the right to insure an individual’s life.

The groups organizing the task force are the National Association of Insurance and Financial Advisors, Falls Church, Va.; the Association for Advanced Life Underwriting, Falls Church, Va.; and the American Council of Life Insurers, Washington.

Some federal officials have suggested that Congress might consider taxing some or all of the inside buildup within life insurance policies if the IOLI market continues to grow.

IOLI programs involve charitable organizations and permit “third-party investors” to acquire interests in life insurance policies that they would otherwise be prohibited from acquiring directly.

In some cases, IOLI program organizers now are making arrangements that bypass state insurable interest laws, such as arrangements through which individuals buy life insurance with the intention of transferring that insurance to third-party investors a relatively short time later, according to task force representatives.

“Such arrangements undermine the intent of state insurable interest laws,” says C. Robert Brown Sr., NAIFA’s president.

Frank Keating, ACLI’s president and chief executive officer, said that, “Such arrangements circumvent the protections that current state insurable interest laws are intended to provide.” The traditional uses of life insurance should not be jeopardized by “inappropriate uses of these products,” says ACLI President Frank Keating.


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