The Idaho Department of Insurance has issued a bulletin warning carriers and producers that “stranger-owned” life insurance arrangements may be illegal in Idaho.
The Idaho department has received reports that residents are “being solicited and offered financial compensation to purchase life insurance policies for the purposes of assigning the policies to investors,” department officials report in Bulletin Number 07-03.
The transactions may violate state insurable interest laws and provisions that prohibit “rebates or other inducements to purchase insurance unless the inducement is set forth in the policy,” officials say.
The Idaho department might consider the following factors when deciding whether an arrangement violates Idaho’s insurable interest law:
- Solicitation materials.
- Who initiates the transaction and how it progresses.
- The terms of all written agreements and related documents.
- The time elapsed between inception and assignment.
- All consideration associated with the transaction, including incentives for assignment and promises of future compensation.
- Who ultimately pays the premium.
Idaho does permit transactions involving legitimate key-man insurance and life insurance policies set up in such a way that the “irrevocable beneficiary is a charitable, benevolent, educational, or religious institution,” officials say.
A copy of the Idaho STOLI bulletin is on the Web at Document Link