The life settlement industry counted the recent passage of legislation aimed at preventing stranger-originated life insurance in Indiana and West Virginia as a split decision, while life insurers and a group representing financial advisors applauded both states for taking action on the issue.
“It’s wonderful that we are starting to see some action on STOLI,” said Jeffrey Taggart, president of the National Association of Insurance and Financial Advisors. “First West Virginia, and now Indiana.”
Doug Head, executive director of the Life Insurance Settlement Association, also offered praise to Indiana state lawmakers for their work. “The legislature of Indiana has taken significant and well-balanced measures to protect the rights of consumer policyholders in that state after they came under attack by life insurers earlier this year” he said.
The Indiana measure maintains a two-year contestability period for insurers and mandates that a life policy is not valid if insurable interest was not present when it was initially purchased. In effect, Head argued, the legislation places the issue of STOLI into the hands of the primary market.
“We do not believe that STOLI is a secondary market problem, but, by definition, is a problem of strangers originating a life insurance policy,” he said. “Insurers sell policies, and they need to combat STOLI when they are aggressively marketing to seniors.”
However, the executive director of NAIFA’s Indiana organization, Kim Stoneking, said the Indiana legislation came as a result of many different groups working together.
“The passage of this legislation was a team effort,” she said. “Key legislators and lobbyists representing life insurers and NAIFA were keenly involved, and we had very good grassroots support from individual producers through NAIFA-Indiana.”
American Council of Life Insurers President Frank Keating was also a supporter of the bill, offering his congratulations to Indiana’s legislators “for making their state one of the first in the nation to act on STOLI.”
Far more contentious, however, was the response to the passage of legislation in West Virginia.