Members of the Ohio Senate voted 95-0 Thursday to approve H.B. 404, a bill that seeks to discourage use of stranger-originated life insurance arrangements in Ohio.

Members of the state General Assembly voted 89-0 to approve H.B. 404 in January.

The bill would limit consumer’s ability to settle life insurance policies within 5 years after buying the policies, but it would permit consumers to sell policies during the 5-year period if they had gone through a major life change, including the death of the sole beneficiary of the policy.

The bill also would permit policyholders to settle policies within 5 years if they could certify that they used their own money to buy coverage and had no agreement to settle the coverage with 2 years of buying the coverage.

Another bill provision would require life insurers to notify state regulators if they suspect a life insurance sale may be a STOLI transaction.

Ohio Department of Insurance Director Mary Jo Hudson has welcomed passage of the STOLI bill.

“The department fully supports the legislature’s efforts and will implement new protocols to comply with consumer protections proposed in this bill,” Hudson says in a statement.

The Life Insurance Settlement Association, Orlando, Fla., also has issued a statement supporting passage of the bill.

Although the bill would limit some use of life settlements, the final version of the bill is better targeted at abusive practices than the original bill was, LISA Executive Director Doug Head says in the statement.

LISA has some concerns about the wording of bill restrictions on selling premium financed policies, LISA says.

The American Council of Life Insurers, Washington, and the National Association of Insurance and Financial Advisors, Falls Church, Va., also are praising Ohio lawmakers’ work on the stranger-owned life insurance issue.

“Ohio lawmakers have stepped to the forefront of the growing national effort to deter this ugly and twisted use of life insurance,” ACLI President Frank Keating says in a statement. “Life insurance was never intended to be an investment tool for hedge funds. It is designed to protect families and businesses. This STOLI legislation will help set things right.”

The Association for Advanced Life Underwriting, Falls Church, Va., says Larry Rybka, the chair of the AALU best practices committee, testified for the bill.

The bill “is a great example of how to deal with abuse while protecting legitimate practices,” AALU Chief Executive David Stertzer says.