Ohio Gov. Ted Strickland on June 12 signed into law a bill that was written in an effort to root out stranger-originated life insurance.
The new amendments to Ohio insurance law “recognize a shared responsibility of the life settlement industry, life insurance companies and the [insurance] department to protect consumers against STOLI transactions,” says Mary Jo Hudson, director of the Ohio Department of Insurance.
The bill, H.B. 404, officially amends the state Viatical Settlement Act. Under the new law, the department will have more authority over life settlements, and life settlement brokers and providers are required to give insurers more information before engaging in a life settlement.
Life insurers will have to ask specific questions aimed at uncovering STOLI schemes and report suspected schemes to the department.
The Ohio law also limits the ability of consumers who use certain types of premium financing arrangements to sell life insurance policies within 5 years of buying the policies.
A policyholder can sell a life policy during the 5-year restricted period if the policyholder has experienced a life-changing event such as illness, unemployment or the death of an intended beneficiary.
“Gov. Strickland and the Ohio legislature have taken major steps towards deterring STOLI abuses by enacting a strong bill,” says Frank Keating, president of the American Council of Life Insurers, Washington.
Keating singled out the increase in the department’s authority and the 5-year restricted period for praise.
Doug Head, executive director of the Life Insurance Settlement Association, Orlando, Fla., says the version of H.B. 404 signed by Strickland was a “massive improvement” over the original version of the bill that came out of the state House of Representatives, and that LISA is “generally pleased” with the bill becoming law.