Life Insurance Settlement Association President David Hartman says stranger-originated life insurance arrangements are no longer plaguing his industry.
"STOLI is dead," Hartman said here at LISA's annual fall meeting. "It's gone. It doesn't exist any more."
STOLI involves consumers who buy life insurance, possibly with cash from investors, solely to sell the policies on the secondary market as quickly as possible.
Critics say the arrangements violate state insurable interest laws.
The idealistic reason for STOLI's demise is simply that "it's illegal, and it's wrong;" Hartman said.
The practical reason is that "nobody can make any money on it," Hartman said.
Life insurers and regulators have become increasingly aware of questionable transactions and are willing to fight them, he said, thus creating a risk that a STOLI transaction may not pan out for the backers.
"None of the investors are willing to take a risk of getting a goose-egg," Hartman said.
Not everyone at the meeting agreed with Hartman's assessment.
Darwin Bayston of Life Settlement Consulting and Management L.L.C., Kennesaw, Ga., said he is "not sure we should be having the funeral for STOLI yet."
