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April 01, 2009 at 08:00 PM
Orlando, Fla.
Life insurers are “pushing back” against what they believe to be inappropriate settlement cases, a panelist said here at the Life Insurance Conference.
Some carriers, for instance, are filing lawsuits against originators of such cases, said panelist Maggie Mitchell, vice president-advanced markets in the Denver office of ING, a unit of ING Groep N.V., Amsterdam.
Typically, these lawsuits charge misrepresentation or failure to prove insurable interest, she said at the meeting, which was co-sponsored by LIMRA International, Windsor, Conn.; LOMA, Atlanta; Society of Actuaries, Schaumberg, Ill.; and the American Council of Life Insurers, Washington.
“We’ve also terminated agents for cause–if all of the agent’s business is settled, for instance,” Mitchell said. “We’ve also turned some agents over to the licensing authorities.”
Legitimate life settlements are not the target, Mitchell stressed, explaining that “there is an appropriate place for settlements.” Rather, “it is the (life) policies that are purchased with the intent of settlement that is our focus,” she said.
Insurers are particularly interested in stopping placement of stranger-originated life insurance policies, Mitchell emphasized.
State regulators are taking action on this, too, she said, reporting that 17 states have already enacted anti-STOLI legislation, and that 20 others have proposed such legislation. But carriers have decided they also need to respond.
If such policies do get issued and carriers later find out they involve STOLI, some carriers move to rescind the policies, Mitchell said.
Other “STOLI strategies” she identified include: flagging applications by age, premium finance, face amount and other factors that may help detect STOLI; reviewing documentation to see if “stealth trusts” are involved (such trusts can change ownership interest without the carrier knowing, she cautioned); and asking on the policy application about whether the applicant intends to sell the policy.
