The Senate Special Committee on Aging has expressed concern about the policy of selling life insurance policies to investors, fearing that the practice may amount to fraud in some cases. An Illinois regulator expressed concern over a growing practice, in which vulnerable consumers are encouraged to enter into the murky “life settlement” market.
Much of the concern centers on a variant of the standard life settlement sale, in which investors offer seniors enticements to take out policies just so they can “flip” them to the investors. Seniors may not know that they are being persuaded to participate in insurance fraud. This so-called stranger-originated policy has been outlawed in a number of states.
Last year, Prudential discovered an example of fraud when a 74-year-old Ohio woman who lived on Social Security was driven from her home another city to sign an insurance application. The frightened woman later learned from investigators that the policy had a death benefit of $9 million. It is not currently known how wide spread such practices are