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.