Doug Head, executive director of the Life Insurance Settlement Association (LISA), flatly denies that STOLI is a problem, and if it is, he says, it’s a problem for the life insurance industry to police. “There’s no market for those [STOLI] policies,” he says, “and hasn’t been for some time. Those policies violate every state’s law against obtaining a policy without an insurable interest.” Further, he adds, any agent who sells such a policy “is probably breaking the law,” and as for the insurance companies that issue them, “I’m reminded of a comment by the president of Baltimore Life, addressed to big insurers: ‘If you don’t know who your agents are and who they’re doing business with, then why are you doing business with them?’”

He questions who the “stranger” is in STOLI. “It’s not the settlement industry; we’re not interested in those policies,” he declares, and asserts, “It’s probably the commissioned agent representing the life insurance company. A policy can’t be originated without a life insurance agent, who is appointed by a life insurance company.” He further says, “STOLI, as commonly understood in the marketplace, does not exist.”

Jack Kelly, director of government relations for the Institutional Life Markets Association, says, equally emphatically, “There are any number of reasons an individual may want to consider a life settlement contract. But the key thing is, immediately upon considering it, you have to get three people involved: first, a financial advisor; second, an accountant or tax planner; and third, an attorney. Those three, independently and in concert, need to evaluate whether your sale is suitable for you.”