State insurance regulators are cracking down on stranger-originated annuity (STOA) transactions, and it could affect your annuities business. You will see stricter compliance procedures and could face reduced commissions—regardless of whether you’re knowingly selling annuities as part of a STOA scheme.
These changes will trickle down from the National Association of Insurance Commissioners’ (NAIC) Life Insurance and Annuities Committee, which approved a model bulletin on STOA on March 27. Although state insurance regulators aren’t required to adopt the bulletin, many certainly will distribute the bulletin to carriers operating in their jurisdiction.
What Is a STOA transaction?
In a STOA transaction, investors or producers offer to pay a nominal fee to an individual as compensation for using the individual’s identity to purchase an annuity offering a high return in the form of a guaranteed death benefit. Those selected for participation are usually in poor or deteriorating health and are unlikely to live past the first year of the policy. They often are targeted via newspaper advertisements and solicitations in nursing homes and hospices.
Although STOA hasn’t received the same amount of press as its cousin STOLI (stranger-originated life insurance), STOA is starting to make waves with regulators and the financial services media.
How the Model Bulletin Will Affect You