Much to the satisfaction of the American Council of Life Insurers (ACLI), the National Association of Insurance and Financial Advisors (NAIFA) and Life Insurance Council of New York (LICONY), New York legislators approved S.66009/A.66009, which was developed to protect senior citizens. According to a joint announcement by the three organizations, senior citizens in New York will have important new protections against a financial fraud called stranger-originated life insurance (STOLI).

In STOLI transactions, financial speculators or their representatives induce senior citizens to purchase life insurance, policies the seniors otherwise would not buy, solely to transfer the death benefits to the speculators. The speculators pay the premiums and then hope to profit by receiving the death benefits when the seniors die. This contrasts with a life insurance settlement, where a policy that was purchased in good faith, but is no longer needed or wanted by the policy owner is sold to a third party.

“This legislation places New York among a growing number of states battling against STOLI and those who would abuse senior citizens,” Frank Keating, president and CEO of ACLI, said in the announcement. “The legislation specifically outlaws STOLI, and it gives the New York Insurance Department new tools to identify and deter fraudulent transactions. It also gives seniors considering a life insurance settlement new rights to assure they get a fair deal. We are happy to endorse this legislation.”

New York is the 27th state to enact legislation deterring STOLI.

Source: InsuranceNetworking.com