A new trend among wealthy Americans is the sale of stranger-originated life insurance (STOLI). Experts peg the industry at $30 billion this year; but over the next decade, the market could surge to over $150 billion, according to the rate of life insurance policy resale figures. Fitch Ratings notes, "The lure of easy money is seducing participants into the secondary market for life insurance and putting life insurers in compromising positions." Indeed, questions remain about the legality and ethics of brokers selling policies with the aim of re-selling them. Joseph M. Belth of the Insurance Forum points out, "If somebody owns several million dollars of insurance on my life who I don't know?it would make me a little nervous to know someone had an interest in having me dead quick." Rules against STOLI date back to England in the sixteenth century, when individuals would gamble on whether seamen would make it back to port. However, the growing number of well-off baby boomers revived the opportunity for brokers to make commissions on these arrangements. Recently, state legislators and insurance commissioners worked on model legislation that individual states could use to address brokers' conflicts of interest and STOLI abuses.
Wealthy Engage in Controversial Re-selling of Life Insurance Policies
Summary:
Washington Post (11/27/07) P. D1; Huslin, Anita
