Senate Acts to Stop Life Insurance Scams

Lehman Sponsored Bill Will Help Protect Consumers from STOLI Scams

Sen. John Lehman

Madison – Legislation to protect Wisconsin consumers from life insurance scams using “stranger originated life insurance” or STOLI policies was approved by the state Senate today.

Senate Bill 513, sponsored by State Senator John Lehman, updates state laws related “viatical” life insurance transactions to ban questionable life insurance settlements, require additional disclosure to consumers and licensing of life insurance settlement providers.

“Life insurance transactions originally developed to help very ill individuals cover extreme health insurance costs and medical bills are instead being used to prey on some of the state’s most vulnerable citizens.  This practice ought to stop and today the Senate took strong action to do just that,” commented Lehman.

So-called STOLI life insurance transactions have come under increasing scrutiny from state and federal insurance regulators and have been banned in a number of states.  Senate Bill 513 is based on the recommendations of a working group convened by the Wisconsin Commissioner of Insurance with representatives of life insurance and life settlement companies, insurance agents and consumer groups and would update state law to:

•    Provide a common definition of life settlements, stranger originated life insurance and fraudulent life settlement acts;

•    Establish licensing and training requirements for life insurance settlement providers and brokers;

•    Require specific disclosures and descriptions of prohibited practices to policyholders;

•    Allow life insurance transactions at any time for individuals who are ill, have lost a job, get divorced or upon the death of an intended beneficiary but restrict other transactions occurring within five years of the initiation of a life insurance policy.

In addition to Insurance Commissioner Sean Dilweg’s support, advocates for Wisconsin seniors and consumers like AARP and the Coalition of Wisconsin Aging Groups along with the State Bar of Wisconsin and the Wisconsin Council of Life Insurers are supporting SB 513.

Lehman concluded, “Life insurance transactions can be complicated affairs with serious legal and tax liability consequences and oftentimes involve elderly or sick individuals.  Setting clear standards, ensuring consumers are provided with complete and accurate information and banning the most egregious practices will help make sure state law stays on the side of Wisconsin consumers.”

Posted @ 5:30 p.m.