HB 1379 defines STOLI as, "a practice or plan to initiate a life insurance policy for the benefit of a third party investor who, at the time the life insurance policy is originated, has no insurable interest in the insured."
"It is a shady practice for a third party stranger, who has no insurable interest, to solicit an individual to purchase a life insurance policy; then to finance or pay for the premiums, become the owner and hope the individual dies, all for the purpose of making a buck," said Rep. Ripley. "This legislation should begin to put a stop to this kind of practice."
Organizations that pursue STOLI arrangements contact individuals who do not currently hold life insurance for the sole purpose of obtaining a viatical settlement.
A viatical settlement is the sale of a life insurance policy by the policy owner before the policy owner dies. These sales are initiated at a price below the total value of the policy but generally in excess of the premiums paid or current cash surrender value. The sale provides the policy owner an immediate cash settlement.
HB 1379 makes STOLI a violation of the law and labels it as an unfair and deceptive act or practice in the business of insurance. The bill must now be signed by the governor before it is enacted into law.