Iowa cracks down on Stoli policies

Chet Culver, Iowa’s governor, has signed a law to discourage stranger-originated-life-insurance practices. The bill, SF 2392, which he signed Saturday, takes elements from the Kansas City, Mo.-based National Association of Insurance Commissioners’ model law, as well as that of the Troy, N.Y.-based National Conference of Insurance Legislators. First, it establishes a five-year moratorium on the settlement of a Stoli policy, an element in the NAIC’s model law. Using the NCOIL model law, SF 2392 also legally defines Stoli, identifying it as a fraudulent act. The insurance involves a third-party investor who encourages an individual to buy a life insurance policy specifically to sell it to the investor. In turn, this investor becomes the beneficiary of the policy and receives death benefits upon the insured’s demise.