The STANDUP for Seniors Coalition, a group of senior advocates, veterans and concerned Floridians, was joined today by Representative Bryan Nelson in launching its effort to urge the Florida Legislature to protect seniors from predatory investors and reject any legislative attempts that would bolster the Stranger-originated Life Insurance (STOLI) market.
“It is alarming to know there are some hedge fund and investor interests preying on seniors, trying to lure us into life insurance scams that will hurt us and our families,” said B.J. West, a member of the 60 Plus Association and a fifth generation native of Florida. “The STANDUP for Seniors Coalition has come together to oppose any legislative effort that would encourage or permit STOLI arrangements that target seniors.”
In recent years, speculative investors have been pushing for a legislative change that would repeal well-established consumer protections in state law and reignite the spread of these fraudulent STOLI practices in Florida. During the 2012 Legislative Session, some interested parties pushed a measure that would have amended state law to validate these illegal financial schemes, which could have re-opened the door for STOLI fraud in Florida and threaten the senior community.
“We anticipate that some speculators will once again try to push for legislative changes this year that will incent investors to participate in these STOLI arrangements,” said Paul Brawner, a life insurance agent and CEO of the National Association of Insurance and Financial Advisors Florida (NAIFA-Florida). “We urge lawmakers to be aware of any attempt that would preserve value in policies that have been obtained fraudulently or reduce the ability of life insurers to detect fraud.”
“It is imperative that my colleagues in the House and Senate understand how fraudulent STOLI arrangements hurt Florida seniors,” said Representative Nelson, chairman of the House Insurance and Banking Subcommittee. “We must not encourage speculators and other investors to profit from stranger-originated life insurance arrangements, which hurt Florida’s seniors and make them targets for scams.”
In 2008, the Florida Legislature recognized the dangers of these predatory schemes and amended the insurable interest statute to help further protect seniors and their families. Across the nation, 29 states have laws in place to deter STOLI arrangements. However, today, some STOLI promoters are finding ways to evade these laws and are devising schemes to mask fraudulent practices.
The STOLI scheme works like this: seniors typically 65 years of age or older are encouraged to purchase large, unneeded life insurance policies. The speculators offer to pay the policy premiums. After two years, marking the end of insurers’ contestability period (the period in which an insurer can contest and act on a misrepresentation in a policy contract), the senior is asked to sign over the entire policy to a hedge fund or other investment group. The senior is typically compensated for his or her role in the scheme with no knowledge that these arrangements are considered insurance fraud. Once the senior signs over the policy, the investors plan to collect the death benefit when the senior dies. Lured into this fraudulent scheme, the senior could be unexpectedly exposed to tax liability for the value of the two years of premiums paid for the policy, and they also could face other stiff government penalties. Further worsening the situation, some seniors are unable to qualify for additional, needed life insurance for their loved ones because their insurance capacity is consumed by the STOLI scheme.
“When I first learned about these fraudulent STOLI scams, I was immediately angry and worried,” said Maurice Langston, a preacher, executive director of the Wakulla Senior Center and retired undersheriff in the Wakulla County Sherriff’s Office. “You hear all the time about people getting caught up in investment fraud or schemes, and most people think it cannot happen to them. Unfortunately, it could happen to any of us and the repercussions are frightening.”
The STANDUP for Seniors Coalition consists of individuals and noted senior advocates, such as the 60 Plus Association and other concerned parties, such as the American Legion, the American Council of Life Insurers (ACLI), the Florida Insurance Council (FIC), and the NAIFA-Florida. The STANDUP for Seniors Coalition opposes any legislative effort that will encourage or permit STOLI schemes that perpetuate fraud against Florida seniors. Any changes to current law that would remove consumer protections for Florida seniors against predatory investment schemes and promote STOLI fraud in Florida, should be rejected.