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House passes bill to curb stranger-originated life insurance schemes
Summary
The Utah House on Feb. 24 passed HB170 to tighten rules on so-called stranger-originated life insurance, adding enforcement tools and definitions intended to protect seniors from investors who profit by acquiring policies on strangers' lives.
The Utah House of Representatives on Feb. 24 approved House Bill 170, legislation aimed at preventing investor-driven "stranger-originated life insurance" schemes that target elderly policyholders.
Representative James Dunnigan, sponsor of HB170, told members the bill is designed to "preserve the integrity of life insurance by prohibiting schemes that induce individuals, typically our senior citizens, to take out life insurance policies that they would not otherwise purchase so that investors can acquire the policy and profit when the senior citizens' life expectancy falls short of the actuarial projections." He said the measure clarifies insurable-interest rules and provides additional enforcement tools for market regulators.
Dunnigan described how such transactions can be hidden through trusts and inducements. "An 82 year old of modest means ... was approached by an investor group and he agreed, through some inducements to take out a $14,000,000 policy on his life," he said, offering that example to illustrate how investors can profit when a senior's death occurs earlier than anticipated.
The bill's language, and Amendment No. 1 that reordered and clarified definitions, seeks to distinguish legitimate life-insurance purchases from transactions intended primarily to create a financial return for unrelated investors. Dunnigan said the measure was crafted with input from numerous parties to avoid disturbing legitimate sales while targeting abusive practices.
After brief floor discussion and a waived summation, the House voted to pass HB170 by a roll call of 70 yes, 0 no. The bill will be transmitted to the Senate for its consideration.
Supporters framed the bill as protecting vulnerable policyholders and preserving the life-insurance market's public-policy purpose; opponents raised no recorded objections on the floor during the House debate that led to final passage.
HB170 now moves to the Senate for consideration and any further action there.
