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  • Writer's pictureKirk Hartley

STOLI Policies – Do Some Life Insurers Actually Love the STOLI Business ?

STOLI policies are Stranger Owned Life Insurance policies. Insurers spend plenty of time and ink complaining about STOLI policies, and seeking laws making them illegal.

But, interestingly, this new lawsuit in Chicago alleges that Lincoln National Life actually encourages STOLI policies in order to earn premium before rescinding the policies. According to the allegations, Lincoln National sold a series of STOLI policies through one particular agent in Chicago, and apparently loved the premium income. In this instance, $10 million policies were sold to a 70 year old husband and wife. Selling policies that size seems fishy on its face when the purchasers are 70 years old.

A Google search on Lincoln National and STOLI turned up multiple cases involving Lincoln as issuer of STOLI policies. And, this article, quotes from one case in which Lincoln National is said to have sold some 80 policies known to it to be financed by a third-party funder (which can happen innocently for some types of policies).

"Lincoln had prior experiences with the Mutual Credit Corporation because Mutual had funded more than eighty other policies that Lincoln had written.301 Of those policies not a single original insured or beneficial trust retained ownership of the policies after the two-year contestability period had expired.302 It was known that Mutual’s funding source was a hedge fund that invests in life settlements.303"

Call me cynical, but I’d bet that Lincoln did in fact know it was aiding and abetting the sale of STOLI policies, and loved the premiums it earned before it sued to rescind the policies.

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