Sparks Fly as ACLI and LISA Square Off over STOLI

He said ACLI officials are being told by officials of the Life Insurance Settlement Association that LISA supports a model law crafted by the National Conference of Insurance Legislators in 2007 that outlaws STOLI.

But, in practice, Lovendusky said, that is not the case.

Specifically, he said that when ACLI officials ask state legislators to pass the model law, they are told that LISA officials are demanding changes in the model law, primarily involving STOLI.

Lovendusky said that if LISA officials indicate to state legislators that they support the model law, as written—and ACLI officials have told state legislators they do support the model law—then it is likely that all 50 states will enact the model law.

He cited amendments LISA has presented to state legislators purporting to support the definition of STOLI as set out in the model law, when in reality LISA does not support such a definition and instead supports language that would support stranger-owned life insurance.

Likewise, he cited a friend of the court brief LISA filed in Delaware that supposedly supported the ACLI's position on STOLI, but the brief was never accepted by the court. Moreover, Lovendusky said, the brief did not support the ACLI's position on STOLI.

Lovendusky said that the distance between LISA's assertions and reality creates a credibility deficit that must be overcome if constructive dialogue can occur.

He cited comments by LISA that he said are "counter-productive, unnecessary, unhelpful irritants and antagonisms to the development of amicable relations."

He pointed to one document published by LISA that says that, "an estimated 90% of all policies lapse before paying a claim," and another document published by LISA, which criticizes the life industry's policy of depositing the proceeds of life insurance policies into retained asset accounts when the policyholder dies.

"Life insurance companies regularly do not pay interest on death benefits, depriving beneficiaries of millions of dollars of unpaid interest every year," Lovendusky said in citing one document. "Perhaps the most troubling aspect of this harmful conduct to beneficiaries is that in almost three-quarters of cases unpaid interest was paid immediately upon request by the beneficiary."

In his comments, Lovendusky said that eliminating STOLI is among the top five priorities of ACLI members.

He also said that with support from LISA members, insurers can reduce the STOLI problem and instead turn their attention to other priorities.

Instead, Lovendusky said, the size of the ACLI task force on STOLI has grown as more and more ACLI members have become concerned about the issue.