ACLI Fights Loose Insurable Interest Laws

The charitable institution would help third-party investors buy life insurance policies on the individual from one insurer and obtain annuity contracts on the same individual from another insurer, they say.

The income generated from the annuity could be used to pay the life insurance premiums, they say.

In exchange for their investments, the third-party investors would receive a substantial portion of the death benefit when the insured individual died, the senators say. Meanwhile, they add, the insured's family might receive nothing while the charity received a small portion of the death benefit for participating in the transaction.

"We believe that laws allowing unrelated third-party investors to profit from an unrelated person's death run counter to good public policy and important life insurance principles," Sens. Smith and Conrad say.

Keating says in his response that the ACLI shares that concern and is actively opposing expanded insurable interest laws where they have been introduced.

"We firmly believe that life insurance contracts should only be issued to persons with a familial or recognized economic relationship with the insured and should not be merely an investment vehicle," Keating says.