In the interest of fairness, before you read this piece I want to direct you to some letters to the editor on page 10 of this issue that respond to a previous column of mine.
OK, now that you're back, I've got a few things I want to say in response to those responses. Ordinarily I let letter writers have their say without responding, but in this case the association leaders, in particular, were quite solicitous about hearing more.
There's an awful lot of chest-thumping going on about how the 5-year prohibition on transactions entered into solely for the purpose of resale and backed by non-recourse premium financing is going to stop the nefarious practice of stranger- or investor-owned life insurance. I sincerely hope it does–I don't think anyone disagrees on that point.
I do think it is somewhat na?ve of the industry–and that includes regulators–to presume that anyone intent on such a practice is going to be deflected by this regulation. First, I find it difficult to believe anyone involved in such schemes is either going to be honest enough or stupid enough to admit upfront that they intend to sell the policy. Second, as I seem to remember one commentator pointing out, people who initiate such transactions and expect to profit from them can easily factor the additional time into expected returns or payoffs.
Another thing I would like to see from the industry is even the slightest smidgen of acknowledgment that the STOLI situation could not have gotten to the crisis point it did without the complicity of at least some companies and agents. They know who they are and, presumably, so do a lot of other people. Going forward, I think the industry needs to make sure the penalties that are in the model are vigorously enforced so that those companies and agents who engage in STOLI transactions, and thus damage the industry from within, feel slammed (not slapped on the wrist) for their transgressions.
As for Commissioner Poolman's (really well-written) letter, I can understand his pique and, in fact, would have been mystified if he had not responded. I do, however, have a few bones to pick with it.
First is Mr. Poolman's statement that "in fact, the question ['Why 5 years?'] has never been posed by a National Underwriter reporter." This is simply not true. In fact, for a long while, Mr. Poolman was coy both in public and in private when the question was posed to him. On one occasion, NU's Jim Connolly asked Mr. Poolman precisely that question and was told that he would only speak off the record. This being the case, of course we did not report it.
