A proposed stranger-originated annuity (STOA) model bulletin has been getting generally favorable reviews from commenters.
The Life Insurance and Annuities Committee at the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., recently posted a STOA bulletin model exposure draft on its section of the NAIC website.
A STOA is a transaction initiated by an agent, investors or others who pay a fee for the right to use an individual's identity to buy an annuity offering high returns. The originators of the transactions prefer to use ailing individuals with short life expectancies as the annuitants, the NAIC says.
A STOA originator often will try to increase annuity returns by adding a bonus rider or guaranteed minimum death benefit option to the base contract, and agents may buy a number of annuities with the same annuitant, according to the NAIC.
The model bulletin would urge carriers to review chargeback policies, to ensure that agent commissions are adjusted if a policy is annuitized within the first year; create procedures to identify agents who may be involved in STOAs; and ensure that agents ask annuitants for information about their health
and how the annuitants will be paying for the annuities they hope to buy. Carriers also should establish methods for reviewing questionable applications and reporting potential STOA contracts to the appropriate state regulators, according to the model draft.
STOA bulletin draft commenters say they support the goals of the drafters, and most have recommended relatively modest changes to the text.