RALEIGH -- Insurance Commissioner Jim Long today expressed his support regarding an important consumer protection bill introduced in the legislature this session.  

Commissioner Long told the General Assembly that he supports the passage of HB1489, legislation that will prohibit stranger-originated life insurance transactions. These transactions are more commonly known as viaticals.

In a viatical transaction, the owner of a life insurance policy who no longer needs or wants the insurance sells the contract to an unrelated third party. The third party then collects the death benefit when the insured person dies. While many settlement transactions are legitimate, some are not.

The illegitimate transactions are initiated by investors who convince senior citizens to purchase life insurance and then sell it. The sole purpose of these transactions is to allow the investors to profit from the death of a stranger. These transactions, called STOLI, have long been held by the United States Supreme Court to violate public policy considerations.

House Bill 1489, introduced by House Majority Leader Hugh Holliman (D-), is based on a national model endorsed by the National Association of Insurance Commissioners. The bill passed the House in May and will carry over to next year's session.  

"Clearly, our laws need to be updated to address STOLI transactions, which put our seniors at risk of being defrauded by unscrupulous investment schemes," said Representative Holliman.

Insurance Commissioner Jim Long said he is investigating at least two schemes in which investors solicited or planned to solicit individuals to purchase insurance, using the investor's money, so that the investors can later acquire those policies and profit from the insured person's death. Of course, the investors are hoping that person dies sooner rather than later.

Holliman's bill allows legitimate viaticals to take place, but denies outside investors the means to immediately purchase a life insurance policy in which they have no insurable interest. Investors can pay for the policy, but are not allowed to purchase it for five years. "This approach protects policyholders' rights to settle their policies if they wish to while taking away the incentive for strangers to cash in on other people's lives," said Commissioner Long.  

"I am a strong supporter of this legislation, which will give us the tools we need to combat these schemes and protect our seniors," Long said. "We need to stop these deals from happening in the first place, and the best way to do that is to make investors wait five years before they can get their hands on a policy."  

North Carolina citizens who are considering a sale of their life insurance policy to a broker or a company can call the Department of Insurance's consumer hotline at 1-800-546-5664 to find out if the agent and the company are licensed to do business in North Carolina and are there any complaints against them in this type of business.