Bank Sued over STOLI Scam
Bank Sued over STOLI Scam in Life Insurance News
Recent news in the life insurance market has featured some disturbing stories regarding the manipulation of elderly Americans by scam-artists intent on taking out STOLI policies, or Stranger Oriented Life Insurance policies, and using them to cheat insurance companies out of millions of dollars.
Stranger oriented life insurance policies allow someone who is not related to you or closely affiliated with you to take out a life insurance policy to be paid upon your death.
Originally these policies were designed for businesses and investment groups whose financial well being depended on a single person’s support. A life insurance policy on that single person would protect the business or investment portfolio should they die unexpectedly.
However, in recent years several scam artists have used STOLIs to take advantage of older Americans and cheat insurance companies. These scams are so realistic that in some cases senior living facilities have been visited by insurance salesmen looking to cash-in.
And according to Life & Health, now an actual bank might have been caught in the act.
According to their Insurance News, an older American named Martha Higuera was approached and offered $5,000 to apply for a life insurance policy that was “free” based on the fact that she was over 70 years old. All she would have to do is get a medical exam that would prove her eligibility for the insurance policy.
Reportedly, Martha Higuera speaks little English, and lives on social security.
However, Higuera’s insurance policy was then converted into “the Higuera Trust,” which was purchased by U.S. Bank and insured by Phoenix Companies Inc., for $5 million dollars. All of the information given to the insurance company was incorrect, and according to them, it came from U.S. Bank itself.
Phoenix Inc. is asking the court to rescind the policy since the information used in the application process was all false. They are also asking to keep the payments made on the policy, though it isn’t clear whether or not that will be allowed.
Similar incidents have been reported nationwide, and have led to a 5 year ban on STOLI policies in Wisconsin. Other states are also looking into ways of limiting, controlling, or banning the use of stranger oriented life insurance policies altogether.
In some cases older Americans knowingly participate in STOLI scams, though most of the time it appears that they have been unknowingly used to purchase such plans. Seniors have been advised to be on the lookout for people offering them “free” insurance, or offering to pay them to get the medical exams often required of a life insurance policy.