- Why is stranger-oriented insurance an opportunity for fraud?
- May 7, 2010
Investors may be able to receive significant profits through purchasing an elderly or ill individual’s life insurance policy through a life settlement.
They may also benefit through selling variable annuities. Individuals who sell these assets through a stranger-originated transaction, however, may be targeted by fraud, according to the Life Insurance Settlement Association.
Insurance agents involved in these schemes will seek terminally ill individuals to sell an annuity for a value so small it falls below underwriting requirements. Still, this amount is subject to growth and can provide the agent with profit at the time of the policyholder’s death.
“There is no reasonable circumstance that would justify an insurance company issuing an annuity to someone who is terminally ill or in severely poor health,” said Russel Dorsett, president of LISA.
LISA is currently urging other organizations, like the National Association of Insurance Commissioners and the National Conference of Insurance Legislators, to combine efforts in order to ban stranger-originated annuity transactions. Organizations should also be required to evaluate an individuals health before selling him or her an annuity, according to the release.
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