Dirty Little Secret
Posted by Steve Piontek, Editor-in-Chief in life insurance, life settlements, regulationI was originally going to headline this piece “Run, Sarah, Run.” But then I realized what a joke it was—and a one-liner at that—so I had to turn to something else to fill the space.
And then I thought: How about the American Council of Life Insurance’s February 3 statement regarding life settlement securitizations, which uses the now-familiar Palin-esque technique of making unfounded allegations to make noise and get noticed.
The ACLI’s comment drew quick and scornful responses from life settlement industry participants. And rightfully so.
For years now the ACLI has been engaged in a very deliberate campaign to conflate legitimate life settlements with stranger-originated life insurance transactions.
In the early days this succeeded, largely because both settlements and STOLI were relatively new and unfamiliar and people had difficulty sorting out the two. But people wised up as the gulf between the two widened.
Part of ACLI’s campaign has been to imply that the life settlement business as a whole is in favor of STOLI and as a whole is behind these transactions.
This of course is not true. The Life Insurance Settlement Association has fought to have STOLI transactions banished in the various states with as much fervor as the ACLI.
The life settlement business realized long ago that STOLI was a poison that would choke off the growth of legitimate business if it were not prohibited and thus controlled.
Might there be some “bad apples” in the settlement business who would try to promote STOLI transactions nonetheless? I’m sure there are.
But this leads me to a dirty little secret that ACLI has been loath to even acknowledge; this is that STOLI transactions have to be done through life insurance companies. Who else writes life insurance policies?
It is hard to believe that life insurers, whose underwriting is truly sophisticated, (and let’s face it, underwriting is involved in any policy large enough to be worthy of settlement) cannot identify an application that is made for STOLI purposes and the agents who consistently bring in these types of apps.
For years there’s been scuttlebutt that certain companies—hungry for business—had little compunction about accepting apps that had STOLI written all over them.
So, I’d like to know more about what type of self-policing the ACLI has encouraged among its members. I’d like to hear more from companies about what actions they’ve taken against any agent who is involved in promoting STOLI.
It’s hard for me to believe that some evil STOLI promoters in the life settlement business are consistently pulling the wool over the eyes of life insurers—especially to the degree the ACLI would have you believe.
ACLI, in its comments, makes some legitimate points about securitization. But it so seriously undercuts its case with these STOLI allegations that its credibility is damaged.
There is always going to be tension between the life insurers and the life settlement business. Just wishing, on ACLI’s part, is not going to make settlements go away—they have, after all, proved their value to consumers. But scurrilous allegations directed toward the entire life settlement community are not going to work either—one would think that would be obvious to the ACLI by now.
But then again, Sarah’s still at it.
Tags: life insurance, life settlements, regulation
Entries (RSS)
Steve –
Your jealousy of Sarah Palin cannot be disguised.
I love the way that lefties constantly go after Palin and tell us how irrelevant she is. If she is so irrelevant and such a loser/joke/etc. then why do you fret about her? Why even mention her? Can’t you make a point without her and are you afraid that by continuing this technique that some might think ill of you?
And, Sarah’s going to continue to be “at it” becuase she makes the left crazy and she connects with many people who share her common-sense conservatism. Now, that is not to say that we all believe that she should be president. But, there are many people who admire her and really love her good humor and grace while others take gratuitous shots at her.
James,
I am simply amazed at how much you missed the point of the piece. No wonder you love her, she does the same thing.
Steve
Steve -
One word …. Bravo!
*Too bad you couldn’t fit the article all in the palm of your hand like Sarah. LOL
All the best,
Rob
Steve, thank you for writing the TRUTH! It has continually amazed me how some of the media, insurance regulators and the public seem to think that life insurance policies somehow mysteriously appear and are issued. The last time I checked, life insurance policies are sold by agents, who represent the life insurance company and compensated by the company for selling the policy. Were these policies properly underwritten? And if the policies had been properly underwritten and priced in the beginning, there would have been no arbitrage, thus no value in the secondary market,
The only thing that you omitted from your article is the phrase, “smoke and mirrors”; as one might think the ACLI is continually trying to deflect the issues of annuities being sold to our seniors that are unsuitable. Take a look at the timeline of some of the life insurance industry’s releases on STOLI compared to reportable violations or complaints against insurers for unsuitable sales to seniors, you might find a correlation.
Thank you for writing the piece that accurately reflects some of the issues.
I did not miss the point. You missed the point which perfectly encapsulates the haters on the left.
Did you or did you not take two shots at Palin; shots that were irrelevant to the article? I see them in the second and final sentences or am I too stupid that I cannot read what you wrote?
You hate her so much that you need to mention how much of an idiot she is in a posting that has nothing to do with her, her politics, etc. Is it some kind of Northeast journalist requirement?
And – you have no idea whether I “love” her. I never wrote that. I am simply amazed as how you could have missed that. Made my point to a tee.
Sorry to be a smartass, but c’mon already. It is old and bogus and you are better than that, I think.
As the Creator and Editor of the National Underwriter’s Tools and Techniques of Life Settlement Planning book, the lead witness before the US Senate Special Committee on Aging, having been quoted by the court in major STOLI cases, and having testified before several State legislative bodies with regard to STOLI laws, I think I can respond with authority to the Steve Piontek commentary entitled “Dirty Little Secrets.”
First, you falsely accuse (slander?) (having presented no evidence) ACLI – of engaging for years in a very deliberate campaign to conflate legitimate life settlements with stranger-originated life insurance transactions.” The truth is that the life settlement community’s leaders have claimed they were anti-STOLI – while at every opportunity going out of their way to lobby to emasculate the Model NCOIL law they said they supported (check out Kentucky).
Your statement that ” The Life Insurance Settlement Association has fought to have STOLI transactions banished in the various states with as much fervor as the ACLI” is – had you attended or been involved as I did – numerous state deliberations – patently absurd. To the contrary, life settlement leadership – together with lobbiests from one of the largest life settlement companies – continue to fight tooth and nail to water down anti-STOLI laws. And with good reason; a large portion of their business comes from “recently manufactored” policies. (You obviously have not read the Life Policy Dynamics studies for the last few years – showing that a large percentage of life settlement business is based on policies sold within their first few years.)
It IS true that many in the life settlement business are highly ethical and have not knowingly engaged in or promote life settlements. And the life settlement business IS one that serves a public need not otherwise met.
But has – as you imply – the leadership of key life settlement organizations lived by the truth that “STOLI is a poison that would choke off the growth of legitimate business if it were not prohibited and thus controlled?” Their lobbying efforts I have witnessed seem to imply otherwise.
The one statement you make with which I agree is, “certain companies—hungry for business—had little compunction about accepting apps that had STOLI written all over them.” And those relatively few companies will reap the reward for their short-sighted and unethical behavior. Most insurers – since they discovered the sub rosa game of STOLI – have spent thousands of dollars and devoted significant personel to thwart new attempts and uncover STOLI policies already issued.
You are naive to think that identifying STOLI is easy; you obviously have not studied these stealth transactions or been involved in any of the cases (as I have). STOLI is a clever constantly mutating virus feed on greed and accelerated by co-opting seniors into conspiracies to commit insurance fraud by lying about their intent, their income, their wealth, and the other policies they own or have applied for. The public needs strong laws to stop it.
You’d like to know more about what companies are doing to prevent it? Why didn’t you ask? For instance, did you ask New York Life about how many contracts with high producing agents were terminated. Did you check with other companies to see if they’ve terminated contracts with STOLI producing agents or brokers? (Did you know that brokers hide behind others to disguise the amount of STOLI business they are generating?).
It’s true that an Editor has an edge – but he has a responsibililty to the (whole) truth as well.
Steve Leimberg
Steve,
Really well written article. One of the best analyses I have seen. Notwithstanding their assertions to the contrary, the ACLI has tried to use STOLI to damage the entire life settlement industry, while at the same time taking a “Hear no evil, see no evil” approach with the life agents and life companies that make STOLI possible. This is unfortunate, as has been the blind eye turned by some life settlement participants who have knowingly processed STOLI business. But the irony here is that – due to the compression in life expectancy estimates – the STOLI market is near death, a small fraction of what it used to be. STOLI could only flourish when there were life settlement underwriters manufacturing absurdly short life expectancy estimates that allowed for sale of STOLI policies through the secondary market at inflated prices. There are too many front-end expenses included in the pricing of life insurance policies to allow a profitable resale only two years after issue, unless the sale price is inflated by virtue of a too short life expectancy estimate. So to be using STOLI as an argument against or for anything is a bit disingeneous.
I have to agree with James in that invoking Palin’s name is a writer’s crutch. She has nothing to do with anything here, and weakens your piece, Steve.
It’s like the sports writers who would bring up Hurricane Katrina when they were supposed to be writing about an awful football team… it was an overdone allusion, and jars one out of thinking about what you actually wrote about. You’re possibly alienating a number of your readers for no good reason.
Suppose one were a writer from the other side, and the allusion being used was Obama hitting at people spending money in Vegas and then turning around and holding fundraisers there in place of the Palin allusions. Did you like that? Did it strengthen the point, or did it distract you by bringing in irrelevant politics?
Steve-
Would you PLEASE stop making inane and divisive political references? Most of your article is pertinent and topical, but your references to Sarah Palin add nothing to your point and only serve to annoy folks who don’t agree with you.
As Editor of a national trade journal, you have a responsibility to have opinions about insaurance and insurance regulation, not a mandate to espouse partisan politics. I would hope that you see your role as a concensus builder, not a mouthpiece for any particular constituancy.
Good article! It did not require the Palin joke – although I enjoyed it. Those that have a problem with the Editor’s sense of humor need to get over themselves. The article itself and the subsequent discussion has been excellent.
It is suggested that you stick with topics that are relevent to our business. Comments such as those made regarding Governor Palin undermine your credibility and serve to discount your validity on other subjects as well. I, for one, will monitor your future articles and should your leftist views continue to appear I will no longer permit your periodical in my offices.
I agree the Palin joke was unnecessary to the piece here at large. But some of you need to relax a bit. This is a blog which is intended to have more of a personal touch than an article. The whole point of this medium is to give us a view of what’s on the writer’s mind at a given point in time. Sometimes this will be a joke that isn’t necessary. And making fun of Palin in a blog is not that divisive as the the majority of her fans are functionally illiterate anyways.
What is it with editors and editorial license? A year ago the Benefits Selling editor makes reference to a female porn star and now we have a non-necessary divisive reference to a political person. Yeesh!
Will everybody, after readying this post, please go to the comments section and look for Steve Leimberg, February 11, 2010 at 6:36 pm. While the editor saw an opportunity to poke fun at Sarah Palin, Mr. Leimberg brought up facts based on years of research and study and firsthand experience testifying and witnessing others testify on this issue. Steve Leimberg’s professional credentials are without question and in that rare air with few others.
When you read his reply you will see a clever and funny and humorous editor getting totally obliterated by a carpet-bombing of facts showered down on him. It was thorough. The editor will have a job after clearing himself from the rubble but you will wonder if the publisher should retain him after seemingly endless number of errors of fact. Perhaps this editor spends too much time streaming the internet for reasons other than studying the topics he editorializes. I will no longer trust anything he writes about . . . he clearly has an agenda. Both political and professional.
Good one, John.
Keep up the condescending attitude as it is just doing wonders for you and your party.
I understand the Post Office is still hiring.
Walter, you’ve brought up the P.O. before, as I remember. Just go take a job there already and stop agonizing!
Ken Martin said everything I wanted to say and Steve Leimberg said more than I could possibly digest…but it sure was fun to try!
The ACLI doth protest too much, methinks. Nevertheless, much of public relations is about publishing snapshots of the moral high ground.
There are only so many life policies in any year to re-sell that were not originally written for that purpose. Securitization is a beast with a voracious appetite. Short-term gains are too sweet for many to ignore. As with sub-prime mortgages, two lines of reasoning are for employed for engaging in presently profitable but long-term possibly ruinous practices: 1) Someone else will get the revenue if we don’t. Or, the great delusion, 2) This time is different.
Re your Feb 11th. Poor taste – but then we have learned to expect such form her detractors. Especially poor when you examine what has happened to our country in the name of insurance reform this weekend. It certainly didn’t cause me to add to the respect that I may have had for your work or judgement.