Ohio became this week, one of the first states to put into action a law in an effort to root out stranger-originated life insurance. The new amendments to Ohio insurance law “recognize a shared responsibility of the life settlement industry, life insurance companies and the [insurance] department to protect consumers against STOLI transactions,” says Mary Jo Hudson, director of the Ohio Department of Insurance.

The bill, H.B. 404, officially amends the state Viatical Settlement Act. Under the new law, the department will have more authority over life settlements, and life settlement brokers and providers are required to give insurers more information before engaging in a life settlement.

Life insurers will have to ask specific questions aimed at uncovering STOLI schemes and report suspected schemes to the department.
The Ohio law also limits the ability of consumers who use certain types of premium financing arrangements to sell life insurance policies within 5 years of buying the policies.

A policyholder can sell a life policy during the 5-year restricted period if the policyholder has experienced a life-changing event such as illness, unemployment, or the death of an intended beneficiary.