The National Association of Insurance Commissioners (NAIC) issued a bulletin this week encouraging insurance companies to establish safeguards to prevent or limit exposure to stranger-originated annuity (STOA) transactions.
NAIFA was the first industry group to adopt a formal policy opposed to STOA transactions, in which investors pay a nominal sum to people in poor health for the ability to purchase annuities with guaranteed minimum payouts in the names of the ill individuals.
“Annuities that provide guaranteed income are an important part of many people’s financial plans,” said NAIFA President Robert Miller. “But STOA transactions violate the fundamental purpose of insurance-based annuity products, which is to guard against the risk of a person outliving their retirement savings.”
NAIFA has worked with the NAIC on the issue and NAIFA's recomendations were included in the final bulletin.
“I want to emphasize that by all accounts the number of agents involved in STOA transactions is minuscule,” Mr. Miller continued. “But the fact that they exist at all poses a threat to the legitimate annuities industry. NAIFA applauds the NAIC for addressing the issue.”