April 25th, 2010Potential Life Insurance Scheme Thwarted
> The following information was released by the Ohio Department of Insurance:
If someone offers to give you money to take out a life insurance policy on yourself for the purpose of selling it to an investor, they are probably involved in a stranger-originated life insurance (STOLI) scam, which is illegal in Ohio. Ohio Department of Insurance officials recently stopped such a scam from taking place.
On March 16, 2010, Ohio Department of Insurance Director Mary Jo Hudson revoked the insurance license of Alex Kozonashvili of California for alleged violations of Ohio insurance law, including misrepresentation and untrustworthiness.
The Department’s investigation revealed that in August 2008, Mr. Kozonashvili allegedly submitted a universal life insurance application to Prudential Insurance Company for $9 million worth of coverage for a 74-year-old woman from Cleveland. In the application, he misrepresented where she lived and claimed she had assets worth $12.5 million. The agent allegedly offered the potential victim at least $8,000 to participate. The potential victim lives on a fixed income of less than $1,000 a month. Fraud was suspected and reported to the Department.
Director Hudson is encouraging seniors to be on the lookout for these types of schemes so they don’t become victims.
“STOLI transactions involve someone betting on your life,” said Director Hudson. “We want Ohioans – especially our senior citizens – to be cautious about any kind of scheme that involves someone offering you money or a low-cost loan to take out a life insurance policy on yourself. We want people to empower themselves with knowledge about insurance, which exists to protect them, not as a vehicle for fraud or financial exploitation. In this case, the good work of the underwriters and investigators at Prudential Insurance and our fraud and enforcement investigators protected someone from potential harm.”
In September 2008, at the Department’s request, Governor Ted Strickland and Ohio legislators made STOLI transactions illegal (Amended House Bill 404).
These schemes “manufacture” life insurance policies for the benefit of investors. Typically, a sales agent or investor pays a person a lump sum or provides the individual with limited-time, free premium financing to purchase life insurance he or she otherwise would not buy. Essentially, the investor buys the policy at a discount, pays the premium, and then gets the death benefit when the person dies.
For more information on STOLI, visit http://www.insurance.ohio.gov/Consumer/Pages/STOLI.aspx.
Ohioans who believe an agent is committing fraud or misconduct should call the department’s fraud hotline, 1-800-686-1527. Information about agent fraud and misconduct can be found on the Department’s website, www.insurance.ohio.gov.
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