Three insurance agents were sentenced to federal prison on Wednesday for deceiving the companies whose policies they sold into issuing STOLI – stranger-owned, also called stranger-originated – life insurance policies, Manhattan U.S. Attorney Preet Bharara said. Court documents show that the scam victimized American General Life Companies, Lincoln Financial Group, Security Mutual Insurance Company and Union Central Life Insurance, which typically would not issue a policy if the applicant intends to resell it to a third-party investor. Insurers generally decline STOLI business because, among other reasons, firms expect a certain percentage of policies to lapse so the companies can keep the premiums received without having to pay out on the policy. The lapse ratio is higher with elderly or ill insureds if they have less disposable income or if the policy is no longer needed because the intended beneficiary, typically a spouse, has died. As a result, an applicant's age, finances
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