Friday, June 02, 2006

And Losing at SOLItaire...

Several weeks ago, we examined Stranger Owned Life Insurance (SOLI), a potentially useful cash flow tool. Seems, though, that there are more nefarious uses for such:
That's just sick.
Apparently, the perps would befriend a homeless person, offering him room and board (and perks?), thus building trust. They would then have the victims sign off on life insurance applications, with themselves as beneficiaries.
I have my doubts about the veracity of this story:
■ If there was no insurable interest, how was the policy underwritten and issued?
■ If the victims were, indeed, homeless, what underwriting dim bulb approved the application?
■ One of the victims apparently had 16 policies; what, exactly, did the agent *think* was going on?
Of course, it's possible (likely?) that these were all purchased on-line, and that no agent was involved. Still, there should have been *some* red flags: insurable interest, moral hazard, possible medical issues. And, each of these policies could have been small enough to fall "under the radar:" no exam, no inspection, no real underwriting.
I'm not sure that really works, though: the sum involved (over $2 million) seems to indicate that at least some of these policies should have triggered at least a cursory examination.
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