New York Child Abuse Identification and Reporting Practice Exam

What legislation was specifically designed to address STOLI and IOLI practices?

1. Health Insurance Portability and Accountability Act (HIPAA)

2. NCOIL Act

3. Employee Retirement Income Security Act (ERISA)

4. Affordable Care Act (ACA)

The correct answer is: NCOIL Act

The NCOIL Act, or the National Conference of Insurance Legislators Act, was specifically designed to address STOLI (Stranger-Originated Life Insurance) and IOLI (Investor-Originated Life Insurance) practices. These practices involve individuals purchasing life insurance policies with the intent to sell them to investors, often upon the insured's death, rather than for the purpose of providing financial support to a beneficiary. The legislation aims to establish regulations and guidelines for the insurance industry that protect consumers from potential exploitation inherent in these practices. It recognizes the ethical concerns and financial risks associated with allowing third-party investors to profit from life insurance policies, which can lead to scenarios where the wellbeing of the insured is overshadowed by the investors' financial interests. By educating states on best practices and implementing consistent regulatory standards, the NCOIL Act seeks to balance the benefits of life insurance with the need for consumer protection. The other options do not specifically address STOLI and IOLI practices. HIPAA primarily focuses on protecting individual health information, ERISA deals with employer-sponsored benefit plans, and the ACA is centered around health insurance reforms. Thus, they are not relevant to the regulation of life insurance policies in the same manner as the NCOIL Act.