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State insurance regulator tells Pasco to just say 'no'

The subject of insurable interest does not come up often. It looks as if the last time we touched on it here was almost four years ago. Those posts (here) covered some basic insurance concepts, but they were not about a Florida case. Now, thanks to an offer from a group of investors, Pasco County has its own insurable interest story to tell.

For the record, Pasco County is included in the Tampa-St. Petersburg-Clearwater metropolitan area. The county is also part of the state's "sinkhole alley," an unavoidable subject for an insurance blog out of Florida. More to our point here, Pasco County's school district is well funded, according to the chairwoman of the County School Board.

It seemed odd, then, that a consulting company from Ohio would approach the county with an offer to take care of a line item from the school district's budget. Pollock Financial Group LLC wanted to pay for life insurance policies for district employees.

Actually, Pollock wanted to facilitate a group of investors' purchase of the policies. The individuals in the group had been looking for "nontraditional ways" to increase their returns on investment. With interest rates so low, these people were not exactly hitting the jackpot with more traditional long-term investments. As a service to their clients, Pollock engaged independent advisors -- lawyers, consultants and the like -- to research the concept of funding benefits for certain employers.

To them, the idea looked sound. The investment group, through Pollock, would purchase life insurance policies for all district employees, nearly 10,000 of them. The policy would carry a $50,000 payout, and the investors would pay the premiums. When one of the insureds passed away, the benefit would go to the school district and the insured's beneficiaries.

The county had some reservations, and earlier this month the Office of Insurance Regulation confirmed most of them and added a few of its own. The county will not be taking advantage of the offer for free insurance.

We'll explain why in our next post.

Sources: 

Wall Street Journal, "Regulators Slam Investor Proposal to Pay for Teachers' Life Insurance," Leslie Scism, June 13, 2014

Tampa Bay Times, "Pasco school district scrutinizes creative life insurance offer," Jeffrey S. Solochek, April 8, 2014

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