What arrangement allows one to bypass insurable interest laws?

Investor-Originated Life Insurance (IOLI) is designed in such a way that it allows investors to purchase life insurance policies on the lives of individuals without having a personal relationship or insurable interest in the lives of those insured. This arrangement effectively bypasses the traditional insurable interest requirements that are typically mandated in life insurance policies, which state that the policyholder must have a legitimate interest in the life of the person being insured.

In IOLI, the investor profits from the death benefit while the insured individual may not have any financial stake in the transaction. This can create ethical and regulatory concerns surrounding the intent of the insurance and its implications for both the insurer and the insured. The differences between IOLI and standard practices in life insurance highlight the importance of insurable interest laws designed to prevent potential abuse of life insurance as a financial instrument.

The other types of insurance mentioned in the options typically have established insurable interest requirements, thus maintaining the integrity and intention of life insurance as a means to financially protect individuals who have a vested interest in the lives of those they insure.