Areivim insists it isn't a true life insurance company and therefore should not be regulated by the State of New York, and it even commissioned a report from a white shoe law firm to back up that contention. But is that true?
The Forward has a report on Areivim, one of the unregulated haredi quasi-life insurance charities FailedMessiah.com and other sources reported on four or five years ago.
Members – who must be haredi or very Orthodox – pay into these charities every month to help take care of the children and spouses of members who pass away who were also members of the charity.
There's usually a cap on the monthly contribution a member must make – $28 in Areivim's case – and the survivors get only what money is available. If several parents from member families would pass away at once (in a car accident, say), the children will get relatively little money. If a person passes away and has only one child, that child will end up getting more. The cap on what each surviving child can get is set, as well – in Areivim's case, at $100,000. And if a natural disaster kills a lot of Areivim members, Areivim won't pay out at all.
The initial idea for these groups is to cover families that do not have life insurance.
But Areivim won't take someone who is sick, and if it later finds out that a member was ill and concealed the illness, it won't pay out. And it has other restrictions, as well.
So why is Areivim not considered to be a form of life insurance and why isn't New York State regulating it?
Buried deep in the Forward's story may very well be the answer to that question:
…The group’s informational packet is six pages long and full of caveats and warnings. Among other things, Areivim says it may not pay out in the event of a major disaster; it won’t pay out if it determines that a person was already ill when he or she joined the group, and it won’t pay out twice if two parents in the same family die in succession.
The packet also protests repeatedly that it is not an insurance policy. If it were an insurance policy, the group would be subject to extensive regulations and oversight by the New York State Department of Financial Services. That agency did not respond to repeated requests for comment from the Forward. Areivim, for its part, maintains that it’s exempt from such regulations.
In April the group commissioned a report from the prominent Manhattan law firm Stroock & Stroock & Lavan LLP on whether its plans constituted insurance. Stroock’s attorneys argued that since Areivim does not guarantee to pay out, its products are not classified as insurance. Areivim declined to provide the entirety of Stroock’s report to the Forward, but it did provide its conclusion, which reads, in part, that Areivim “is not issuing insurance contracts, because Areivim does not have an obligation to confer benefit of pecuniary value upon another party in the event of the death of one of its members.”
Stroock therefore concludes that Areivim does not need to be licensed by the state’s DFS.…
Haredi charities like Areivim rarely commission expensive reports from attorneys unless they have a pressing reason to do so and New York State government agencies, while often evasive, normally answer questions about the legality of of something like Areivim – unless that legality is in the process of being contested, and the charity belongs to a powerful voting bloc linked to the governor.
In other words, the legality of Areivim has likely been challenged in some way and the law firm's report was written to show New York State (or, perhaps, a judge) why Areivim is operating within the law.
Asking Areivim a simple question, "Are you now or have you ever been a subject of a city, state or federal investigation into your practices or your legality?" likely would have given enough information, even with a refusal to answer, to know whether or not Areivim is currently being looked at.
Areivim claims to be a project of "The Tzedakah Organizations of America."
I searched for that charity in Guidestar and couldn't find it. I also could not find it with a Google or Bing search.
Searching Guidestar for Areivim brings up two charities, neither of which does what Areivim says it does and one of them based in Monsey, not Brooklyn.
And that may mean it is not even a legal charity in the State of New York or in the US. (Why the Forward didn't check this is beyond me.)
With term life insurance with guaranteed payouts and state supervision and with rates similar to or even less than what Areivim charges readily available, if the state isn't moving to shut down Aveirm, it certainly should be.