Senate Study Bill 3238
SENATE/HOUSE FILE
BY (PROPOSED DEPARTMENT OF
COMMERCE/INSURANCE
DIVISION BILL)
Passed Senate, Date Passed House, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act to regulate viatical settlements, and providing for fees
2 and penalties.
3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
4 TLSB 5446XD 82
5 da/rj/5
PAG LIN
1 1 Section 1. NEW SECTION. 508E.1A SHORT TITLE.
1 2 This Act may be cited as the "Viatical Settlements Act".
1 3 Sec. 2. Section 508E.2, Code 2007, is amended to read as
1 4 follows:
1 5 508E.2 DEFINITIONS.
1 6 As used in this chapter, unless the context otherwise
1 7 requires:
1 8 1. "Advertising" means any written, electronic, or printed
1 9 communication or any communication by means of recorded
1 10 telephone messages or transmitted on radio; television; the
1 11 internet; or similar communications media, including film
1 12 strips, motion pictures, and videos, published, disseminated,
1 13 circulated, or placed directly before the public in this
1 14 state, for the purpose of creating an interest in or inducing
1 15 a person to sell, assign, devise, bequest, or transfer the
1 16 death benefit or ownership of a life insurance policy pursuant
1 17 to a viatical settlement contract.
1 18 2. "Business of viatical settlements" means an activity
1 19 involved in but not limited to the offering, soliciting,
1 20 negotiating, procuring, effectuating, purchasing, investing,
1 21 financing, monitoring, tracking, underwriting, selling,
1 22 transferring, assigning, pledging, hypothecating, or in any
1 23 other manner acquiring an interest in a life insurance policy
1 24 by means of a viatical settlement contract.
1 25 1. 3. "Chronically ill" means any of the following:
1 26 a. Being unable to perform or maintain at least two
1 27 activities of daily living, including but not limited to
1 28 eating, toileting, transferring, bathing, dressing, or
1 29 continence.
1 30 b. Requiring substantial supervision to protect the
1 31 individual from threats to health and safety due to severe
1 32 cognitive impairment.
1 33 c. Having a level of disability similar to that described
1 34 in paragraph "a" as determined by the United States secretary
1 35 of health and human services.
2 1 2. 4. "Commissioner" means the commissioner of insurance.
2 2 5. a. "Financing entity" means an underwriter, placement
2 3 agent, lender, purchaser of securities, purchaser of a policy
2 4 or certificate from a viatical settlement provider, credit
2 5 enhancer, or any entity that has a direct ownership in a
2 6 policy or certificate that is the subject of a viatical
2 7 settlement contract, but subject to all of the following:
2 8 (1) Whose principal activity related to the transaction is
2 9 providing funds to effect the viatical settlement or purchase
2 10 of one or more viaticated policies.
2 11 (2) Who has an agreement in writing with one or more
2 12 licensed viatical settlement providers to finance the
2 13 acquisition of viatical settlement contracts.
2 14 b. "Financing entity" does not include a nonaccredited
2 15 investor or a viatical settlement purchaser.
2 16 6. "Fraudulent viatical settlement act" includes any of
2 17 the following:
2 18 a. An act or omission committed by any person who,
2 19 knowingly or with intent to defraud, for the purpose of
2 20 depriving another of property or for pecuniary gain, commits
2 21 or permits its employees or its agents to engage in acts
2 22 including any of the following:
2 23 (1) Presenting, causing to be presented, or preparing with
2 24 knowledge or belief that it will be presented to or by a
2 25 viatical settlement provider, viatical settlement broker,
2 26 viatical settlement purchaser, financing entity, insurer,
2 27 insurance producer, or any other person, false material
2 28 information, or concealing material information, as part of,
2 29 in support of, or concerning a fact material to one or more of
2 30 the following:
2 31 (a) An application for the issuance of a viatical
2 32 settlement contract or insurance policy.
2 33 (b) The underwriting of a viatical settlement contract or
2 34 insurance policy.
2 35 (c) A claim for payment or benefit pursuant to a viatical
3 1 settlement contract or insurance policy.
3 2 (d) Premiums paid on an insurance policy.
3 3 (e) Payments and changes in ownership or beneficiary made
3 4 in accordance with the terms of a viatical settlement contract
3 5 or insurance policy.
3 6 (f) The reinstatement or conversion of an insurance
3 7 policy.
3 8 (g) In the solicitation, offer, effectuation, or sale of a
3 9 viatical settlement contract or insurance policy.
3 10 (h) The issuance of written evidence of viatical
3 11 settlement contract or insurance policy.
3 12 (i) A financing transaction.
3 13 (2) Employing any plan, financial structure, device,
3 14 scheme, or artifice to defraud related to viaticated policies.
3 15 b. In the furtherance of a fraud or to prevent the
3 16 detection of a fraud to do, or permit an employee or agent to
3 17 do, any of the following:
3 18 (1) Remove, conceal, alter, destroy, or sequester from the
3 19 commissioner the assets or records of a licensee or other
3 20 person engaged in the business of viatical settlements.
3 21 (2) Misrepresent or conceal the financial condition of a
3 22 licensee, financing entity, insurer, or other person.
3 23 (3) Transact the business of viatical settlements in
3 24 violation of laws requiring a license, certificate of
3 25 authority, or other legal authority for the transaction of the
3 26 business of viatical settlements.
3 27 (4) File with the commissioner or the equivalent chief
3 28 insurance regulatory official of another jurisdiction a
3 29 document containing false information or otherwise conceal
3 30 information about a material fact from the commissioner.
3 31 c. Embezzlement, theft, misappropriation, or conversion of
3 32 moneys, funds, premiums, credits, or other property of a
3 33 viatical settlement provider, insurer, insured, viator,
3 34 insurance policyowner, or any other person engaged in the
3 35 business of viatical settlements or insurance.
4 1 d. Recklessly entering into, negotiating, brokering, or
4 2 otherwise dealing in a viatical settlement contract, the
4 3 subject of which is a life insurance policy that was obtained
4 4 by presenting false information concerning any fact material
4 5 to the policy or by concealing, for the purpose of misleading
4 6 another, information concerning any fact material to the
4 7 policy, where the person or the persons intended to defraud
4 8 the policy's issuer, the viatical settlement provider, or the
4 9 viator. As used in this paragraph, "recklessly" means
4 10 engaging in the conduct in conscious and clearly unjustifiable
4 11 disregard of a substantial likelihood of the existence of the
4 12 relevant facts or risks, such disregard involving a gross
4 13 deviation from acceptable standards of conduct.
4 14 e. Facilitating the change of state of ownership of a
4 15 policy or certificate or the state of residency of a viator to
4 16 a state or jurisdiction that does not have a law similar to
4 17 this chapter for the express purposes of evading or avoiding
4 18 the provisions of this chapter.
4 19 f. Attempting to commit, assisting, aiding or abetting in
4 20 the commission of, or conspiracy to commit the acts or
4 21 omissions specified in this subsection.
4 22 7. "Life insurance producer" means any person licensed in
4 23 this state as a resident or nonresident insurance producer who
4 24 has received qualification or authority for life insurance
4 25 coverage or a life line of coverage pursuant to chapter 522B.
4 26 8. "Person" means a natural person or a legal entity,
4 27 including, without limitation, an individual, partnership,
4 28 limited liability company, association, trust, or corporation.
4 29 9. "Policy" means an individual or group policy, group
4 30 certificate, contract, or arrangement of life insurance owned
4 31 by a resident of this state, regardless of whether delivered
4 32 or issued for delivery in this state.
4 33 10. "Related provider trust" means a titling trust or
4 34 other trust established by a licensed viatical settlement
4 35 provider or a financing entity for the sole purpose of holding
5 1 the ownership or beneficial interest in purchased policies in
5 2 connection with a financing transaction. The trust shall have
5 3 a written agreement with the licensed viatical settlement
5 4 provider under which the licensed viatical settlement provider
5 5 is responsible for ensuring compliance with all statutory and
5 6 regulatory requirements and under which the trust agrees to
5 7 make all records and files related to viatical settlement
5 8 transactions available to the commissioner as if those records
5 9 and files were maintained directly by the licensed viatical
5 10 settlement provider.
5 11 11. "Special purpose entity" means a corporation,
5 12 partnership, trust, limited liability company, or other
5 13 similar entity formed solely to provide either directly or
5 14 indirectly access to institutional capital markets for or in
5 15 connection with any of the following:
5 16 a. For a financing entity or licensed viatical settlement
5 17 provider.
5 18 b. (1) In connection with a transaction in which the
5 19 securities in the special purposes entity are acquired by the
5 20 viator or by qualified institutional buyers as defined in 17
5 21 C.F.R. } 230.144 promulgated by the United States securities
5 22 and exchange commission under the federal Securities Act of
5 23 1933, as amended, 15 U.S.C. } 77a et seq.
5 24 (2) In connection with a transaction in which the
5 25 securities pay a fixed rate of return commensurate with
5 26 established asset=backed institutional capital markets.
5 27 3. 12. "Terminally ill" means having an illness or
5 28 sickness that can reasonably be expected to result in death in
5 29 twenty=four months or less.
5 30 13. "Viatical settlement broker" means a person, including
5 31 a life insurance producer as provided for in section 508E.3,
5 32 who working exclusively on behalf of a viator and for a fee,
5 33 commission, or other valuable consideration, offers or
5 34 attempts to negotiate viatical settlement contracts between a
5 35 viator and one or more viatical settlement providers or one or
6 1 more viatical settlement brokers. Notwithstanding the manner
6 2 in which the viatical settlement broker is compensated, a
6 3 viatical settlement broker is deemed to represent only the
6 4 viator, and not the insurer or the viatical settlement
6 5 provider, and owes a fiduciary duty to the viator to act
6 6 according to the viator's instructions and in the best
6 7 interest of the viator. "Viatical settlement broker" does not
6 8 include an attorney, certified public accountant, or a
6 9 financial planner accredited by a nationally recognized
6 10 accreditation agency who is retained to represent the viator
6 11 and whose compensation is not paid directly or indirectly by
6 12 the viatical settlement provider or purchaser.
6 13 4. 14. a. "Viatical settlement contract" means a written
6 14 agreement entered into between a viator and a viatical
6 15 settlement provider and a person who owns or is insured under
6 16 a life insurance or any affiliate of the viatical settlement
6 17 provider establishing the terms under which compensation or
6 18 anything of value is or will be paid, which compensation or
6 19 value is less than the expected death benefits of the policy
6 20 in return for the viator's present or future assignment,
6 21 transfer, sale, devise, or bequest of the death benefit or
6 22 ownership of any portion of the insurance policy or
6 23 certificate, or who owns or is covered under a group life of
6 24 insurance policy.
6 25 b. "Viatical settlement contract" includes a premium
6 26 finance loan made for a life insurance policy by a lender to a
6 27 viator on, before, or after the date of issuance of the policy
6 28 where any of the following applies:
6 29 (1) The viator or the insured receives on the date of the
6 30 premium finance loan a guarantee of a future viatical
6 31 settlement value of the policy.
6 32 (2) The viator or the insured agrees on the date of the
6 33 premium finance loan to sell the policy or any portion of its
6 34 death benefit on any date following the issuance of the
6 35 policy.
7 1 c. "Viatical settlement contract" does not mean a written
7 2 agreement entered into between a viator and a person having an
7 3 insurable interest in the viator's life. include any of the
7 4 following:
7 5 (1) A policy loan or accelerated death benefit made by the
7 6 insurer pursuant to the policy's terms.
7 7 (2) Loan proceeds that are used solely to pay any of the
7 8 following:
7 9 (a) Premiums for the policy.
7 10 (b) The costs of the loan, including, without limitation,
7 11 interest, arrangement fees, utilization fees and similar fees,
7 12 closing costs, legal fees and expenses, trustee fees and
7 13 expenses, and third=party collateral provider fees and
7 14 expenses, including fees payable to letter of credit issuers.
7 15 (3) A loan made by a bank or other licensed financial
7 16 institution in which the lender takes an interest in a life
7 17 insurance policy solely to secure repayment of a loan or, if
7 18 there is a default on the loan and the policy is transferred,
7 19 the transfer of such a policy by the lender, provided that the
7 20 default itself is not pursuant to an agreement or
7 21 understanding with any other person for the purpose of evading
7 22 regulation under this chapter.
7 23 (4) A loan made by a lender that does not violate
7 24 insurance premium finance law, provided that the premium
7 25 finance loan is not described in paragraph "b".
7 26 (5) An agreement where all the parties are closely related
7 27 to the insured by blood or law; have a lawful substantial
7 28 economic interest in the continued life, health, and bodily
7 29 safety of the person insured; or are trusts established
7 30 primarily for the benefit of such parties.
7 31 (6) Any designation, consent, or agreement by an insured
7 32 who is an employee of an employer in connection with the
7 33 purchase by the employer, or trust established by the
7 34 employer, of life insurance on the life of the employee.
7 35 (7) A bona fide business succession planning arrangement
8 1 between one or more of the following:
8 2 (a) Shareholders in a corporation or between a corporation
8 3 and one or more of its shareholders or one or more trusts
8 4 established by its shareholders.
8 5 (b) Partners in a partnership or between a partnership and
8 6 one or more of its partners or one or more trusts established
8 7 by its partners.
8 8 (c) Members in a limited liability company or between a
8 9 limited liability company and one or more of its members or
8 10 one or more trusts established by its members.
8 11 (8) An agreement entered into by a service recipient, or a
8 12 trust established by the service recipient, and a service
8 13 provider, or a trust established by the service provider, who
8 14 performs significant services for the service recipient's
8 15 trade or business.
8 16 (9) Any other contract, transaction, or arrangement
8 17 exempted from the definition of viatical settlement contract
8 18 by the commissioner based on a determination that the
8 19 contract, transaction, or arrangement is not of the type
8 20 intended to be regulated by this chapter.
8 21 15. a. "Viatical settlement provider" means a person,
8 22 other than a viator, that enters into or effectuates a
8 23 viatical settlement contract with a viator resident in this
8 24 state.
8 25 b. "Viatical settlement provider" does not include any of
8 26 the following:
8 27 (1) A bank, savings bank, savings and loan association,
8 28 credit union, or other licensed lending institution that takes
8 29 an assignment of a life insurance policy solely as collateral
8 30 for a loan.
8 31 (2) A premium finance company making premium finance loans
8 32 and exempted by the commissioner from the licensing
8 33 requirement under the premium finance laws that takes an
8 34 assignment of a life insurance policy solely as collateral for
8 35 a loan.
9 1 (3) The issuer of the life insurance policy.
9 2 (4) An authorized or eligible insurer that provides
9 3 stop=loss coverage or financial guaranty insurance to a
9 4 viatical settlement provider, purchaser, financing entity,
9 5 special purpose entity, or related provider trust.
9 6 (5) A natural person who enters into or effectuates no
9 7 more than one agreement in a calendar year for the transfer of
9 8 life insurance policies for any value less than the expected
9 9 death benefit.
9 10 (6) A financing entity.
9 11 (7) A special purpose entity.
9 12 (8) A related provider trust.
9 13 (9) A viatical settlement purchaser.
9 14 (10) Any other person that the commissioner determines is
9 15 not the type of person intended to be covered by the
9 16 definition of viatical settlement provider.
9 17 16. a. "Viatical settlement purchaser" means a person who
9 18 provides a sum of money as consideration for a life insurance
9 19 policy or an interest in the death benefits of a life
9 20 insurance policy, or a person who owns or acquires or is
9 21 entitled to a beneficial interest in a trust that owns a
9 22 viatical settlement contract or is the beneficiary of a life
9 23 insurance policy that has been or will be the subject of a
9 24 viatical settlement contract, for the purpose of deriving an
9 25 economic benefit.
9 26 b. "Viatical settlement purchaser" does not include any of
9 27 the following:
9 28 (1) A licensee under this chapter.
9 29 (2) An accredited investor or qualified institutional
9 30 buyer as defined, respectively, in 17 C.F.R. } 230.501(a) or
9 31 17 C.F.R. } 230.144A as promulgated by the United States
9 32 securities and exchange commission under the federal
9 33 Securities Act of 1933, as amended, 15 U.S.C. } 77a et seq.
9 34 (3) A financing entity.
9 35 (4) A special purpose entity.
10 1 (5) A related provider trust.
10 2 17. "Viaticated policy" means a life insurance policy or
10 3 certificate that has been acquired by a viatical settlement
10 4 provider pursuant to a viatical settlement contract.
10 5 5. 18. a. "Viator" means a person selling the owner of a
10 6 life insurance policy or a certificate holder under a group
10 7 policy who resides in this state and enters or seeks to enter
10 8 into a viatical settlement contract. "Viator" includes but is
10 9 not limited to an owner of a life insurance policy or a
10 10 certificate holder under a group policy insuring the life of
10 11 an individual with a terminal or chronic illness or condition
10 12 except where specifically addressed. If there is more than
10 13 one viator on a single policy and the viators are residents of
10 14 different states, the transaction shall be governed by the law
10 15 of the state in which the viator having the largest percentage
10 16 ownership resides or, if the viators hold equal ownership, the
10 17 state of residence of one viator agreed upon in writing by all
10 18 the viators.
10 19 b. "Viator" does not include any of the following:
10 20 (1) A licensee under this chapter, including a life
10 21 insurance producer acting as a viatical settlement broker
10 22 pursuant to this chapter.
10 23 (2) A qualified institutional buyer as defined in 17
10 24 C.F.R. } 230.144=144A as promulgated by the United States
10 25 securities and exchange commission under the federal
10 26 Securities Act of 1933, as amended, 15 U.S.C. } 77a et seq.
10 27 (3) A financing entity.
10 28 (4) A special purpose entity.
10 29 (5) A related provider trust.
10 30 Sec. 3. Section 508E.3, Code 2007, is amended by striking
10 31 the section and inserting in lieu thereof the following:
10 32 508E.3 LICENSE AND BOND REQUIREMENTS.
10 33 1. a. A person shall not operate as a viatical settlement
10 34 provider or viatical settlement broker without first obtaining
10 35 a license from the commissioner of the state of residence of
11 1 the viator.
11 2 b. (1) A life insurance producer who has been duly
11 3 licensed as a resident insurance producer with a life line of
11 4 authority in this state or the life insurance producer's home
11 5 state for at least one year and is licensed as a nonresident
11 6 producer in this state shall be deemed to meet the licensing
11 7 requirements of this section and shall be permitted to operate
11 8 as a viatical settlement broker.
11 9 (2) Not later than thirty days from the first day of
11 10 operating as a viatical settlement broker, the life insurance
11 11 producer shall notify the commissioner that the life insurance
11 12 producer is acting as a viatical settlement broker on a form
11 13 prescribed by the commissioner, and shall pay any applicable
11 14 fee of up to one hundred dollars as provided by rules adopted
11 15 by the commissioner. The notification shall include an
11 16 acknowledgment by the life insurance producer that the life
11 17 insurance producer will operate as a viatical settlement
11 18 broker in accordance with this chapter.
11 19 (3) The insurer that issued the policy being viaticated
11 20 shall not be responsible for any act or omission of a viatical
11 21 settlement broker or viatical settlement provider arising out
11 22 of or in connection with the viatical settlement transaction,
11 23 unless the insurer receives compensation for the placement of
11 24 a viatical settlement contract from the viatical settlement
11 25 provider or viatical settlement broker in connection with the
11 26 viatical settlement contract.
11 27 c. A person licensed as an attorney, certified public
11 28 accountant, or financial planner accredited by a nationally
11 29 recognized accreditation agency who is retained to represent
11 30 the viator, whose compensation is not paid directly or
11 31 indirectly by the viatical settlement provider, may negotiate
11 32 viatical settlement contracts on behalf of the viator without
11 33 having to obtain a license as a viatical settlement broker.
11 34 2. An application for a viatical settlement provider or
11 35 viatical settlement broker license shall be made to the
12 1 commissioner by the applicant on a form prescribed by the
12 2 commissioner, and the application shall be accompanied by a
12 3 fee of not more than one hundred dollars as provided by rules
12 4 adopted by the commissioner.
12 5 3. A license may be renewed from year to year on the
12 6 anniversary date upon payment of the annual renewal fee of not
12 7 more than one hundred dollars as provided by rules adopted by
12 8 the commissioner. A failure to pay the fee by the renewal
12 9 date results in expiration of the license.
12 10 4. An applicant shall provide information on forms
12 11 required by the commissioner. The commissioner shall have
12 12 authority, at any time, to require the applicant to fully
12 13 disclose the identity of all stockholders, partners, officers,
12 14 members, and employees, and the commissioner may, in the
12 15 exercise of the commissioner's discretion, refuse to issue a
12 16 license in the name of a legal entity if not satisfied that
12 17 any officer, employee, stockholder, partner, or member thereof
12 18 who may materially influence the applicant's conduct meets the
12 19 standards of this chapter.
12 20 5. A license issued to a legal entity authorizes all
12 21 partners, officers, members, and designated employees to act
12 22 as viatical settlement providers or viatical settlement
12 23 brokers, as applicable, under the license, and all those
12 24 persons shall be named in the application and any supplements
12 25 to the application.
12 26 6. Upon the filing of an application and the payment of
12 27 the license fee, the commissioner shall make an investigation
12 28 of each applicant and issue a license if the commissioner
12 29 finds that the applicant complies with all of the following:
12 30 a. If a viatical settlement provider, has provided a
12 31 detailed plan of operation.
12 32 b. Is competent and trustworthy and intends to act in good
12 33 faith in the capacity involved by the license applied for.
12 34 c. Has a good business reputation and has had experience,
12 35 training, or education so as to be qualified in the business
13 1 for which the license is applied for.
13 2 d. (1) If a viatical settlement provider, has
13 3 demonstrated evidence of financial responsibility in a format
13 4 prescribed by the commissioner through either a surety bond
13 5 executed and issued by an insurer authorized to issue surety
13 6 bonds in this state, or a deposit of cash, certificates of
13 7 deposit, or securities, or any combination thereof in the
13 8 amount of two hundred fifty thousand dollars.
13 9 (2) If a viatical settlement broker, has demonstrated
13 10 evidence of financial responsibility in a format prescribed by
13 11 the commissioner through either a surety bond executed and
13 12 issued by an insurer authorized to issue surety bonds in this
13 13 state, or a deposit of cash, certificates of deposit, or
13 14 securities, or any combination thereof in the amount of two
13 15 hundred fifty thousand dollars.
13 16 (3) The commissioner may demand evidence of financial
13 17 responsibility at any time the commissioner deems necessary.
13 18 (4) Any surety bond issued pursuant to this paragraph "d"
13 19 shall be in the favor of this state and shall specifically
13 20 authorize recovery by the commissioner on behalf of any person
13 21 in this state who sustained damages as the result of an
13 22 erroneous act, failure to act, conviction of fraud, or
13 23 conviction of an unfair practice by the viatical settlement
13 24 provider or viatical settlement broker.
13 25 (5) Notwithstanding any provision of this paragraph "d" to
13 26 contrary, the commissioner shall accept, as evidence of
13 27 financial responsibility, proof that financial instruments in
13 28 accordance with the requirements in this paragraph "d" have
13 29 been filed with one state where the applicant is licensed as a
13 30 viatical settlement provider or viatical settlement broker.
13 31 e. If a legal entity, provides a certificate of good
13 32 standing from the state of its domicile.
13 33 f. If a viatical settlement provider or viatical
13 34 settlement broker, has provided an antifraud plan that meets
13 35 the requirements of section 508E.14, subsection 7.
14 1 7. The commissioner shall not issue a license to a
14 2 nonresident applicant unless a written designation of an agent
14 3 for service of process is filed and maintained with the
14 4 commissioner or the applicant has filed with the commissioner
14 5 the applicant's written irrevocable consent that any action
14 6 against the applicant may be commenced against the applicant
14 7 by service of process on the commissioner.
14 8 8. A viatical settlement provider or viatical settlement
14 9 broker shall provide to the commissioner new or revised
14 10 information about officers, ten=percent=or=more stockholders,
14 11 partners, directors, members, or designated employees within
14 12 thirty days of the change.
14 13 9. An individual licensed as a viatical settlement broker
14 14 shall complete on a biennial basis fifteen hours of training
14 15 related to viatical settlements and viatical settlement
14 16 transactions, as required by the commissioner; provided,
14 17 however, that a life insurance producer who is operating as a
14 18 viatical settlement broker pursuant to subsection 1, paragraph
14 19 "b", shall not be subject to the requirements of this
14 20 subsection. Any person failing to meet the requirements of
14 21 this subsection shall be subject to the penalties imposed by
14 22 the commissioner.
14 23 10. Fees collected pursuant to this section shall be
14 24 deposited into the general fund of the state.
14 25 Sec. 4. Section 508E.4, Code 2007, is amended by striking
14 26 the section and inserting in lieu thereof the following:
14 27 508E.4 LICENSE REVOCATION AND DENIAL.
14 28 1. The commissioner may refuse to issue, suspend, revoke,
14 29 or refuse to renew the license of a viatical settlement
14 30 provider or viatical settlement broker if the commissioner
14 31 finds that any of the following applies:
14 32 a. There was any material misrepresentation in the
14 33 application for the license.
14 34 b. The licensee or any officer, partner, member, or key
14 35 management personnel has been convicted of fraudulent or
15 1 dishonest practices, is subject to a final administrative
15 2 action, or is otherwise shown to be untrustworthy or
15 3 incompetent.
15 4 c. The viatical settlement provider demonstrates a pattern
15 5 of unreasonable payments to viators.
15 6 d. The licensee or any officer, partner, member, or key
15 7 management personnel has been found guilty of, or has pleaded
15 8 guilty or nolo contendere to, any felony, or to a misdemeanor
15 9 involving fraud or moral turpitude, regardless of whether a
15 10 judgment of conviction has been entered by the court.
15 11 e. The viatical settlement provider has entered into any
15 12 viatical settlement contract that has not been approved
15 13 pursuant to this chapter.
15 14 f. The viatical settlement provider has failed to honor
15 15 contractual obligations set out in a viatical settlement
15 16 contract.
15 17 g. The licensee no longer meets the requirements for
15 18 initial licensure.
15 19 h. The viatical settlement provider has assigned,
15 20 transferred, or pledged a viaticated policy to a person other
15 21 than a viatical settlement provider licensed in this state,
15 22 viatical settlement purchaser, an accredited investor, or
15 23 qualified institutional buyer as defined respectively in 17
15 24 C.F.R. } 230.501(a) or 17 C.F.R. } 230.144A as promulgated by
15 25 the United States securities and exchange commission under the
15 26 federal Securities Act of 1933, as amended, 15 U.S.C. } 77a et
15 27 seq., a financing entity, special purpose entity, or related
15 28 provider trust.
15 29 i. The licensee or any officer, partner, member, or key
15 30 management personnel has violated any provision of this
15 31 chapter.
15 32 2. The commissioner may suspend, revoke, or refuse to
15 33 renew the license of a viatical settlement broker or a life
15 34 insurance producer operating as a viatical settlement broker
15 35 pursuant to this chapter if the commissioner finds that the
16 1 viatical settlement broker or life insurance producer has
16 2 violated the provisions of this chapter or has otherwise
16 3 engaged in bad faith conduct with one or more viators.
16 4 3. If the commissioner denies a license application or
16 5 suspends, revokes, or refuses to renew the license of a
16 6 viatical settlement provider or viatical settlement broker, or
16 7 suspends, revokes, or refuses to renew a license of a life
16 8 insurance producer operating as a viatical settlement broker
16 9 pursuant to this chapter, the commissioner shall conduct a
16 10 hearing in accordance with chapter 17A.
16 11 Sec. 5. NEW SECTION. 508E.5 APPROVAL OF VIATICAL
16 12 SETTLEMENT CONTRACTS AND DISCLOSURE STATEMENTS.
16 13 A person shall not use a viatical settlement contract form
16 14 or provide to a viator a disclosure statement form in this
16 15 state unless first filed with and approved by the
16 16 commissioner. The commissioner shall disapprove a viatical
16 17 settlement contract form or disclosure statement form if, in
16 18 the commissioner's opinion, the contract or provisions
16 19 contained therein fail to meet the requirements of sections
16 20 508E.8, 508E.10, 508E.13, and 508.14, subsection 2, or are
16 21 unreasonable, contrary to the interests of the public, or
16 22 otherwise misleading or unfair to the viator. At the
16 23 commissioner's discretion, the commissioner may require the
16 24 submission of advertising material.
16 25 Sec. 6. NEW SECTION. 508E.6 REPORTING REQUIREMENTS AND
16 26 PRIVACY.
16 27 1. Each viatical settlement provider shall file with the
16 28 commissioner on or before March 1 of each year an annual
16 29 statement containing such information as the commissioner may
16 30 adopt by rule. Such information shall be limited to only
16 31 those transactions where the viator is a resident of this
16 32 state. Notwithstanding chapter 22, individual transaction
16 33 data regarding the business of viatical settlements or data
16 34 that could compromise the privacy of personal, financial, and
16 35 health information of the viator or insured shall be filed
17 1 with the commissioner on a confidential basis.
17 2 2. Except as otherwise allowed or required by law, a
17 3 viatical settlement provider, viatical settlement broker,
17 4 insurance company, insurance producer, information bureau,
17 5 rating agency or company, or any other person with actual
17 6 knowledge of an insured's identity shall not disclose that
17 7 identity as an insured, or the insured's financial or medical
17 8 information to any other person unless the disclosure is any
17 9 of the following:
17 10 a. Necessary to effect a viatical settlement between the
17 11 viator and a viatical settlement provider and the viator and
17 12 insured have provided prior written consent to the disclosure.
17 13 b. Provided in response to an investigation or examination
17 14 by the commissioner or any other governmental officer or
17 15 agency or pursuant to the requirements of section 508E.14,
17 16 subsection 3.
17 17 c. A term of or condition to the transfer of a policy by
17 18 one viatical settlement provider to another viatical
17 19 settlement provider.
17 20 d. Necessary to permit a financing entity, related
17 21 provider trust, or special purpose entity to finance the
17 22 purchase of policies by a viatical settlement provider and the
17 23 viator and insured have provided prior written consent to the
17 24 disclosure.
17 25 e. Necessary to allow the viatical settlement provider,
17 26 viatical settlement broker, or their authorized
17 27 representatives to make contacts for the purpose of
17 28 determining health status.
17 29 f. Required to purchase stop=loss coverage or financial
17 30 guaranty insurance.
17 31 Sec. 7. NEW SECTION. 508E.7 EXAMINATION OR
17 32 INVESTIGATIONS.
17 33 1. AUTHORITY, SCOPE, AND SCHEDULING OF EXAMINATIONS.
17 34 a. (1) The commissioner may conduct an examination under
17 35 this chapter of a licensee as often as the commissioner in the
18 1 commissioner's discretion deems appropriate after considering
18 2 the factors set forth in this paragraph "a".
18 3 (2) In scheduling and determining the nature, scope, and
18 4 frequency of the examinations, the commissioner shall consider
18 5 such matters as the consumer complaints, results of financial
18 6 statement analyses and ratios, changes in management or
18 7 ownership, actuarial opinions, reports of independent
18 8 certified public accountants, and other relevant criteria as
18 9 determined by the commissioner.
18 10 b. For purposes of completing an examination of a licensee
18 11 under this chapter, the commissioner may examine or
18 12 investigate any person, or the business of any person, in so
18 13 far as the examination or investigation is, in the sole
18 14 discretion of the commissioner, necessary or material to the
18 15 examination of the licensee.
18 16 c. In lieu of an examination under this chapter of any
18 17 foreign or alien licensee licensed in this state, the
18 18 commissioner may, at the commissioner's discretion, accept an
18 19 examination report on the licensee as prepared by the
18 20 commissioner for the licensee's state of domicile or
18 21 port=of=entry state.
18 22 d. As far as practical, the examination of a foreign or
18 23 alien licensee shall be made in cooperation with the insurance
18 24 supervisory officials of other states in which the licensee
18 25 transacts business.
18 26 2. RECORD RETENTION REQUIREMENTS.
18 27 a. A person required to be licensed pursuant to section
18 28 508E.3 shall for five years retain copies of all of the
18 29 following:
18 30 (1) Proposed, offered, or executed contracts, purchase
18 31 agreements, underwriting documents, policy forms, and
18 32 applications from the date of the proposal, offer, or
18 33 execution of the contract or purchase agreement, whichever is
18 34 later.
18 35 (2) All checks, drafts, or other evidence and
19 1 documentation related to the payment, transfer, deposit, or
19 2 release of funds from the date of the transaction.
19 3 (3) All other records and documents related to the
19 4 requirements of this chapter.
19 5 b. This section does not relieve a person of the
19 6 obligation to produce documents described in paragraph "a" to
19 7 the commissioner after the retention period has expired if the
19 8 person has retained the documents.
19 9 c. Records required to be retained by paragraph "a" must
19 10 be legible and complete and may be retained in paper,
19 11 photograph, microprocess, magnetic, mechanical, or electronic
19 12 media, or by any process that accurately reproduces or forms a
19 13 durable medium for the reproduction of a record.
19 14 3. CONDUCT OF EXAMINATIONS.
19 15 a. Upon determining that an examination should be
19 16 conducted, the commissioner shall issue an examination warrant
19 17 appointing one or more examiners to perform the examination
19 18 and instructing them as to the scope of the examination. In
19 19 conducting the examination, the examiner shall observe those
19 20 guidelines and procedures set forth in the examiners handbook
19 21 adopted by the national association of insurance
19 22 commissioners. The commissioner may also adopt rules for such
19 23 other guidelines or procedures as the commissioner may deem
19 24 appropriate.
19 25 b. Every licensee or person from whom information is
19 26 sought, its officers, directors, and agents shall provide to
19 27 the examiners timely, convenient, and free access at all
19 28 reasonable hours at its offices to all books, records,
19 29 accounts, papers, documents, assets, and computer or other
19 30 recordings relating to the property, assets, business, and
19 31 affairs of the licensee being examined. The officers,
19 32 directors, employees, and agents of the licensee or person
19 33 shall facilitate the examination and aid in the examination so
19 34 far as it is in their power to do so. The refusal of a
19 35 licensee, by its officers, directors, employees, or agents, to
20 1 submit to examination or to comply with any reasonable written
20 2 request of the commissioner shall be grounds for suspension or
20 3 refusal of, or nonrenewal of, any license or authority held by
20 4 the licensee to engage in the viatical settlement business or
20 5 other business subject to the commissioner's jurisdiction.
20 6 Any proceedings for suspension, revocation, or refusal of any
20 7 license or authority shall be conducted pursuant to section
20 8 507B.6A.
20 9 c. The commissioner shall have the power to issue
20 10 subpoenas, to administer oaths, and to examine under oath any
20 11 person as to any matter pertinent to the examination. Upon
20 12 the failure or refusal of a person to obey a subpoena, the
20 13 commissioner may petition a court of competent jurisdiction,
20 14 and upon proper showing, the court may enter an order
20 15 compelling the witness to appear and testify or produce
20 16 documentary evidence. A failure to obey the court order shall
20 17 be punishable as contempt of court.
20 18 d. When making an examination under this chapter, the
20 19 commissioner may retain attorneys, appraisers, independent
20 20 actuaries, independent certified public accountants, or other
20 21 professionals and specialists as examiners, the reasonable
20 22 cost of which shall be borne by the licensee that is the
20 23 subject of the examination.
20 24 e. Nothing contained in this chapter shall be construed to
20 25 limit the commissioner's authority to terminate or suspend an
20 26 examination in order to pursue other legal or regulatory
20 27 action pursuant to the insurance laws of this state. Findings
20 28 of fact and conclusions made pursuant to any examination shall
20 29 be prima facie evidence in any legal or regulatory action.
20 30 f. The commissioner's authority to use and, if
20 31 appropriate, to make public any final or preliminary
20 32 examination report, any examiner or licensee workpapers, or
20 33 other documents, or any other information discovered or
20 34 developed during the course of any examination in the
20 35 furtherance of any legal or regulatory action shall be
21 1 permitted consistent with section 507.14.
21 2 4. EXAMINATION REPORTS.
21 3 a. Examination reports shall be comprised of only facts
21 4 appearing upon the books, records, or other documents of the
21 5 licensee, its agents, or other persons examined, or as
21 6 ascertained from the testimony of its officers, agents, or
21 7 other persons examined concerning its affairs, and such
21 8 conclusions and recommendations as the examiners find
21 9 reasonably warranted from the facts.
21 10 b. Not later than sixty days following completion of the
21 11 examination, the examiner in charge shall file with the
21 12 commissioner a verified written report of examination under
21 13 oath. Upon receipt of the verified report, the commissioner
21 14 shall transmit the report to the licensee examined, together
21 15 with a notice that shall afford the licensee examined a
21 16 reasonable opportunity of not more than thirty days to make a
21 17 written submission or rebuttal with respect to any matters
21 18 contained in the examination report.
21 19 c. In the event the commissioner determines that
21 20 regulatory action is appropriate as a result of an
21 21 examination, the commissioner may initiate any proceedings or
21 22 actions provided by law.
21 23 5. CONFIDENTIALITY OF EXAMINATION INFORMATION.
21 24 a. Notwithstanding chapter 22, the names and individual
21 25 identification data for all viators shall be considered
21 26 private and confidential information and shall not be
21 27 disclosed by the commissioner, unless required by law.
21 28 b. Except as otherwise provided in this chapter, all
21 29 examination reports, working papers, recorded information,
21 30 documents, and copies thereof produced by, obtained by, or
21 31 disclosed to the commissioner or any other person in the
21 32 course of an examination made under this chapter, or in the
21 33 course of an analysis or investigation by the commissioner of
21 34 the financial condition or market conduct of a licensee, shall
21 35 be confidential by law and privileged, shall not be subject to
22 1 chapter 22, shall not be subject to subpoena, and shall not be
22 2 subject to discovery or admissible in evidence in any private
22 3 civil action. The commissioner is authorized to use the
22 4 documents, materials, or other information in the furtherance
22 5 of any regulatory or legal action brought as part of the
22 6 commissioner's official duties.
22 7 c. Documents, materials, or other information, including
22 8 but not limited to all working papers and copies, in the
22 9 possession or control of the national association of insurance
22 10 commissioners and its affiliates and subsidiaries shall be
22 11 confidential by law and privileged, shall not be subject to
22 12 chapter 22, shall not be subject to subpoena, and shall not be
22 13 subject to discovery or admissible in evidence in any private
22 14 civil action if they are any of the following:
22 15 (1) Created, produced, or obtained by or disclosed to the
22 16 national association of insurance commissioners and its
22 17 affiliates and subsidiaries in the course of assisting an
22 18 examination made under this chapter, or assisting the
22 19 commissioner in the analysis or investigation of the financial
22 20 condition or market conduct of a licensee.
22 21 (2) Disclosed to the national association of insurance
22 22 commissioners and its affiliates and subsidiaries under
22 23 paragraph "d" by the commissioner.
22 24 (3) For the purposes of paragraph "b", "chapter" includes
22 25 the law of another state or jurisdiction that is substantially
22 26 similar to this chapter.
22 27 d. Neither the commissioner nor any person that received
22 28 the documents, materials, or other information while acting
22 29 under the authority of the commissioner, including the
22 30 national association of insurance commissioners and its
22 31 affiliates and subsidiaries, shall be permitted to testify in
22 32 any private civil action concerning any confidential
22 33 documents, materials, or information subject to paragraph "a".
22 34 e. In order to assist in the performance of the
22 35 commissioner's duties, the commissioner may do all of the
23 1 following:
23 2 (1) Share documents, materials, or other information,
23 3 including the confidential and privileged documents,
23 4 materials, or information subject to paragraph "a", with other
23 5 state, federal, and international regulatory agencies, with
23 6 the national association of insurance commissioners and its
23 7 affiliates and subsidiaries, and with state, federal, and
23 8 international law enforcement authorities, provided that the
23 9 recipient agrees to maintain the confidentiality and
23 10 privileged status of the documents, materials, communications,
23 11 or other information.
23 12 (2) Receive documents, materials, communications, or
23 13 information, including otherwise confidential and privileged
23 14 documents, materials, or information, from the national
23 15 association of insurance commissioners and its affiliates and
23 16 subsidiaries, notwithstanding chapter 22, and from regulatory
23 17 and law enforcement officials of other foreign or domestic
23 18 jurisdictions, and shall maintain as confidential or
23 19 privileged any documents, materials, or information received
23 20 with notice or the understanding that it is confidential or
23 21 privileged under the laws of the jurisdiction that is the
23 22 source of the documents, materials, or information.
23 23 (3) Enter into agreements governing sharing and use of
23 24 information consistent with section 507.14, subsection 4.
23 25 f. No waiver of any applicable privilege or claim of
23 26 confidentiality in the documents, materials, or information
23 27 shall occur as a result of disclosure to the commissioner
23 28 under this section or as a result of sharing as authorized in
23 29 paragraph "c".
23 30 g. A privilege established under the law of any state or
23 31 jurisdiction that is substantially similar to the privilege
23 32 established under this subsection shall be available and
23 33 enforced in any proceeding in, and in any court of, this
23 34 state.
23 35 h. Nothing contained in this chapter shall prevent or be
24 1 construed as prohibiting the commissioner from disclosing the
24 2 content of an examination report, preliminary examination
24 3 report or results, or any matter relating thereto, to the
24 4 commissioner of any other state or country, or to law
24 5 enforcement officials of this or any other state or agency of
24 6 the federal government at any time or to the national
24 7 association of insurance commissioners, so long as such agency
24 8 or office receiving the report or matters relating thereto
24 9 agrees in writing to hold it confidential and in a manner
24 10 consistent with this chapter.
24 11 6. CONFLICT OF INTEREST.
24 12 a. An examiner may not be appointed by the commissioner if
24 13 the examiner, either directly or indirectly, has a conflict of
24 14 interest or is affiliated with the management of or owns a
24 15 pecuniary interest in any person subject to examination under
24 16 this chapter. This section shall not be construed to
24 17 automatically preclude an examiner from being any of the
24 18 following:
24 19 (1) A viator.
24 20 (2) An insured in a viaticated insurance policy.
24 21 (3) A beneficiary in an insurance policy that is proposed
24 22 to be viaticated.
24 23 b. Notwithstanding the requirements of paragraph "a", the
24 24 commissioner may retain from time to time, on an individual
24 25 basis, qualified actuaries, certified public accountants, or
24 26 other similar individuals who are independently practicing
24 27 their professions, even though these persons may from time to
24 28 time be similarly employed or retained by persons subject to
24 29 examination under this chapter.
24 30 7. COST OF EXAMINATIONS.
24 31 a. The commissioner may appoint insurance examiners who,
24 32 while conducting examinations, shall possess all the powers
24 33 conferred upon the commissioner for such purposes. The entire
24 34 time of the examiners shall be under the control of the
24 35 commissioner, and shall be employed as the commissioner may
25 1 direct.
25 2 b. The commissioner may, when in the commissioner's
25 3 judgment it is advisable, appoint assistants to aid in making
25 4 examinations. The examiners shall be compensated on the basis
25 5 of the normal workweek of the insurance division at a salary
25 6 to be fixed by the commissioner subject, however, to the
25 7 provisions of section 505.14. The compensation shall be paid
25 8 from appropriations for such purposes upon certification of
25 9 the commissioner, which shall be reimbursed as provided in
25 10 sections 507.8 and 507.9.
25 11 c. When making an examination under this chapter, the
25 12 commissioner may retain attorneys, appraisers, independent
25 13 actuaries, independent certified public accountants, or other
25 14 professionals and specialists as examiners, the reasonable
25 15 cost of which shall be borne by the company which is the
25 16 subject of the examination.
25 17 d. The commissioner shall, upon the completion of an
25 18 examination, or at such regular intervals prior to completion
25 19 as the commissioner determines, prepare an account of the
25 20 costs incurred in performing and preparing the report of such
25 21 examinations which shall be charged to and paid by the company
25 22 examined, and upon failure or refusal of a company examined to
25 23 pay such costs, the same may be recovered by the commissioner
25 24 or the attorney general in an action brought in the name of
25 25 the state, and the commissioner may also revoke the
25 26 certificate of authority of such company to transact business
25 27 within this state.
25 28 8. IMMUNITY FROM LIABILITY.
25 29 a. No cause of action shall arise, nor shall any liability
25 30 be imposed, against the commissioner, the commissioner's
25 31 authorized representatives, or any examiner appointed by the
25 32 commissioner for any statements made or conduct performed in
25 33 good faith while carrying out the provisions of this chapter.
25 34 b. No cause of action shall arise, nor shall any liability
25 35 be imposed, against any person for the act of communicating or
26 1 delivering information or data to the commissioner or the
26 2 commissioner's authorized representative or examiner pursuant
26 3 to an examination made under this chapter, if the act of
26 4 communication or delivery was performed in good faith and
26 5 without fraudulent intent or the intent to deceive. This
26 6 paragraph does not abrogate or modify in any way any common
26 7 law or statutory privilege or immunity heretofore enjoyed by
26 8 any person identified in paragraph "a".
26 9 c. A person identified in paragraph "a" or "b" shall be
26 10 entitled to an award of attorney fees and costs if the person
26 11 is the prevailing party in a civil cause of action for libel,
26 12 slander, or any other relevant tort arising out of activities
26 13 in carrying out the provisions of this chapter and the party
26 14 bringing the action was not substantially justified in doing
26 15 so. For purposes of this paragraph, a proceeding is
26 16 "substantially justified" if it had a reasonable basis in law
26 17 or fact at the time that it was initiated.
26 18 9. INVESTIGATIVE AUTHORITY OF THE COMMISSIONER. The
26 19 commissioner may investigate suspected fraudulent viatical
26 20 settlement acts and persons engaged in the business of
26 21 viatical settlements.
26 22 Sec. 8. NEW SECTION. 508E.8 DISCLOSURE TO VIATOR.
26 23 1. With each application for a viatical settlement, a
26 24 viatical settlement provider or viatical settlement broker
26 25 shall provide the viator with at least the following
26 26 disclosures no later than the time the application for the
26 27 viatical settlement contract is signed by all parties. The
26 28 disclosures shall be provided in a separate document that is
26 29 signed by the viator and the viatical settlement provider or
26 30 viatical settlement broker, and shall provide all of the
26 31 following information:
26 32 a. There are possible alternatives to viatical settlement
26 33 contracts including any accelerated death benefits or policy
26 34 loans offered under the viator's life insurance policy.
26 35 b. That a viatical settlement broker represents
27 1 exclusively the viator, and not the insurer or the viatical
27 2 settlement provider, and owes a fiduciary duty to the viator,
27 3 including a duty to act according to the viator's instructions
27 4 and in the best interest of the viator.
27 5 c. Some or all of the proceeds of the viatical settlement
27 6 may be taxable under federal income tax and state franchise
27 7 and income taxes, and assistance should be sought from a
27 8 professional tax advisor.
27 9 d. Proceeds of the viatical settlement could be subject to
27 10 the claims of creditors.
27 11 e. Receipt of the proceeds of a viatical settlement may
27 12 adversely affect the viator's eligibility for Medicaid or
27 13 other government benefits or entitlements, and advice should
27 14 be obtained from the appropriate government agencies.
27 15 f. The viator has the right to rescind a viatical
27 16 settlement contract before the earlier of sixty days after the
27 17 date upon which the viatical settlement contract is executed
27 18 by all parties or thirty days after the viatical settlement
27 19 proceeds have been paid to the viator, as provided in section
27 20 508E.10, subsection 3. Recision, if exercised by the viator,
27 21 is effective only if both notice of the recision is given, and
27 22 the viator repays all proceeds and any premiums, loans, and
27 23 loan interest paid on account of the viatical settlement
27 24 within the recision period. If the insured dies during the
27 25 recision period, the viatical settlement contract shall be
27 26 deemed to have been rescinded, subject to repayment by the
27 27 viator or the viator's estate of all viatical settlement
27 28 proceeds and any premiums, loans, and loan interest that have
27 29 been paid by the viatical settlement provider or purchaser
27 30 within sixty days of the insured's death.
27 31 g. Funds will be sent to the viator within three business
27 32 days after the viatical settlement provider has received the
27 33 insurer's or group administrator's written acknowledgment that
27 34 ownership of the policy or interest in the certificate has
27 35 been transferred and the beneficiary has been designated.
28 1 h. Entering into a viatical settlement contract may cause
28 2 other rights or benefits, including conversion rights and
28 3 waiver of premium benefits, that may exist under the policy or
28 4 certificate, to be forfeited by the viator. Assistance should
28 5 be sought from a financial adviser.
28 6 i. Disclosure to a viator shall include distribution of a
28 7 brochure describing the process of viatical settlements. The
28 8 national association of insurance commissioners form for the
28 9 brochure shall be used unless another form is developed or
28 10 approved by the commissioner.
28 11 j. The disclosure document shall contain the following
28 12 language:
28 13 "All medical, financial, or personal information solicited
28 14 or obtained by a viatical settlement provider or viatical
28 15 settlement broker about an insured, including the insured's
28 16 identity or the identity of family members, a spouse, or a
28 17 significant other may be disclosed as necessary to effect the
28 18 viatical settlement between the viator and the viatical
28 19 settlement provider. If you are asked to provide this
28 20 information, you will be asked to consent to the disclosure.
28 21 The information may be provided to someone who buys the policy
28 22 or provides funds for the purchase. You may be asked to renew
28 23 your permission to share information every two years."
28 24 k. Following execution of a viatical contract, the insured
28 25 may be contacted for the purpose of determining the insured's
28 26 health status and to confirm the insured's residential or
28 27 business street address and telephone number, or as otherwise
28 28 provided in this chapter. This contact shall be limited to
28 29 once every three months if the insured has a life expectancy
28 30 of more than one year, and no more than once per month if the
28 31 insured has a life expectancy of one year or less. All such
28 32 contracts shall be made only by a viatical settlement provider
28 33 licensed in the state in which the viator resided at the time
28 34 of the viatical settlement, or by the authorized
28 35 representative of a duly licensed viatical settlement
29 1 provider.
29 2 2. A viatical settlement provider shall provide the viator
29 3 with at least the following disclosures no later than the date
29 4 the viatical settlement contract is signed by all parties.
29 5 The disclosures shall be conspicuously displayed in the
29 6 viatical settlement contract or in a separate document signed
29 7 by the viator and provide all of the following information:
29 8 a. The affiliation, if any, between the viatical
29 9 settlement provider and the issuer of the insurance policy to
29 10 be viaticated.
29 11 b. The name, business address, and telephone number of the
29 12 viatical settlement provider.
29 13 c. Any affiliations or contractual arrangements between
29 14 the viatical settlement provider and the viatical settlement
29 15 purchaser.
29 16 d. If an insurance policy to be viaticated has been issued
29 17 as a joint policy or involves family riders or any coverage of
29 18 a life other than the insured under the policy to be
29 19 viaticated, a notice of the viator's possible loss of coverage
29 20 on the other lives under the policy and to consult with the
29 21 viator's insurance producer or the insurer issuing the policy
29 22 for advice on the proposed viatical settlement.
29 23 e. The dollar amount of the current death benefit payable
29 24 to the viatical settlement provider under the policy or
29 25 certificate. If known, the viatical settlement provider shall
29 26 also disclose the availability of any additional guaranteed
29 27 insurance benefits, the dollar amount of any accidental death
29 28 and dismemberment benefits under the policy or certificate,
29 29 and the extent to which the viator's interest in those
29 30 benefits will be transferred as a result of the viatical
29 31 settlement contract.
29 32 f. Whether the funds will be escrowed with an independent
29 33 third party during the transfer process, and if so, provide
29 34 the name, business address, and telephone number of the
29 35 independent third=party escrow agent, and the fact that the
30 1 viator or owner may inspect or receive copies of the relevant
30 2 escrow or trust agreements or documents.
30 3 3. A viatical settlement broker shall provide the viator
30 4 with at least the following disclosures no later than the date
30 5 the viatical settlement contract is signed by all parties.
30 6 The disclosures shall be conspicuously displayed in the
30 7 viatical settlement contract or in a separate document signed
30 8 by the viator and provide all of the following information:
30 9 a. The name, business address, and telephone number of the
30 10 viatical settlement broker.
30 11 b. A full, complete, and accurate description of all
30 12 offers, counteroffers, acceptances, and rejections relating to
30 13 the proposed viatical settlement contract.
30 14 c. Any affiliations or contractual arrangements between
30 15 the viatical settlement broker and any person making an offer
30 16 in connection with the proposed viatical settlement contracts.
30 17 d. The amount and method of calculating the broker's
30 18 compensation. As used in this paragraph, "compensation"
30 19 includes anything of value paid or given to a viatical
30 20 settlement broker for the placement of a policy.
30 21 e. Where any portion of the viatical settlement broker's
30 22 compensation, as defined in paragraph "d", is taken from a
30 23 proposed viatical settlement offer, the broker shall disclose
30 24 the total amount of the viatical settlement offer and the
30 25 percentage of the viatical settlement offer comprised by the
30 26 viatical settlement broker's compensation.
30 27 4. If the viatical settlement provider transfers ownership
30 28 or changes the beneficiary of the insurance policy, the
30 29 viatical settlement provider shall communicate in writing the
30 30 change in ownership or beneficiary to the insured within
30 31 twenty days after the change.
30 32 5. A viatical settlement provider shall provide the
30 33 viatical settlement purchaser with at least the following
30 34 disclosures prior to the date the viatical settlement purchase
30 35 agreement is signed by all parties. The disclosures shall be
31 1 conspicuously displayed in any viatical purchase contract or
31 2 in a separate document signed by the viatical settlement
31 3 purchaser and viatical settlement provider or viatical
31 4 settlement investment agent, and shall make the following
31 5 disclosure to the viatical settlement purchaser:
31 6 a. The viatical settlement purchaser will receive no
31 7 returns including dividends and interest, until the insured
31 8 dies and a death claim payment is made.
31 9 b. The actual annual rate of return on a viatical
31 10 settlement contract is dependent upon an accurate projection
31 11 of the insured's life expectancy, and the actual date of the
31 12 insured's death. An annual "guaranteed" rate of return is not
31 13 determinable.
31 14 c. The viaticated life insurance contract should not be
31 15 considered a liquid purchase since it is impossible to predict
31 16 the exact timing of its maturity and the funds probably are
31 17 not available until the death of the insured. There is no
31 18 established secondary market for resale of these products by
31 19 the viatical settlement purchaser.
31 20 d. The viatical settlement purchaser may lose all benefits
31 21 or may receive substantially reduced benefits if the insurer
31 22 goes out of business during the term of the viatical
31 23 investment.
31 24 e. The purchaser is responsible for payment of the
31 25 insurance premium or other costs related to the policy, if
31 26 required by the terms of the viatical purchase agreement.
31 27 These payments may reduce the viatical settlement purchaser's
31 28 return. If a party other than the viatical settlement
31 29 purchaser is responsible for the payment, the name and address
31 30 of that party also shall be disclosed.
31 31 f. The viatical settlement purchaser is responsible for
31 32 payment of the insurance premiums or other costs related to
31 33 the policy if the insured returns to health. The viatical
31 34 settlement provider shall disclose the amount of such
31 35 premiums, if applicable.
32 1 g. The name, business address, and telephone number of the
32 2 independent third party providing escrow services and the
32 3 relationship to the viatical settlement broker.
32 4 h. The amount of any trust fees or other expenses to be
32 5 charged to the viatical settlement purchaser shall be
32 6 disclosed.
32 7 i. Whether the viatical settlement purchaser is entitled
32 8 to a refund of all or part of the viatical settlement
32 9 purchaser's investment under the settlement contract if the
32 10 policy is later determined to be null and void.
32 11 j. That group policies may contain limitations or caps in
32 12 the conversion rights, additional premiums may have to be paid
32 13 if the policy is converted, the name of the party responsible
32 14 for the payment of the additional premiums, and, if a group
32 15 policy is terminated and replaced by another group policy,
32 16 that there may be no right to convert the original coverage.
32 17 k. The risks associated with policy contestability
32 18 including but not limited to the risk that the viatical
32 19 settlement purchaser will have no claim or only a partial
32 20 claim to death benefits should the insurer rescind the policy
32 21 within the contestability period.
32 22 l. Whether the viatical settlement purchaser will be the
32 23 owner of the policy in addition to being the beneficiary, and
32 24 if the viatical settlement purchaser is the beneficiary only
32 25 and not also the owner, the special risks associated with that
32 26 status, including but not limited to the risk that the
32 27 beneficiary may be changed or the premium may not be paid.
32 28 m. The experience and qualifications of the person who
32 29 determines the life expectancy of the insured, including
32 30 in=house staff, independent physicians, and specialty firms
32 31 that weigh medical and actuarial data; the information this
32 32 projection is based on; and the relationship of the projection
32 33 maker to the viatical settlement provider, if any.
32 34 n. A brochure describing the process of investment in
32 35 viatical settlements. The national association of insurance
33 1 commissioners form for the brochure shall be used unless
33 2 another form is developed and approved by the commissioner.
33 3 6. A viatical settlement provider shall provide the
33 4 viatical settlement purchaser with at least the following
33 5 disclosures no later than at the time of the assignment,
33 6 transfer, or sale of all or a portion of an insurance policy.
33 7 The disclosures shall be contained in a document signed by the
33 8 viatical settlement purchaser and viatical settlement
33 9 provider, and shall make all of the following disclosures to
33 10 the viatical settlement purchaser:
33 11 a. All the life expectancy certifications obtained by the
33 12 provider in the process of determining the price paid to the
33 13 viator.
33 14 b. Whether premium payments or other costs related to the
33 15 policy have been escrowed. If escrowed, state the date upon
33 16 which the escrowed funds will be depleted and whether the
33 17 viatical settlement purchaser will be responsible for payment
33 18 of premiums thereafter and, if so, the amount of the premiums.
33 19 c. Whether premium payments or other costs related to the
33 20 policy have been waived. If waived, disclose whether the
33 21 investor will be responsible for payment of the premiums if
33 22 the insurer that wrote the policy terminates the waiver after
33 23 purchase and the amount of those premiums.
33 24 d. The type of policy offered or sold, i.e., whole life,
33 25 term life, universal life, or a group policy certificate, any
33 26 additional benefits contained in the policy, and the current
33 27 status of the policy.
33 28 e. If the policy is term insurance, the special risks
33 29 associated with term insurance including but not limited to
33 30 the viatical settlement purchaser's responsibility for
33 31 additional premiums if the viator continues the term policy at
33 32 the end of the current term.
33 33 f. Whether the policy is contestable.
33 34 g. Whether the insurer that wrote the policy has any
33 35 additional rights that could negatively affect or extinguish
34 1 the viatical settlement purchaser's rights under the viatical
34 2 settlement contract, what these rights are, and under what
34 3 conditions these rights are activated.
34 4 h. The name and address of the person responsible for
34 5 monitoring the insured's condition. The viatical settlement
34 6 provider shall describe how often the monitoring of the
34 7 insured's condition is done, how the date of death is
34 8 determined, and how and when this information will be
34 9 transmitted to the viatical settlement purchaser.
34 10 Sec. 9. NEW SECTION. 508E.9 DISCLOSURE TO INSURER.
34 11 Prior to the initiation of a plan, transaction, or series
34 12 of transactions, a viatical settlement broker, or viatical
34 13 settlement provider, shall fully disclose to an insurer a
34 14 plan, transaction, or series of transactions to which the
34 15 viatical settlement broker or viatical settlement provider is
34 16 a party to originate, renew, continue, or finance a life
34 17 insurance policy with the insurer for the purpose of engaging
34 18 in the business of viatical settlements at any time prior to,
34 19 or during the first five years after, issuance of the policy.
34 20 Sec. 10. NEW SECTION. 508E.10 GENERAL RULES.
34 21 1. a. A viatical settlement provider entering into a
34 22 viatical settlement contract shall first obtain all of the
34 23 following:
34 24 (1) If the viator is the insured, a written statement from
34 25 a licensed attending physician that the viator is of sound
34 26 mind and under no constraint or undue influence to enter into
34 27 a viatical settlement contract.
34 28 (2) A document in which the insured consents to the
34 29 release of the insured's medical records to a licensed
34 30 viatical settlement provider, viatical settlement broker, and
34 31 the insurance company that issued the life insurance policy
34 32 covering the life of the insured.
34 33 b. Within twenty days after a viator executes documents
34 34 necessary to transfer any rights under an insurance policy or
34 35 within twenty days of entering any agreement, option, promise,
35 1 or any other form of understanding, expressed or implied, to
35 2 viaticate the policy, the viatical settlement provider shall
35 3 give written notice to the insurer that issued that insurance
35 4 policy that the policy has or will become a viaticated policy.
35 5 The notice shall be accompanied by the documents required by
35 6 paragraph "c".
35 7 c. The viatical provider shall deliver a copy of the
35 8 medical release required under paragraph "a", subparagraph
35 9 (2), a copy of the viator's application for the viatical
35 10 settlement contract, the notice required under paragraph "b",
35 11 and a request for verification of coverage to the insurer that
35 12 issued the life policy that is the subject of the viatical
35 13 transaction. The national association of insurance
35 14 commissioners form for verification of coverage shall be used
35 15 unless another form is developed and approved by the
35 16 commissioner.
35 17 d. The insurer shall respond to a request for verification
35 18 of coverage submitted on an approved form by a viatical
35 19 settlement provider or viatical settlement broker within
35 20 thirty days of the date the request is received and shall
35 21 indicate whether, based on the medical evidence and documents
35 22 provided, the insurer intends to pursue an investigation at
35 23 this time regarding the validity of the insurance contract or
35 24 possible fraud. The insurer shall accept a request for
35 25 verification of coverage made on a national association of
35 26 insurance commissioners form or any other form developed and
35 27 approved by the commissioner. The insurer shall accept an
35 28 original, facsimile, or electronic copy of such request and
35 29 any accompanying authorization signed by the viator. A
35 30 failure by the insurer to meet its obligations under this
35 31 subsection shall be a violation of sections 508E.11 and
35 32 508E.16.
35 33 e. Prior to or at the time of execution of the viatical
35 34 settlement contract, the viatical settlement provider shall
35 35 obtain a witnessed document in which the viator consents to
36 1 the viatical settlement contract, represents that the viator
36 2 has a full and complete understanding of the viatical
36 3 settlement contract, that the viator has a full and complete
36 4 understanding of the benefits of the life insurance policy,
36 5 acknowledges that the viator is entering into the viatical
36 6 settlement contract freely and voluntarily, and, for persons
36 7 with a terminal or chronic illness or condition, acknowledges
36 8 that the insured has a terminal or chronic illness and that
36 9 the terminal or chronic illness or condition was diagnosed
36 10 after the life insurance policy was issued.
36 11 f. If a viatical settlement broker performs any of these
36 12 activities required of the viatical settlement provider, the
36 13 viatical settlement provider is deemed to have fulfilled the
36 14 requirements of this section.
36 15 2. All medical information solicited or obtained by any
36 16 licensee shall be subject to the applicable provisions of
36 17 state law relating to confidentiality of medical information,
36 18 including section 505.8.
36 19 3. All viatical settlement contracts entered into in this
36 20 state shall provide the viator with an absolute right to
36 21 rescind the contract before the earlier of sixty days after
36 22 the date upon which the viatical settlement contract is
36 23 executed by all parties or thirty days after the viatical
36 24 settlement proceeds have been sent to the viator as provided
36 25 in section 508E.10, subsection 4. Recision by the viator may
36 26 be conditioned upon the viator both giving notice and repaying
36 27 to the viatical settlement provider within the recision period
36 28 all viatical settlement proceeds, and any premiums, loans, and
36 29 loan interest paid by or on behalf of the viatical settlement
36 30 provider in connection with or as a consequence of the
36 31 viatical settlement. If the insured dies during the recision
36 32 period, the viatical settlement contract shall be deemed to
36 33 have been rescinded, subject to repayment to the viatical
36 34 settlement provider or purchaser of all viatical settlement
36 35 proceeds, and any premiums, loans, and loan interest that have
37 1 been paid by the viatical settlement provider or purchaser,
37 2 which shall be paid within sixty days of the death of the
37 3 insured. In the event of any recision, if the viatical
37 4 settlement provider has paid commissions or other compensation
37 5 to a viatical settlement broker in connection with the
37 6 rescinded transaction, the viatical settlement broker shall
37 7 refund all such commissions and compensation to the viatical
37 8 settlement provider within five business days following
37 9 receipt of written demand from the viatical settlement
37 10 provider, which demand shall be accompanied by either the
37 11 viator's notice of recision if rescinded at the election of
37 12 the viator, or a notice of the death of the insured if
37 13 rescinded by reason of the death of the insured within the
37 14 applicable recision period.
37 15 4. The viatical settlement provider shall instruct the
37 16 viator to send the executed documents required to effect the
37 17 change in ownership, assignment, or change in beneficiary
37 18 directly to the independent escrow agent. Within three
37 19 business days after the date the escrow agent receives the
37 20 document, or from the date the viatical settlement provider
37 21 receives the documents, if the viator erroneously provides the
37 22 documents directly to the viatical settlement provider, the
37 23 viatical settlement provider shall pay or transfer the
37 24 viatical settlement proceeds into an escrow or trust account
37 25 maintained in a state or federally chartered financial
37 26 institution whose deposits are insured by the federal deposit
37 27 insurance corporation. Upon payment of the viatical
37 28 settlement proceeds into the escrow account, the escrow agent
37 29 shall deliver the original change in ownership, assignment, or
37 30 change in beneficiary forms to the viatical settlement
37 31 provider or related provider trust, or other designated
37 32 representative of the viatical settlement provider. Upon the
37 33 escrow agent's receipt of the acknowledgment of the properly
37 34 completed transfer of ownership, assignment, or designation of
37 35 beneficiary from the insurance company, the escrow agent shall
38 1 pay the viatical settlement proceeds to the viator.
38 2 5. A failure to tender consideration to the viator for the
38 3 viatical settlement contract within the time set forth in the
38 4 disclosure pursuant to section 508E.8, subsection 1, paragraph
38 5 "g", renders the viatical settlement contract voidable by the
38 6 viator for lack of consideration until the time consideration
38 7 is tendered to and accepted by the viator. Funds shall be
38 8 deemed sent by a viatical settlement provider to a viator as
38 9 of the date that the escrow agent either releases funds for
38 10 wire transfer to the viator or places a check for delivery to
38 11 the viator via the United States postal service or other
38 12 nationally recognized delivery service.
38 13 6. A contact with the insured for the purpose of
38 14 determining the health status of the insured by the viatical
38 15 settlement provider or viatical settlement broker after the
38 16 viatical settlement has occurred shall only be made by the
38 17 viatical settlement provider or viatical settlement broker
38 18 licensed pursuant to section 508E.3 or its authorized
38 19 representatives and shall be limited to once every three
38 20 months for insureds with a life expectancy of more than one
38 21 year, and to no more than once per month for insureds with a
38 22 life expectancy of one year or less. The viatical settlement
38 23 provider or viatical settlement broker shall explain the
38 24 procedure for these contacts at the time the viatical
38 25 settlement contract is entered into. The limitations set
38 26 forth in this subsection shall not apply to any contact with
38 27 an insured for reasons other than determining the insured's
38 28 health status. A viatical settlement provider and a viatical
38 29 settlement broker shall be responsible for the actions of
38 30 their authorized representatives.
38 31 Sec. 11. NEW SECTION. 508E.11 PROHIBITED PRACTICES.
38 32 1. It is a violation of this chapter for any person to
38 33 enter into a viatical settlement contract at any time prior to
38 34 the application or issuance of a policy which is the subject
38 35 of a viatical settlement contract or within a five=year period
39 1 commencing with the date of issuance of the insurance policy
39 2 or certificate unless the viator certifies to the viatical
39 3 settlement provider that one or more of the following
39 4 conditions have been met within the five=year period:
39 5 a. The policy was issued upon the viator's exercise of
39 6 conversion rights arising out of a group or individual policy,
39 7 provided the total of the time covered under the conversion
39 8 policy plus the time covered under the prior policy is at
39 9 least sixty months. The time covered under a group policy
39 10 shall be calculated without regard to any change in insurance
39 11 carriers, provided the coverage has been continuous and under
39 12 the same group sponsorship.
39 13 b. The viator submits independent evidence to the viatical
39 14 settlement provider that one or more of the following
39 15 conditions have been met within the five=year period:
39 16 (1) The viator or insured is terminally or chronically
39 17 ill.
39 18 (2) The viator's spouse dies.
39 19 (3) The viator divorces the viator's spouse.
39 20 (4) The viator retires from full=time employment.
39 21 (5) The viator becomes physically or mentally disabled and
39 22 a physician determines that the disability prevents the viator
39 23 from maintaining full=time employment.
39 24 (6) A final order, judgment, or decree is entered by a
39 25 court of competent jurisdiction, on the application of a
39 26 creditor of the viator, adjudicating the viator bankrupt or
39 27 insolvent, or approving a petition seeking reorganization of
39 28 the viator or appointing a receiver, trustee, or liquidator to
39 29 all or a substantial part of the viator's assets.
39 30 c. The viator enters into a viatical settlement contract
39 31 more than two years after the date of issuance of a policy
39 32 and, with respect to the policy, at all times prior to the
39 33 date that is two years after policy issuance, all of the
39 34 following conditions are met:
39 35 (1) Policy premiums have been funded exclusively with
40 1 unencumbered assets, including an interest in the life
40 2 insurance policy being financed only to the extent of its net
40 3 cash surrender value, provided by, or fully recourse liability
40 4 incurred by, the insured or a person described in section
40 5 508E.2, subsection 14, paragraph "c", subparagraph (3).
40 6 (2) There is no agreement or understanding with any other
40 7 person to guarantee any such liability or to purchase, or
40 8 stand ready to purchase, the policy, including through an
40 9 assumption or forgiveness of the loan.
40 10 (3) Neither the insured nor the policy has been evaluated
40 11 for settlement.
40 12 2. Copies of the independent evidence described in
40 13 subsection 1, paragraph "b", and documents required by section
40 14 508E.10, subsection 1, shall be submitted to the insurer when
40 15 the viatical settlement provider or other party entering into
40 16 a viatical settlement contract with a viator submits a request
40 17 to the insurer for verification of coverage. The copies shall
40 18 be accompanied by a letter of attestation from the viatical
40 19 settlement provider that the copies are true and correct
40 20 copies of the documents received by the viatical settlement
40 21 provider.
40 22 3. If the viatical settlement provider submits to the
40 23 insurer a copy of the owner's or insured's certification
40 24 described in and the independent evidence required by
40 25 subsection 1, paragraph "b" when the provider submits a
40 26 request to the insurer to effect the transfer of the policy or
40 27 certificate to the viatical settlement provider, the copy
40 28 shall be deemed to conclusively establish that the viatical
40 29 settlement contract satisfies the requirements of this section
40 30 and the insurer shall timely respond to the request.
40 31 4. An insurer shall not, as a condition of responding to a
40 32 request for verification of coverage or effecting the transfer
40 33 of a policy pursuant to a viatical settlement contract,
40 34 require that the viator, insured, viatical settlement
40 35 provider, or viatical settlement broker sign any form,
41 1 disclosure, consent, or waiver form that has not been
41 2 expressly approved by the commissioner for use in connection
41 3 with viatical settlement contracts in this state.
41 4 5. Upon receipt of a properly completed request for change
41 5 of ownership or beneficiary of a policy, the insurer shall
41 6 respond in writing within thirty days with written
41 7 acknowledgment confirming that the change has been effected or
41 8 specifying the reasons why the requested change cannot be
41 9 processed. The insurer shall not unreasonably delay effecting
41 10 a change of ownership or beneficiary and shall not otherwise
41 11 seek to interfere with any viatical settlement contract
41 12 lawfully entered into in this state.
41 13 Sec. 12. NEW SECTION. 508E.12 PROHIBITED PRACTICES AND
41 14 CONFLICTS OF INTEREST.
41 15 1. With respect to any viatical settlement contract or
41 16 insurance policy, a viatical settlement broker shall not
41 17 knowingly solicit an offer from, effectuate a viatical
41 18 settlement with, or make a sale to any viatical settlement
41 19 provider, viatical settlement purchaser, financing entity, or
41 20 related provider trust that is controlling, controlled by, or
41 21 under common control with such viatical settlement broker.
41 22 2. With respect to any viatical settlement contract or
41 23 insurance policy, a viatical settlement provider shall not
41 24 knowingly enter into a viatical settlement contract with a
41 25 viator, if, in connection with such viatical settlement
41 26 contract, anything of value will be paid to a viatical
41 27 settlement broker that is controlling, controlled by, or under
41 28 common control with such viatical settlement provider or the
41 29 viatical settlement purchaser, financing entity, or related
41 30 provider trust that is involved in such viatical settlement
41 31 contract.
41 32 3. A violation of subsection 1 or 2 shall be deemed a
41 33 fraudulent viatical settlement act.
41 34 4. No viatical settlement provider shall enter into a
41 35 viatical settlement contract unless the viatical settlement
42 1 promotional, advertising, and marketing materials, as may be
42 2 prescribed by rules adopted by the commissioner, have been
42 3 filed with the commissioner. In no event shall any marketing
42 4 materials expressly reference that the insurance is free for
42 5 any period of time. The inclusion of any reference in the
42 6 marketing materials that would cause a viator to reasonably
42 7 believe that the insurance is free for any period of time
42 8 shall be considered a violation of this chapter.
42 9 5. No life insurance producer, insurance company, viatical
42 10 settlement broker, or viatical settlement provider shall make
42 11 any statement or representation to the applicant or
42 12 policyholder in connection with the sale or financing of a
42 13 life insurance policy to the effect that the insurance is free
42 14 or without cost to the policyholder for any period of time
42 15 unless provided in the policy.
42 16 Sec. 13. NEW SECTION. 508E.13 ADVERTISING FOR VIATICAL
42 17 SETTLEMENTS.
42 18 The purpose of this section is to provide prospective
42 19 viators with clear and unambiguous statements in the
42 20 advertisement of viatical settlements and to assure the clear,
42 21 truthful, and adequate disclosure of the benefits, risks,
42 22 limitations, and exclusions of any viatical settlement
42 23 contract. This purpose is intended to be accomplished by
42 24 rules adopted by the commissioner for the establishment of
42 25 guidelines and standards of permissible and impermissible
42 26 conduct in the advertising of viatical settlements to assure
42 27 that product descriptions are presented in a manner that
42 28 prevents unfair, deceptive, or misleading advertising, and is
42 29 conducive to accurate presentation and description of viatical
42 30 settlements through the advertising media and materials used
42 31 by viatical settlement licensees.
42 32 1. This section shall apply to any advertising of viatical
42 33 settlement contracts or related products or services intended
42 34 for dissemination in this state, including internet
42 35 advertising viewed by persons located in this state. Where
43 1 disclosure requirements are established pursuant to federal
43 2 regulation, this section shall be interpreted so as to
43 3 minimize or eliminate conflict with federal regulation
43 4 wherever possible.
43 5 2. Every viatical settlement licensee shall establish and
43 6 at all times maintain a system of control over the content,
43 7 form, and method of dissemination of all advertisements of its
43 8 contracts, products, and services. All advertisements,
43 9 regardless of by whom written, created, designed, or
43 10 presented, shall be the responsibility of the viatical
43 11 settlement licensees, as well as the individual who created or
43 12 presented the advertisement. A system of control shall
43 13 include regular, routine notification, at least once a year,
43 14 to agents and others authorized by the viatical settlement
43 15 licensee who disseminate advertisements of the requirements
43 16 and procedures for approval prior to the use of any
43 17 advertisements not furnished by the viatical settlement
43 18 licensee.
43 19 3. An advertisement shall be truthful and not misleading
43 20 in fact or by implication. The form and content of an
43 21 advertisement of a viatical settlement contract shall be
43 22 sufficiently complete and clear so as to avoid deception. It
43 23 shall not have the capacity or tendency to mislead or deceive.
43 24 Whether an advertisement has the capacity or tendency to
43 25 mislead or deceive shall be determined by the commissioner
43 26 from the overall impression that the advertisement may be
43 27 reasonably expected to create upon a person of average
43 28 education or intelligence within the segment of the public to
43 29 which it is directed.
43 30 4. The information required to be disclosed under this
43 31 section shall not be minimized, rendered obscure, or presented
43 32 in an ambiguous fashion or intermingled with the text of the
43 33 advertisement so as to be confusing or misleading.
43 34 a. An advertisement shall not omit material information or
43 35 use words, phrases, statements, references, or illustrations
44 1 if the omission or use has the capacity, tendency, or effect
44 2 of misleading or deceiving viators as to the nature or extent
44 3 of any benefit, loss covered, premium payable, or state or
44 4 federal tax consequence. The fact that the viatical
44 5 settlement contract offered is made available for inspection
44 6 prior to consummation of the sale, or an offer is made to
44 7 refund the payment if the viator is not satisfied or that the
44 8 viatical settlement contract includes a free=look period that
44 9 satisfies or exceeds legal requirements, does not remedy a
44 10 misleading statement.
44 11 b. An advertisement shall not use the name or title of a
44 12 life insurance company or a life insurance policy unless the
44 13 advertisement has been approved by the insurer.
44 14 c. An advertisement shall not state or imply that interest
44 15 charged on an accelerated death benefit or a policy loan is
44 16 unfair, inequitable, or in any manner an incorrect or improper
44 17 practice.
44 18 d. The words "free", "no cost", "without cost", "no
44 19 additional cost", "at no extra cost", or words of similar
44 20 import shall not be used with respect to any benefit or
44 21 service unless true. An advertisement may specify the charge
44 22 for a benefit or a service or may state that a charge is
44 23 included in the payment or use other appropriate language.
44 24 e. Testimonials, appraisals, analyses, or endorsements
44 25 used in advertisements must be genuine; represent the current
44 26 opinion of the author; be applicable to the viatical
44 27 settlement contract product or service advertised, if any; and
44 28 be accurately reproduced with sufficient completeness to avoid
44 29 misleading or deceiving prospective viators as to the nature
44 30 or scope of the testimonials, appraisal, analysis, or
44 31 endorsement. In using a testimonial, appraisal, analysis, or
44 32 endorsement, a licensee under this chapter makes as its own
44 33 all the statements contained therein, and the statements are
44 34 subject to all of the provisions of this section.
44 35 (1) If the individual making a testimonial, appraisal,
45 1 analysis, or an endorsement has a financial interest in the
45 2 party making use of the testimonial, appraisal, analysis, or
45 3 endorsement, either directly or through a related entity as a
45 4 stockholder, director, officer, employee, or otherwise, or
45 5 receives any benefit directly or indirectly other than
45 6 required union scale wages, that fact shall be prominently
45 7 disclosed in the advertisement.
45 8 (2) An advertisement shall not state or imply that a
45 9 viatical settlement contract benefit or product or service has
45 10 been approved or endorsed by a group of individuals, society,
45 11 association, or other organization unless that is the fact and
45 12 unless any relationship between an organization and the
45 13 viatical settlement licensee is disclosed. If the entity
45 14 making the endorsement or testimonial is owned, controlled, or
45 15 managed by the viatical settlement licensee, or receives any
45 16 payment or other consideration from the viatical settlement
45 17 licensee for making an endorsement or testimonial, that fact
45 18 shall be disclosed in the advertisement.
45 19 (3) When an endorsement refers to benefits received under
45 20 a viatical settlement contract, all pertinent information
45 21 shall be retained by the viatical settlement licensee for a
45 22 period of five years after its use.
45 23 5. An advertisement shall not contain statistical
45 24 information unless it accurately reflects recent and relevant
45 25 facts. The source of all statistics used in an advertisement
45 26 shall be identified.
45 27 6. An advertisement shall not disparage an insurer,
45 28 viatical settlement provider, viatical settlement broker,
45 29 insurance producer, policy, services, or methods of marketing.
45 30 7. The name of the viatical settlement licensee shall be
45 31 clearly identified in all advertisements about the viatical
45 32 settlement licensee or its viatical settlement contract,
45 33 products, or services, and if any specific viatical settlement
45 34 contract is advertised, the viatical settlement contract shall
45 35 be identified either by form number or some other appropriate
46 1 description. If an application is part of the advertisement,
46 2 the name of the viatical settlement provider shall be shown on
46 3 the application.
46 4 8. An advertisement shall not use a trade name, group
46 5 designation, name of the parent company of a viatical
46 6 settlement licensee, name of a particular division of the
46 7 viatical settlement licensee, service mark, slogan, symbol or
46 8 other device, or reference without disclosing the name of the
46 9 viatical settlement licensee, if the advertisement would have
46 10 the capacity or tendency to mislead or deceive as to the true
46 11 identity of the viatical settlement licensee, or to create the
46 12 impression that a company other than the viatical settlement
46 13 licensee would have any responsibility for the financial
46 14 obligation under a viatical settlement contract.
46 15 9. An advertisement shall not use any combination of
46 16 words, symbols, or physical materials that by their content,
46 17 phraseology, shape, color, or other characteristics are so
46 18 similar to a combination of words, symbols, or physical
46 19 materials used by a government program or agency or otherwise
46 20 appear to be of such a nature that they tend to mislead
46 21 prospective viators into believing that the solicitation is in
46 22 some manner connected with a government program or agency.
46 23 10. An advertisement may state that a viatical settlement
46 24 licensee is licensed in the state where the advertisement
46 25 appears, provided it does not exaggerate that fact or suggest
46 26 or imply that a competing viatical settlement licensee may not
46 27 be so licensed. The advertisement may ask the audience to
46 28 consult the viatical settlement licensee's internet site or
46 29 contact the commissioner to find out if the state requires
46 30 licensing and, if so, whether the viatical settlement provider
46 31 or viatical settlement broker is licensed.
46 32 11. An advertisement shall not create the impression that
46 33 the viatical settlement provider, its financial condition or
46 34 status, the payment of its claims or the merits, desirability,
46 35 or advisability of its viatical settlement contracts are
47 1 recommended or endorsed by any government entity.
47 2 12. The name of the actual viatical settlement licensee
47 3 shall be stated in each of its advertisements. An
47 4 advertisement shall not use a trade name, any group
47 5 designation, name of any affiliate, or controlling entity of
47 6 the viatical settlement licensee, service mark, slogan,
47 7 symbol, or other device in a manner that would have the
47 8 capacity or tendency to mislead or deceive as to the true
47 9 identity of the actual viatical settlement licensee or create
47 10 the false impression that an affiliate or controlling entity
47 11 would have any responsibility for the financial obligation of
47 12 the viatical settlement licensee.
47 13 13. An advertisement shall not directly or indirectly
47 14 create the impression that any division or agency of the state
47 15 or of the United States government endorses, approves, or
47 16 favors any of the following:
47 17 a. A viatical settlement licensee or its business
47 18 practices or methods of operation.
47 19 b. The merits, desirability, or advisability of any
47 20 viatical settlement contract.
47 21 c. Any viatical settlement contract.
47 22 d. Any life insurance policy or life insurance company.
47 23 14. If the advertiser emphasizes the speed with which the
47 24 viatication will occur, the advertising must disclose the
47 25 average time frame from completed application to the date of
47 26 offer and from acceptance of the offer to receipt of the funds
47 27 by the viator.
47 28 15. If the advertising emphasizes the dollar amounts
47 29 available to viators, the advertising shall disclose the
47 30 average purchase price as a percent of face value obtained by
47 31 viators contracting with the licensee during the past six
47 32 months.
47 33 Sec. 14. NEW SECTION. 508E.14 FRAUD PREVENTION AND
47 34 CONTROL
47 35 1. FRAUDULENT VIATICAL SETTLEMENT ACTS == INTERFERENCE AND
48 1 PARTICIPATION OF CONVICTED FELONS PROHIBITED.
48 2 a. A person shall not commit a fraudulent viatical
48 3 settlement act.
48 4 b. A person shall not knowingly or intentionally interfere
48 5 with the enforcement of the provisions of this chapter or
48 6 investigations of suspected or actual violations of this
48 7 chapter.
48 8 c. A person in the business of viatical settlements shall
48 9 not knowingly or intentionally permit any person convicted of
48 10 a felony involving dishonesty or breach of trust to
48 11 participate in the business of viatical settlements.
48 12 2. FRAUD WARNING REQUIRED.
48 13 a. A viatical settlements contract and application for a
48 14 viatical settlement, regardless of the form of transmission,
48 15 shall contain the following statement or a substantially
48 16 similar statement:
48 17 "Any person who knowingly presents false information in an
48 18 application for insurance or viatical settlement contract is
48 19 guilty of a crime and may be subject to fines and confinement
48 20 in prison."
48 21 b. The lack of a statement as required in paragraph "a"
48 22 does not constitute a defense in any prosecution for a
48 23 fraudulent viatical settlement act.
48 24 3. MANDATORY REPORTING OF FRAUDULENT VIATICAL SETTLEMENT
48 25 ACTS.
48 26 a. Any person engaged in the business of viatical
48 27 settlements having knowledge or a reasonable suspicion that a
48 28 fraudulent viatical settlement act is being, will be, or has
48 29 been committed shall provide to the commissioner such
48 30 information as required by and in a manner prescribed by rules
48 31 adopted by the commissioner.
48 32 b. Any other person having knowledge or a reasonable
48 33 belief that a fraudulent viatical settlement act is being,
48 34 will be, or has been committed may provide to the commissioner
48 35 the information required by and in a manner prescribed by
49 1 rules adopted by the commissioner.
49 2 4. IMMUNITY FROM LIABILITY.
49 3 a. No civil liability shall be imposed on and no cause of
49 4 action shall arise from a person's furnishing information
49 5 concerning suspected, anticipated, or completed fraudulent
49 6 viatical settlement acts or suspected or completed fraudulent
49 7 insurance acts, if the information is provided to or received
49 8 from any of the following:
49 9 (1) The commissioner or the commissioner's employees,
49 10 agents, or representatives.
49 11 (2) A federal, state, or local law enforcement or
49 12 regulatory official or the official's employees, agents, or
49 13 representatives.
49 14 (3) A person involved in the prevention and detection of
49 15 fraudulent viatical settlement acts or that person's agents,
49 16 employees, or representatives.
49 17 (4) The national association of insurance commissioners;
49 18 the national association of securities dealers; the north
49 19 American securities administrators association; their
49 20 employees, agents, or representatives; or other regulatory
49 21 body overseeing life insurance, viatical settlements,
49 22 securities, or investment fraud.
49 23 (5) A life insurer that issued the life insurance policy
49 24 covering the life of the insured.
49 25 b. Paragraph "a" does not apply to a statement made with
49 26 actual malice. In an action brought against a person for
49 27 filing a report or furnishing other information concerning a
49 28 fraudulent viatical settlement act, the party bringing the
49 29 action shall plead specifically any allegation that paragraph
49 30 "a" does not apply because the person filing the report or
49 31 furnishing the information did so with actual malice.
49 32 c. A person furnishing information as identified in
49 33 paragraph "a" shall be entitled to an award of attorney fees
49 34 and costs if the person is the prevailing party in a civil
49 35 cause of action for libel, slander, or any other relevant tort
50 1 arising out of an activity in carrying out the provisions of
50 2 this chapter and the party bringing the action was not
50 3 substantially justified in doing so. For purposes of this
50 4 paragraph, a proceeding is substantially justified if it had a
50 5 reasonable basis in law or fact at the time that it was
50 6 initiated. However, such an award does not apply to any
50 7 person furnishing information concerning the person's own
50 8 fraudulent viatical settlement act.
50 9 d. This section does not abrogate or modify a common law
50 10 or statutory privilege or immunity enjoyed by a person
50 11 described in paragraph "a".
50 12 5. CONFIDENTIALITY.
50 13 a. A document or evidence provided pursuant to subsection
50 14 4 or obtained by the commissioner in an investigation of a
50 15 suspected or actual fraudulent viatical settlement act shall
50 16 be privileged and confidential, notwithstanding chapter 22,
50 17 shall not be a public record, and shall not be subject to
50 18 discovery or subpoena in a civil or criminal action.
50 19 b. Paragraph "a" does not prohibit the release by the
50 20 commissioner of a document or evidence obtained in an
50 21 investigation of a suspected or actual fraudulent viatical
50 22 settlement act if any of the following applies:
50 23 (1) In an administrative or judicial proceeding to enforce
50 24 laws administered by the commissioner.
50 25 (2) To a federal, state, or local law enforcement or
50 26 regulatory agency, to an organization established for the
50 27 purpose of detecting and preventing fraudulent viatical
50 28 settlement acts, or to the national association of insurance
50 29 commissioners.
50 30 (3) At the discretion of the commissioner, to a person in
50 31 the business of viatical settlements that is aggrieved by a
50 32 fraudulent viatical settlement act.
50 33 c. Release of a document or evidence under paragraph "b"
50 34 does not abrogate or modify the privilege granted in paragraph
50 35 "a".
51 1 6. OTHER LAW ENFORCEMENT OR REGULATORY AUTHORITY. This
51 2 chapter shall not do any of the following:
51 3 a. Preempt the authority or relieve the duty of other law
51 4 enforcement or regulatory agencies to investigate, examine,
51 5 and prosecute suspected violations of law.
51 6 b. Prevent or prohibit a person from disclosing
51 7 voluntarily information concerning viatical settlement fraud
51 8 to a law enforcement or regulatory agency other than the
51 9 commissioner.
51 10 c. Limit the powers granted elsewhere by the laws of this
51 11 state to the commissioner or an insurance fraud unit to
51 12 investigate and examine possible violations of law and to take
51 13 appropriate action against wrongdoers.
51 14 7. VIATICAL SETTLEMENT ANTIFRAUD INITIATIVES.
51 15 a. A viatical settlement provider or viatical settlement
51 16 broker shall have in place antifraud initiatives reasonably
51 17 calculated to detect, prosecute, and prevent fraudulent
51 18 viatical settlement acts. At the discretion of the
51 19 commissioner, the commissioner may order, or a licensee may
51 20 request and the commissioner may grant, such modifications of
51 21 the following required initiatives as necessary to ensure an
51 22 effective antifraud program. The modifications may be more or
51 23 less restrictive than the required initiatives so long as the
51 24 modifications may reasonably be expected to accomplish the
51 25 purpose of this section.
51 26 b. Antifraud initiatives shall include all of the
51 27 following:
51 28 (1) A fraud investigator, who may be a viatical settlement
51 29 provider, viatical settlement broker, a viatical settlement
51 30 provider's or viatical settlement broker's employee, or an
51 31 independent contractor.
51 32 (2) An antifraud plan, which shall be submitted to the
51 33 commissioner. The antifraud plan shall include, but is not
51 34 limited to all of the following:
51 35 (a) A description of the procedures for detecting and
52 1 investigating possible fraudulent viatical settlement acts and
52 2 procedures for resolving material inconsistencies between
52 3 medical records and insurance applications.
52 4 (b) A description of the procedures for reporting possible
52 5 fraudulent viatical settlement acts to the commissioner.
52 6 (c) A description of the plan for antifraud education and
52 7 training of underwriters and other personnel.
52 8 (d) A description or chart outlining the organizational
52 9 arrangement of the antifraud personnel who are responsible for
52 10 the investigation and reporting of possible fraudulent
52 11 viatical settlement acts and investigating unresolved material
52 12 inconsistencies between medical records and insurance
52 13 applications.
52 14 c. An antifraud plan submitted to the commissioner shall
52 15 be privileged and confidential, notwithstanding chapter 22,
52 16 shall not be a public record, and shall not be subject to
52 17 discovery or subpoena in a civil or criminal action.
52 18 Sec. 15. NEW SECTION. 508E.15 INJUNCTIONS == CIVIL
52 19 REMEDIES == CEASE AND DESIST ORDERS == CIVIL PENALTY.
52 20 1. In addition to the penalties and other enforcement
52 21 provisions of this chapter, if any person violates this
52 22 chapter or any rule implementing this chapter, the
52 23 commissioner may seek an injunction in a court of competent
52 24 jurisdiction and may apply for a temporary or permanent order
52 25 that the commissioner determines is necessary to restrain the
52 26 person from committing the violation.
52 27 2. A person damaged by the act of a person in violation of
52 28 this chapter may bring a civil action against the person
52 29 committing the violation in a court of competent jurisdiction.
52 30 3. The commissioner may issue, in accordance with chapter
52 31 17A, a cease and desist order upon a person that violates any
52 32 provision of this chapter, any rule or order adopted by the
52 33 commissioner, or any written agreement entered into with the
52 34 commissioner.
52 35 4. When the commissioner finds that an activity in
53 1 violation of this chapter presents an immediate danger to the
53 2 health, safety, or welfare of the public requiring immediate
53 3 agency action, the commissioner may proceed under section
53 4 17A.18A.
53 5 5. In addition to the penalties and other enforcement
53 6 provisions of this chapter, any person who violates this
53 7 chapter is subject to a civil penalty of up to five thousand
53 8 dollars for each violation of this chapter. The civil penalty
53 9 shall be deposited into the general fund of the state. If a
53 10 person has not been ordered to pay restitution by a court, the
53 11 commissioner's order may require a person found to be in
53 12 violation of this chapter to make restitution to a person
53 13 aggrieved by a violation of this chapter.
53 14 6. Except for a fraudulent viatical settlement act
53 15 committed by a viator, the enforcement provisions and
53 16 penalties of this section shall not apply to a viator.
53 17 Sec. 16. NEW SECTION. 508E.16 UNFAIR TRADE PRACTICES.
53 18 A violation of this chapter, including the commission of a
53 19 fraudulent viatical settlement act, is an unfair trade
53 20 practice under chapter 507B and a person convicted of the
53 21 violation is subject to the penalties contained in that
53 22 chapter.
53 23 Sec. 17. NEW SECTION. 508E.17 AUTHORITY TO PROMULGATE
53 24 REGULATIONS.
53 25 The commissioner shall have the authority to do all of the
53 26 following:
53 27 1. Adopt rules implementing and administering this
53 28 chapter.
53 29 2. Establish standards for evaluating reasonableness of
53 30 payments under viatical settlement contracts for persons who
53 31 are terminally or chronically ill. This authority includes
53 32 but is not limited to regulation of discount rates used to
53 33 determine the amount paid in exchange for assignment,
53 34 transfer, sale, devise, or bequest of a benefit under a life
53 35 insurance policy insuring the life of a person who is
54 1 chronically or terminally ill.
54 2 3. Establish appropriate licensing requirements, fees, and
54 3 standards for continued licensure for viatical settlement
54 4 providers and brokers.
54 5 4. Require a bond or other mechanism for financial
54 6 accountability for viatical settlement providers and viatical
54 7 settlement brokers.
54 8 5. Adopt rules governing the relationship and
54 9 responsibilities of both insurers and viatical settlement
54 10 providers and viatical settlement brokers during the
54 11 viatication of a life insurance policy or certificate.
54 12 Sec. 18. Section 507B.3, subsection 1, Code 2007, is
54 13 amended to read as follows:
54 14 1. A person shall not engage in this state in any trade
54 15 practice which is defined in this chapter as, or determined
54 16 pursuant to section 507B.6 to be, an unfair method of
54 17 competition, or an unfair or deceptive act or practice in the
54 18 business of insurance.
54 19 a. A person who violates a provision in chapter 508E shall
54 20 be guilty of committing a violation of this chapter.
54 21 b. The issuance of a qualified charitable gift annuity as
54 22 provided in chapter 508F does not constitute a trade practice
54 23 in violation of this chapter.
54 24 Sec. 19. CODIFICATION.
54 25 1. The Code editor shall codify section 508E.1 as section
54 26 508E.1A.
54 27 2. The Code editor shall codify section 508E.1A, as
54 28 enacted in this Act, as section 508E.1.
54 29 Sec. 20. Section 508E.3A, Code 2007, is repealed.
54 30 EXPLANATION
54 31 This bill provides for the regulation of viatical
54 32 settlements by the commissioner of insurance (commissioner).
54 33 A viatical settlement is a transaction involving the sale of a
54 34 life insurance policy (policy) issued by a life insurance
54 35 company (insurer) before the policy matures. A viatical
55 1 settlement may involve a number of parties including the
55 2 "viator", "viatical settlement broker", "viatical settlement
55 3 provider", and "insurer".
55 4 The viator is the policy owner who agrees to sell their
55 5 policy, presumably for less than its face value payable upon
55 6 death, to a viatical settlement provider either directly or
55 7 through a viatical settlement broker. The settlement is
55 8 governed by a "viatical settlement contract". The bill
55 9 contemplates that the viator may be chronically or terminally
55 10 ill.
55 11 Generally, the bill provides for a short title (Code
55 12 section 508E.1A), amends the Code chapter's current
55 13 definitional provisions (Code section 508E.2), eliminates
55 14 current provisions relating to the regulation of viatical
55 15 settlement contracts (Code section 508E.3), immunity from
55 16 liability for persons who provide information to the
55 17 commissioner (Code section 508E.3A), and authorization of the
55 18 commissioner to adopt rules to administer the Code chapter
55 19 (Code section 508E.4). The bill rewrites a number of these
55 20 provisions and includes additional regulations as follows:
55 21 CODE SECTION 508E.3 == LICENSE AND BOND REQUIREMENTS. The
55 22 bill requires a viatical settlement provider or viatical
55 23 settlement broker obtain a license by the commissioner or from
55 24 the commissioner of the viator's state of residence. The bill
55 25 provides for the issuance and renewal of licenses, the
55 26 disclosure of information relating to the applicant's
55 27 business, and the payment of license and renewal fees. It
55 28 also requires the viatical settlement provider or viatical
55 29 settlement broker provide evidence of financial responsibility
55 30 to the commissioner (e.g., by posting a surety bond with the
55 31 commissioner).
55 32 CODE SECTION 508E.4 == LICENSE REVOCATION AND DENIAL. The
55 33 bill provides that the commissioner may refuse to issue,
55 34 suspend, revoke, or refuse to renew the license of a viatical
55 35 settlement provider or viatical settlement broker for cause,
56 1 including misrepresentation or fraud, a violation of the
56 2 bill's provisions, a failure to honor a contractual
56 3 obligation, the use of an unfair or unreasonable practice, or
56 4 the wrongful transfer of a policy.
56 5 CODE SECTION 508E.5 == APPROVAL OF VIATICAL SETTLEMENT
56 6 CONTRACTS AND DISCLOSURE STATEMENTS. The bill requires a
56 7 viatical settlement producer or viatical settlement broker to
56 8 file with the commissioner forms used in their business. The
56 9 commissioner must approve the documents which comply with the
56 10 bill's requirements.
56 11 CODE SECTION 508E.6 == REPORTING REQUIREMENTS AND PRIVACY.
56 12 The bill requires that a viatical settlement provider annually
56 13 file an annual statement with the commissioner involving
56 14 transactions conducted in this state. Certain information
56 15 that could compromise the privacy of personal, financial, and
56 16 health information of the viator is filed with the
56 17 commissioner on a confidential basis.
56 18 CODE SECTION 508E.7 == EXAMINATION OR INVESTIGATIONS. The
56 19 bill provides that the commissioner may conduct examinations
56 20 of viatical settlement providers and viatical settlement
56 21 brokers licensed under the bill's provisions. It provides for
56 22 the authority, scope, and scheduling of examinations; requires
56 23 licensees to retain business records; provides for the conduct
56 24 of an examination; provides for the preparation of examination
56 25 reports; provides for the confidentiality of examination
56 26 information; prohibits a conflict of interest by an examiner;
56 27 provides for the payment of costs associated with
56 28 examinations; provides for immunity from liability; and
56 29 provides investigatory authority to the commissioner.
56 30 CODE SECTION 508E.8 == DISCLOSURE TO VIATOR. The bill
56 31 requires that a viatical settlement provider or viatical
56 32 settlement broker disclose information regarding their
56 33 business, their relationship with the viator and viatical
56 34 settlement producer, and the transaction. The type of
56 35 disclosure includes possible legal implications that could
57 1 result from executing a viatical settlement contract (e.g.,
57 2 tax consequences, claims of creditors, and proceeds from
57 3 Medicaid or other government benefits); statutory rights
57 4 granted under a viatical settlement contract (e.g., the right
57 5 of recision and when moneys must be paid to the viator); the
57 6 terms and conditions of the transaction (e.g., the dollar
57 7 amount of the current benefits payable to the viatical
57 8 settlement provider under the policy and how funds will be
57 9 escrowed with an independent third party during the transfer
57 10 process); and the viatical settlement broker's business
57 11 relationship with the parties (e.g., the receipt of competing
57 12 offers and how the broker is to be compensated). A viatical
57 13 settlement provider who transfers ownership or changes the
57 14 policy's beneficiary must notify the viator of the change.
57 15 CODE SECTION 508E.9 == DISCLOSURE TO INSURER. The bill
57 16 requires that a viatical settlement broker or viatical
57 17 settlement provider disclose information regarding business
57 18 transactions to the insurer.
57 19 CODE SECTION 508E.10 == GENERAL RULES. The bill provides a
57 20 number of general requirements imposed upon the parties.
57 21 Prior to entering into a viatical settlement contract, a
57 22 viatical settlement provider must obtain a medical statement
57 23 attesting to the viator's sound mental condition and a release
57 24 of the viator's medical records. The viatical settlement
57 25 provider must notify the insurer that the insurance policy has
57 26 or will become a viaticated policy and include a copy of the
57 27 medical release.
57 28 The insurer must verify the policy's coverage to the
57 29 viatical settlement provider or viatical settlement broker as
57 30 requested.
57 31 The viatical settlement provider must obtain a witnessed
57 32 document affirming that the viator knowingly consented to the
57 33 viatical settlement contract.
57 34 The viator's medical information is confidential.
57 35 A viator has an absolute right to rescind a viatical
58 1 settlement contract within a time certain, subject to giving
58 2 notice of the recision to a viatical settlement provider and
58 3 repaying the viatical settlement provider proceeds associated
58 4 with the transfer (e.g., the settlement and premiums, loans,
58 5 and loan interest paid by or on behalf of the viatical
58 6 settlement provider).
58 7 The documents and moneys required to effect the change in
58 8 the policy and consideration for the change must be delivered
58 9 to the parties through an independent escrow agent.
58 10 The failure by a viatical settlement provider to provide a
58 11 viator timely payment allows the viator to void the viatical
58 12 settlement contract.
58 13 Limitations are placed on the right of a viatical
58 14 settlement provider or viatical settlement broker to contact
58 15 an insured for purposes of determining the insured's health
58 16 status.
58 17 CODE SECTION 508E.11 == PROHIBITED PRACTICES. The bill
58 18 prohibits a person from entering into a viatical settlement
58 19 contract prior to applying for a policy or within five years
58 20 of the date of insurance, unless a condition is satisfied
58 21 (e.g., the policy was issued upon the viator's conversion
58 22 rights) or some extraordinary occurrence is independently
58 23 established (e.g., the viator becomes terminally or
58 24 chronically ill, physically or mentally disabled, or
58 25 financially distressed).
58 26 The insurer must respond to a demand effecting change of a
58 27 policy's ownership or beneficiary within a time certain.
58 28 CODE SECTION 508E.12 == PROHIBITED PRACTICES AND CONFLICTS
58 29 OF INTEREST. The bill prohibits a viatical settlement broker
58 30 or viatical settlement provider from having a conflict of
58 31 interest in connection with a viatical settlement (e.g.,
58 32 certain payments between viatical settlement providers and
58 33 viatical settlement brokers). The bill restricts advertising.
58 34 Advertising materials must be filed with the commissioner and
58 35 no suggestion can be made that a settlement is provided free
59 1 to the viator.
59 2 CODE SECTION 508E.13 == ADVERTISING FOR VIATICAL
59 3 SETTLEMENTS. The bill requires a viatical settlement provider
59 4 or viatical settlement broker to establish and maintain a
59 5 system of control over the dissemination of advertisements.
59 6 It requires that advertisements be truthful and that
59 7 information not be presented to a prospective viator in a
59 8 misleading manner (e.g., minimized, obscured, or ambiguous).
59 9 It restricts the use of testimonials, appraisals, or
59 10 endorsements; restricts the use of names and symbols (e.g., a
59 11 trade name, service mark, slogan, or symbol) in a misleading
59 12 manner; or prohibits an impression that a governmental entity
59 13 approves a viatical settlement broker or viatical settlement
59 14 provider or a transaction.
59 15 CODE SECTION 508E.14 == FRAUD PREVENTION AND CONTROL. The
59 16 bill provides for a number of measures to prevent and control
59 17 fraud.
59 18 A number of acts involving fraud or interference with an
59 19 investigation is prohibited. A person convicted of a felony
59 20 cannot participate in the business of viatical settlements. A
59 21 viatical settlement contract must contain a fraud warning. A
59 22 person engaged in the business of viatical settlements must
59 23 report violations of the bill to the commissioner.
59 24 A person who furnishes information regarding fraud to the
59 25 commissioner or other law enforcement agency enjoys immunity
59 26 from liability (unless the information is furnished with
59 27 actual malice); the person may be entitled to an award of
59 28 attorney fees and court costs if the person prevails in a
59 29 cause or action relating to libel or slander.
59 30 Information obtained by the commissioner in an
59 31 investigation is confidential with certain exceptions (e.g.,
59 32 information released as part of an administrative or judicial
59 33 proceeding or to a law enforcement or regulatory agency).
59 34 A viatical settlement provider or viatical settlement
59 35 broker must implement antifraud initiatives to detect,
60 1 prosecute, and prevent fraudulent viatical settlement acts,
60 2 and submit related antifraud plans to the commissioner.
60 3 CODE SECTION 508E.15 == INJUNCTIONS == CIVIL REMEDIES ==
60 4 CEASE AND DESIST ORDERS == CRIMINAL PENALTIES. The bill
60 5 authorizes the commissioner to seek injunctive relief in order
60 6 to restrain a person from violating the bill's provisions.
60 7 A person damaged by a violation may bring a civil action
60 8 against the person committing the violation. The commissioner
60 9 may issue an emergency order to require a person to
60 10 immediately cease and desist from a violation.
60 11 A person who violates a provision of the bill is subject to
60 12 a civil penalty.
60 13 CODE SECTION 508E.16 == UNFAIR TRADE PRACTICE. The bill
60 14 provides that a violation of the bill's provisions is
60 15 considered a violation of Code chapter 507B, governing
60 16 insurance trade practices.
60 17 CODE SECTION 508E.17 == AUTHORITY TO PROMULGATE RULES. The
60 18 bill authorizes the commissioner to adopt rules necessary to
60 19 implement and administer the Code chapter. As part of this
60 20 authority, the commissioner is responsible for establishing a
60 21 standard for payments under viatical settlement contracts,
60 22 establishing licensing requirements and fees, establishing
60 23 standards for evidence of financial responsibility, and
60 24 governing the responsibilities of insurers, viatical
60 25 settlement providers, and viatical settlement brokers.
60 26 UNCODIFIED PROVISIONS. The bill provides directions to the
60 27 Code editor necessary to renumber sections in conformity with
60 28 the model Act.
60 29 LSB 5446XD 82
60 30 da/rj/5