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| THE GENERAL ASSEMBLY OF PENNSYLVANIA |
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| HOUSE BILL |
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| INTRODUCED BY BOYD, FRANKEL, CALTAGIRONE, D. COSTA, FABRIZIO, GROVE, HARKINS, JOSEPHS, KORTZ, MATZIE, MILLARD, MUSTIO, PASHINSKI, READSHAW AND DONATUCCI, MARCH 23, 2011 |
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| REFERRED TO COMMITTEE ON INSURANCE, MARCH 23, 2011 |
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| AN ACT |
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1 | Amending the act of July 4, 2002 (P.L.699, No.107), entitled "An |
2 | act providing for the regulation of viatical settlements and |
3 | for powers and duties of the Insurance Department," further |
4 | providing for definitions, for license requirements and for |
5 | disclosure; providing for disclosure to insurer; further |
6 | providing for general rules and for prohibited practices; and |
7 | providing for additional prohibited practices and conflicts |
8 | of interest. |
9 | The General Assembly of the Commonwealth of Pennsylvania |
10 | hereby enacts as follows: |
11 | Section 1. The definitions of "advertising," "fraudulent |
12 | viatical settlement act," "viatical settlement broker," |
13 | "viatical settlement contract," "viatical settlement provider" |
14 | and "viator" in section 2 of the act of July 4, 2002 (P.L.699, |
15 | No.107), known as the Viatical Settlements Act, are amended and |
16 | the section is amended by adding definitions to read: |
17 | Section 2. Definitions. |
18 | The following words and phrases when used in this act shall |
19 | have the meanings given to them in this section unless the |
20 | context clearly indicates otherwise: |
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1 | "Advertising." Any written, electronic or printed |
2 | communication or any communication by means of recorded |
3 | telephone messages or transmitted on radio, television, the |
4 | Internet or similar communications media, including film strips, |
5 | motion pictures and videos, published, disseminated, circulated |
6 | or placed before the public, directly or indirectly, for the |
7 | purpose of creating an interest in or inducing a person to sell, |
8 | assign, devise, bequest or transfer the death benefit or |
9 | ownership of a life insurance policy pursuant to a viatical |
10 | settlement contract. |
11 | * * * |
12 | "Fraudulent viatical settlement act." [An act or omission |
13 | committed by any person who, knowingly or with intent to |
14 | defraud, for the purpose of depriving another of property or for |
15 | pecuniary gain commits or permits its employees or its agents to |
16 | commit any of the following acts: |
17 | (1) Presenting, causing to be presented or preparing |
18 | with knowledge or belief that it will be presented to or by a |
19 | viatical settlement provider, viatical settlement broker, |
20 | viatical settlement purchaser, financing entity, insurer, |
21 | insurance broker, insurance agent or any other person false |
22 | material information or concealing material information as |
23 | part of, in support of or concerning a fact material to one |
24 | or more of the following: |
25 | (i) An application for the issuance of a viatical |
26 | settlement contract or insurance policy. |
27 | (ii) The underwriting of a viatical settlement |
28 | contract or insurance policy. |
29 | (iii) A claim for payment or benefit pursuant to a |
30 | viatical settlement contract or insurance policy. |
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1 | (iv) Premiums paid on an insurance policy. |
2 | (v) Payments and changes in ownership or beneficiary |
3 | made in accordance with the terms of a viatical |
4 | settlement contract or insurance policy. |
5 | (vi) The reinstatement or conversion of an insurance |
6 | policy. |
7 | (vii) The solicitation, offer, effectuation or sale |
8 | of a viatical settlement contract or insurance policy. |
9 | (viii) The issuance of written evidence of a |
10 | viatical settlement contract or insurance. |
11 | (ix) A financing transaction. |
12 | (2) In the furtherance of a fraud or to prevent the |
13 | detection of a fraud: |
14 | (i) destroys, removes, conceals or alters the assets |
15 | or records of a licensee or other person engaged in the |
16 | business of viatical settlements; |
17 | (ii) misrepresents or conceals the financial |
18 | condition of a licensee or insurer; |
19 | (iii) transacts the business of viatical settlements |
20 | in violation of laws requiring a license, certificate of |
21 | authority or other legal authority for the transaction of |
22 | the business of viatical settlements; or |
23 | (iv) files with the Insurance Commissioner, the |
24 | Insurance Department or the chief insurance regulatory |
25 | official or agency of another jurisdiction a document |
26 | containing false information or otherwise conceals |
27 | information about a material fact. |
28 | (3) Presenting, causing to be presented or preparing |
29 | with knowledge or reason to believe that it will be presented |
30 | to or by a viatical settlement provider, viatical settlement |
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1 | broker, insurer, insurance agent, financing entity, viatical |
2 | settlement purchaser or any other person, in connection with |
3 | a viatical settlement transaction or insurance transaction, |
4 | an insurance policy, knowing the policy was fraudulently |
5 | obtained by the insured, owner or any agent thereof. |
6 | (4) Embezzlement, theft, misappropriation or conversion |
7 | of moneys, funds, premiums, credits or other property of a |
8 | viatical settlement provider, insurer, insured, viator, |
9 | insurance policy owner or any other person engaged in the |
10 | business of viatical settlements or insurance. |
11 | (5) Attempting to commit, assisting, aiding or abetting |
12 | in the commission of or the conspiracy to commit the acts or |
13 | omissions specified in this subsection.] Includes: |
14 | (1) acts or omissions committed by a person who |
15 | knowingly or with intent to defraud for the purpose of |
16 | depriving another of property or for pecuniary gain commits |
17 | or permits its employees or its agents to engage in acts |
18 | including: |
19 | (i) presenting, causing to be presented or preparing |
20 | with knowledge or belief it will be presented to or by a |
21 | viatical settlement provider, viatical settlement broker, |
22 | viatical settlement purchaser, financing entity, insurer, |
23 | insurance producer or another person, false material |
24 | information or concealing material information as part |
25 | of, in support of or concerning a fact material to one or |
26 | more of the following: |
27 | (A) an application for the issuance of a |
28 | viatical settlement contract or insurance policy; |
29 | (B) the underwriting of a viatical settlement |
30 | contract or insurance policy; |
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1 | (C) a claim for payment or benefit pursuant to a |
2 | viatical settlement contract or insurance policy; |
3 | (D) premiums paid on an insurance policy; |
4 | (E) payments and changes in ownership or |
5 | beneficiary made in accordance with the terms of a |
6 | viatical settlement contract or insurance policy; |
7 | (F) the reinstatement or conversion of an |
8 | insurance policy; |
9 | (G) in the solicitation, offer, effectuation or |
10 | sale of a viatical settlement contract or insurance |
11 | policy; |
12 | (H) the issuance of written evidence of viatical |
13 | settlement contract or insurance; |
14 | (I) a financing transaction; or |
15 | (J) enter into STOLI; or |
16 | (ii) employing a plan, financial structure, device, |
17 | scheme or artifice to defraud related to viaticated |
18 | policies; or |
19 | (2) in the furtherance of a fraud or to prevent the |
20 | detection of a fraud, a person commits or permits his |
21 | employees or agents to: |
22 | (i) remove, conceal, alter, destroy or sequester |
23 | from the commissioner the assets or records of a licensee |
24 | or other person engaged in the business of viatical |
25 | settlements; |
26 | (ii) misrepresent or conceal the financial condition |
27 | of a licensee, financing entity, insurer or other person; |
28 | (iii) transact the business of viatical settlements |
29 | in violation of laws requiring a license, certificate of |
30 | authority or other legal authority for the transaction of |
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1 | the business of viatical settlements; or |
2 | (iv) file with the commissioner or the equivalent |
3 | chief insurance regulatory official of another |
4 | jurisdiction a document containing false information or |
5 | otherwise concealing information about a material fact |
6 | from the commissioner; |
7 | (3) embezzlement, theft, misappropriation or conversion |
8 | of moneys, funds, premiums, credits or other property of a |
9 | viatical settlement provider, insurer, insured, viator, |
10 | insurance policy owner or any other person engaged in the |
11 | business of viatical settlements or insurance; |
12 | (4) knowingly and with intent to defraud, entering into, |
13 | negotiating, brokering or otherwise dealing in a viatical |
14 | settlement contract, the subject of which is a life insurance |
15 | policy obtained by presenting false information concerning a |
16 | fact material to the policy or by concealing, for the purpose |
17 | of misleading another, information concerning a fact material |
18 | to the policy, where the person or the persons intended to |
19 | defraud the policy's issuer, the viatical settlement provider |
20 | or the viator; |
21 | (5) facilitating the change of state of ownership of a |
22 | policy or certificate or the state of residency of a viator |
23 | to a state or jurisdiction that does not have a law similar |
24 | to this act for the express purposes of evading or avoiding |
25 | the provisions of this act; or |
26 | (6) attempting to commit, assisting, aiding or abetting |
27 | in the commission of or conspiracy to commit the acts or |
28 | omissions specified in this definition. |
29 | * * * |
30 | "Life insurance producer." A person licensed in this |
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1 | Commonwealth as a resident or nonresident insurance producer who |
2 | has received qualification or authority for life insurance |
3 | coverage or a life line of coverage under Article VI-A of the |
4 | act of May 17, 1921 (P.L.789, No.285), known as The Insurance |
5 | Department Act of 1921. |
6 | * * * |
7 | "Premium finance loan." A loan made primarily for the |
8 | purposes of making premium payments on a life insurance policy |
9 | which is secured by an interest in the life insurance policy. |
10 | * * * |
11 | "Stranger-originated life insurance" or "STOLI." An |
12 | agreement to initiate a life insurance policy by a third-party |
13 | investor who, at the time of policy origination, has no |
14 | insurable interest in the insured. STOLI practices include, but |
15 | are not limited to: |
16 | (1) Cases in which life insurance is purchased with |
17 | resources or guarantees from or through a person or entity |
18 | who, at the time of inception, has a verbal or written |
19 | arrangement or agreement to directly or indirectly transfer |
20 | the ownership of the policy or the policy benefits to a third |
21 | party. |
22 | (2) Trusts created to give the appearance of insurable |
23 | interest which are used to initiate policies for investors, |
24 | violate or evade insurable interest laws and the prohibition |
25 | against wagering on life. |
26 | The term does not include lawful viatical settlement contracts |
27 | as permitted by this act or the practices set forth in paragraph |
28 | (3) of the definition of "viatical settlement contract," |
29 | provided they are not for the purpose of evading regulation |
30 | under this act. |
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1 | * * * |
2 | "Viatical settlement broker." [A person that on behalf of a |
3 | viator and for a fee, commission or other valuable consideration |
4 | offers to negotiate or attempts to negotiate viatical |
5 | settlements between a viator and one or more viatical settlement |
6 | providers. The term does not include an attorney, certified |
7 | public accountant or financial planner accredited by a |
8 | nationally recognized accreditation agency who is retained to |
9 | represent the viator and whose compensation is not paid directly |
10 | or indirectly by the viatical settlement provider or purchaser. |
11 | The term also does not include an investment advisor registered |
12 | under the Investment Advisers Act of 1940 (15 U.S.C. § 80b-1 et |
13 | seq.) or the act of December 5, 1972 (P.L.1280, No.284), known |
14 | as the Pennsylvania Securities Act of 1972, possessing a |
15 | designation recognized by the Pennsylvania Securities Commission |
16 | for the purposes of waiving any examination requirement under |
17 | the Pennsylvania Securities Act of 1972, who is retained to |
18 | represent the viator and whose compensation is not paid directly |
19 | or indirectly by the viatical settlement provider or purchaser.] |
20 | A person, including a life insurance producer, as provided for |
21 | in Division 1 of Subarticle A of Article VI-A of the act of May |
22 | 17, 1921 (P.L.789, No.285), known as The Insurance Department |
23 | Act of 1921, working exclusively on behalf of a viator and for a |
24 | fee, commission or other valuable consideration, who offers or |
25 | attempts to negotiate viatical settlement contracts between a |
26 | viator and one or more viatical settlement providers or one or |
27 | more viatical settlement brokers. Notwithstanding the manner in |
28 | which the viatical settlement broker is compensated, a viatical |
29 | settlement broker is deemed to represent only the viator and not |
30 | the insurer or the viatical settlement provider and owes a |
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1 | fiduciary duty to the viator to act according to the viator's |
2 | instructions and in the best interest of the viator. The term |
3 | does not include an attorney, certified public accountant or a |
4 | financial planner accredited by a nationally recognized |
5 | accreditation agency retained to represent the viator whose |
6 | compensation is not paid directly or indirectly by the viatical |
7 | settlement provider or purchaser. |
8 | "Viatical settlement contract." [A written agreement entered |
9 | into between a viatical settlement provider and a person owning |
10 | a policy or group policy establishing the terms under which |
11 | compensation or anything of value will be paid, which |
12 | compensation or value is less than the expected death benefit of |
13 | the insurance policy or certificate, in return for the viator's |
14 | assignment, transfer, sale, devise or bequest of the death |
15 | benefit or ownership of any portion of the insurance policy or |
16 | certificate of insurance. The term also includes a contract for |
17 | a loan or other financing transaction secured primarily by an |
18 | individual or group life insurance policy, other than a loan by |
19 | a life insurance company pursuant to the terms of the life |
20 | insurance contract, or a loan secured by the cash value of a |
21 | policy. A viatical settlement contract includes an agreement to |
22 | transfer ownership or change the beneficiary designation at a |
23 | later date regardless of the date that compensation is paid to |
24 | the viator. This term shall not include a written agreement |
25 | entered into between a viator and a person having an insurable |
26 | interest in the viator's life.] |
27 | (1) A written agreement between a viator and a viatical |
28 | settlement provider establishing the terms under which |
29 | compensation or anything of value is or will be paid, which |
30 | compensation or value is less than the expected death |
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1 | benefits of the policy, in return for the viator's present or |
2 | future assignment, transfer, sale, devise or bequest of the |
3 | death benefit or ownership of a portion of the insurance |
4 | policy or certificate of insurance. The term also includes |
5 | the transfer of ownership or beneficial interest in a trust |
6 | or other entity owning a life insurance policy for |
7 | compensation or value if the trust or other entity was formed |
8 | or availed of for the principal purpose of acquiring one or |
9 | more life insurance contracts which insure the life of a |
10 | person residing in this Commonwealth. |
11 | (2) A premium finance loan made for a life insurance |
12 | policy by a lender to the viator on, before or after the date |
13 | of issuance of the policy where: |
14 | (i) the viator or the insured receives on or before |
15 | the date of the premium finance loan a guarantee of a |
16 | future viatical settlement value of the policy; or |
17 | (ii) the viator or the insured agrees on the date of |
18 | the premium finance loan to sell the policy or a portion |
19 | of its death benefit on a date following the issuance of |
20 | the policy. |
21 | (3) The term does not include: |
22 | (i) a policy loan or accelerated death benefit made |
23 | by the insurer under the policy's terms; |
24 | (ii) loan proceeds used solely to pay both: |
25 | (A) Premiums for the policy. |
26 | (B) The costs of the loan, including, but not |
27 | limited to, interest, arrangement fees, utilization |
28 | fees and similar fees, closing costs, legal fees and |
29 | expenses, trustee fees and expenses, and third-party |
30 | collateral provider fees and expenses, including fees |
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1 | payable to letter of credit issuers. |
2 | (iii) a loan made by a bank or other licensed |
3 | financial institution in which the lender takes an |
4 | interest in a life insurance policy solely to secure |
5 | repayment of a loan or, if there is a default on the loan |
6 | and the policy is transferred, the transfer of the policy |
7 | by the lender, provided the default itself is not under |
8 | an agreement or understanding with another person for the |
9 | purpose of evading regulation under this act; |
10 | (iv) an agreement where all the parties are closely |
11 | related to the insured by blood or law or have a lawful |
12 | substantial economic interest in the continued life, |
13 | health and bodily safety of the person insured or trusts |
14 | established primarily for the benefit of the parties; |
15 | (v) a designation, consent or agreement by an |
16 | insured who is an employee of an employer in connection |
17 | with the purchase by the employer, or trust established |
18 | by the employer of life insurance on the life of the |
19 | employee; |
20 | (vi) a bona fide business succession planning |
21 | arrangement: |
22 | (A) between one or more shareholders in a |
23 | corporation or between a corporation and one or more |
24 | of its shareholders or one or more trusts established |
25 | by its shareholders; |
26 | (B) between one or more partners in a |
27 | partnership or between a partnership and one or more |
28 | of its partners or one or more trusts established by |
29 | its partners; or |
30 | (C) between one or more members in a limited |
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1 | liability company or between a limited liability |
2 | company and one or more of its members or one or more |
3 | trusts established by its members; or |
4 | (vii) an agreement entered into by a service |
5 | recipient or a trust established by the service recipient |
6 | and a service provider or a trust established by the |
7 | service provider who performs significant services for |
8 | the service recipient's trade or business. |
9 | (4) A life settlement contract has the same meaning as a |
10 | viatical settlement contract. |
11 | ["Viatical settlement provider." A person other than a |
12 | viator that enters into or effectuates a viatical settlement |
13 | contract. The term does not include: |
14 | (1) a bank, bank and trust, savings bank, savings and |
15 | loan association, credit union or other licensed lending |
16 | institution that takes an assignment of a life insurance |
17 | policy as collateral for a loan; |
18 | (2) the issuer of a life insurance policy providing |
19 | accelerated benefits pursuant to the contract; |
20 | (3) an authorized or eligible insurer that provides stop |
21 | loss coverage to a viatical settlement provider, purchaser, |
22 | financing entity, special purpose entity or related provider |
23 | trust; |
24 | (4) a natural person who enters into or effectuates no |
25 | more than one agreement in a calendar year for the transfer |
26 | of life insurance policies for any value less than the |
27 | expected death benefit; |
28 | (5) a financing entity; |
29 | (6) a special purpose entity; |
30 | (7) a related provider trust; |
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1 | (8) a viatical settlement purchaser; or |
2 | (9) an accredited investor, qualified institutional |
3 | buyer or qualified purchaser as defined respectively in 17 |
4 | CFR § 230.501 (relating to definitions and terms used in |
5 | Regulation D), 17 CFR § 230.144A (relating to private resales |
6 | of securities to institutions), section 18(b)(3) of the |
7 | Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77c et seq.) |
8 | and who purchases a viaticated policy from a licensed |
9 | viatical settlement provider.] |
10 | "Viatical settlement provider." A person other than a viator |
11 | entering into or effectuating a viatical settlement contract |
12 | with a viator residing in this Commonwealth. The term does not |
13 | include: |
14 | (1) a bank, savings bank, savings and loan association, |
15 | credit union or other licensed lending institution that takes |
16 | an assignment of a life insurance policy solely as collateral |
17 | for a loan; |
18 | (2) a premium finance company that takes an assignment |
19 | of a life insurance policy solely as collateral for a loan; |
20 | (3) the issuer of the life insurance policy; |
21 | (4) an authorized or eligible insurer that provides stop |
22 | loss coverage or financial guaranty insurance to a viatical |
23 | settlement provider, purchaser, financing entity, special |
24 | purpose entity or related provider trust; |
25 | (5) a natural person who enters into or effectuates no |
26 | more than one agreement in a calendar year for the transfer |
27 | of life insurance policies for a value less than the expected |
28 | death benefit; |
29 | (6) a financing entity; |
30 | (7) a special purpose entity; |
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1 | (8) a related provider trust; |
2 | (9) a viatical settlement purchaser; or |
3 | (10) another person the commissioner determines is not |
4 | the type of person intended to be covered by the definition |
5 | of viatical settlement provider. |
6 | * * * |
7 | ["Viator." The owner of a life insurance policy or a |
8 | certificate holder under a group policy who enters or seeks to |
9 | enter into a viatical settlement contract. For the purposes of |
10 | this act, a viator shall not be limited to an owner of a life |
11 | insurance policy or a certificate holder under a group policy |
12 | insuring the life of an individual with a terminal or chronic |
13 | illness or condition except where specifically addressed in this |
14 | act. The term does not include: |
15 | (1) a licensee under this act; |
16 | (2) an accredited investor or qualified institutional |
17 | buyer as defined respectively in 17 CFR § 230.501 (relating |
18 | to definitions and terms used in Regulation D), 17 CFR § |
19 | 230.144A (relating to private resales of securities to |
20 | institutions); |
21 | (3) a financing entity; |
22 | (4) a special purpose entity; or |
23 | (5) a related provider trust.] |
24 | "Viator." The owner of a life insurance policy or a |
25 | certificate holder under a group policy who resides in this |
26 | Commonwealth and enters or seeks to enter into a viatical |
27 | settlement contract. For the purposes of this act, a viator |
28 | shall not be limited to an owner of a life insurance policy or a |
29 | certificate holder under a group policy insuring the life of an |
30 | individual with a terminal or chronic illness or condition |
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1 | except where specifically addressed. If there is more than one |
2 | viator on a single policy and the viators are residents of |
3 | different states, the transaction shall be governed by the law |
4 | of the state in which the viator having the largest percentage |
5 | ownership resides or, if the viators hold equal ownership, the |
6 | state of residence of one viator agreed upon in writing by all |
7 | the viators. The term does not include: |
8 | (1) a licensee under this act, including a life |
9 | insurance producer acting as a viatical settlement broker |
10 | pursuant to this act; |
11 | (2) a qualified institutional buyer as defined in 17 CFR |
12 | § 230.144A (relating to private resales of securities to |
13 | institutions); |
14 | (3) a financing entity; |
15 | (4) a special purpose entity; or |
16 | (5) a related provider trust. |
17 | Section 2. Section 3(a) of the act is amended and the |
18 | section is amended by adding subsections to read: |
19 | Section 3. License requirements. |
20 | (a) General rule.--No person shall [engage in the business |
21 | of viatical settlements as a viatical settlement provider or as |
22 | a viatical settlement broker or otherwise operate] act as a |
23 | viatical settlement provider or viatical settlement broker, |
24 | except as provided for in this subsection, in this Commonwealth |
25 | without first obtaining an appropriate license from the |
26 | department and being considered by the department to be worthy |
27 | of such licensure. |
28 | (a.1) A life insurance producer who has been duly licensed |
29 | as a resident insurance producer with a life line of authority |
30 | in this Commonwealth, or his or her home state for at least one |
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1 | year and is licensed as a nonresident producer in this |
2 | Commonwealth, shall be deemed to meet the licensing requirements |
3 | of this section and shall be permitted to operate as a viatical |
4 | settlement broker. |
5 | (a.2) Not later than 30 days from the first day of operating |
6 | as a viatical settlement broker, the life insurance producer |
7 | shall notify the commissioner that he or she is acting as a |
8 | viatical settlement broker on a form prescribed by the |
9 | commissioner, and shall pay any applicable fee to be determined |
10 | by the commissioner. Notification shall include an |
11 | acknowledgment by the life insurance producer that he or she |
12 | will operate as a viatical settlement broker in accordance with |
13 | this act. |
14 | (a.3) The insurer that issued the policy being viaticated |
15 | shall not be responsible for any act or omission of a viatical |
16 | settlement broker or viatical settlement provider arising out of |
17 | or in connection with the viatical settlement transaction, |
18 | unless the insurer receives compensation for the placement of a |
19 | viatical settlement contract from the viatical settlement |
20 | provider or viatical settlement broker in connection with the |
21 | viatical settlement contract. |
22 | * * * |
23 | Section 3. Section 7(a) introductory paragraph, (8) and (9) |
24 | of the act are amended and the subsection is amended by adding a |
25 | paragraph to read: |
26 | Section 7. Disclosure. |
27 | (a) General rule.--With each application for a viatical |
28 | settlement, a viatical settlement provider or viatical |
29 | settlement broker shall provide the viator with at least the |
30 | following disclosures no later than the time the application for |
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1 | the viatical settlement contract is signed by all parties. The |
2 | following disclosures shall be provided in a separate document |
3 | that is signed by the viator and the viatical settlement |
4 | provider or viatical settlement broker and shall provide the |
5 | following information: |
6 | * * * |
7 | (8) all medical, financial or personal information |
8 | solicited or obtained by a viatical settlement provider or |
9 | viatical settlement broker about an insured, including the |
10 | insured's identity or the identity of family members, a |
11 | spouse or a significant other may be disclosed as necessary |
12 | to effect the viatical settlement between the viator and the |
13 | viatical settlement provider and/or financing entities. If a |
14 | viator is asked to provide this information, the viator must |
15 | consent to the disclosure, and failure to consent may affect |
16 | the viator's ability to viaticate a life insurance policy. |
17 | The information may be provided to viatical settlement |
18 | purchasers, financing entities, special purpose entities or |
19 | related provider trusts; [and] |
20 | (9) all information provided by a viator or insured to a |
21 | viatical settlement provider or viatical settlement broker |
22 | will be shared with the insurer that issued the life |
23 | insurance policy that is the subject of the viatical |
24 | transaction[.]; and |
25 | (10) following the execution of a viatical contract, the |
26 | insured may be contacted for the purpose of determining the |
27 | insured's health status and to confirm the insured's |
28 | residential or business street address and telephone number |
29 | or as otherwise provided in this act. This contact shall be |
30 | limited to once every three months if the insured has a life |
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1 | expectancy of more than one year and no more than once per |
2 | month if the insured has a life expectancy of one year or |
3 | less. The contacts shall be made only by a viatical |
4 | settlement provider licensed in this Commonwealth in which |
5 | the viator resided at the time of the viatical settlement or |
6 | by the authorized representative of a duly licensed viatical |
7 | settlement provider. |
8 | * * * |
9 | Section 4. The act is amended by adding a section to read: |
10 | Section 7.1. Disclosure to insurer. |
11 | (a) Determination by carrier.--Insurance carriers may |
12 | determine in the application for insurance if the proposed owner |
13 | intends to pay premiums with the assistance of a loan by a |
14 | lending institution which uses the policy as collateral for the |
15 | loan as follows: |
16 | (1) If, as described in the definition of viatical |
17 | settlement contract, the loan provides funds which may be |
18 | used for a purpose other than paying for the premiums, costs |
19 | and expenses associated with obtaining and maintaining the |
20 | life insurance policy and loan, the application shall be |
21 | rejected as a violation of this act. |
22 | (2) If the loan does not violate this act in the manner |
23 | described under paragraph (1), the insurance carrier: |
24 | (i) May not reject the application based on this |
25 | method of payment. |
26 | (ii) May make the following disclosure to the |
27 | applicant and the insured, either on the application or |
28 | an amendment to the application to be completed no later |
29 | than the delivery of the policy: |
30 | If you have entered into a loan arrangement where the |
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1 | policy is used as collateral and the policy does |
2 | change ownership at some point in the future in |
3 | satisfaction of the loan, the following may be true: |
4 | (A) A change of ownership could lead to a |
5 | stranger owning an interest in the insured's |
6 | life. |
7 | (B) A change of ownership could in the |
8 | future limit your ability to purchase future |
9 | insurance on the insured's life because there is |
10 | a limit to how much coverage insurers will issue |
11 | on one life. |
12 | (C) Should there be a change of ownership |
13 | and you wish to obtain more insurance coverage on |
14 | the insured's life in the future, the insured's |
15 | higher issue age, a change in health status, and/ |
16 | or other factors may reduce the ability to obtain |
17 | coverage and/or may result in significantly |
18 | higher premiums. |
19 | (D) You should consult a professional |
20 | advisor, since a change in ownership in |
21 | satisfaction of the loan may result in tax |
22 | consequences to the owner, depending on the |
23 | structure of the loan. |
24 | (iii) May require the following certification from |
25 | the applicant and/or the insured: |
26 | (A) This policy is being purchased in order to |
27 | meet a need for death benefit coverage determined in |
28 | consultation with financial and/or legal advisors. |
29 | (B) I have not entered into any agreement or |
30 | arrangement providing for the future sale of this |
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1 | life insurance policy. |
2 | (C) My loan arrangement for this policy provides |
3 | funds sufficient to pay for some or all of the |
4 | premiums, costs and expenses associated with |
5 | obtaining and maintaining my life insurance policy, |
6 | but I have not entered into any agreement by which I |
7 | am to receive consideration in exchange for procuring |
8 | this policy. |
9 | (D) The borrower has an insurable interest in |
10 | the insured. |
11 | (b) Written notice.-- |
12 | (1) An insurer shall provide the written notice required |
13 | by this subsection to the owner of a life insurance policy |
14 | who is a resident of this Commonwealth, if the insured |
15 | individual covered by the policy is 60 years of age or older |
16 | or is known by the insurer to be terminally ill or |
17 | chronically ill, and if: |
18 | (i) the owner requests the surrender, in whole or in |
19 | part, of a policy; |
20 | (ii) the owner requests an accelerated death benefit |
21 | under a policy; |
22 | (iii) the insurer sends notice to the owner that the |
23 | policy may lapse; provided, however, that the insurer |
24 | shall not be required to include the notice required by |
25 | this paragraph to the owner more than one time within a |
26 | 12-month period from the date of the first notice of |
27 | lapse of the policy; or |
28 | (iv) at any other time that the commissioner may |
29 | prescribe by rule. |
30 | (2) The commissioner shall develop the written notice, |
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1 | promulgated by rule, to apprise owners of alternatives to the |
2 | lapse or surrender of a policy and of the owner's rights as |
3 | an owner of a policy related to the disposition of a policy. |
4 | The notice shall be developed at no cost to insurers or other |
5 | licensees and shall be written in lay terms. |
6 | (3) The written notice shall contain the following: |
7 | (i) A statement explaining that life insurance is a |
8 | critical part of a broader financial plan. |
9 | (ii) A statement explaining that there are |
10 | alternatives to the lapse or surrender of a policy. |
11 | (iii) A general description of the following |
12 | alternatives to the lapse or surrender of a policy: |
13 | (A) Accelerated death benefits available under |
14 | the policy or as a rider to the policy. |
15 | (B) The assignment of the policy as a gift. |
16 | (C) The sale of the policy pursuant to a life |
17 | settlement contract, including that a life settlement |
18 | is a regulated transaction in this Commonwealth. |
19 | (D) The replacement of the policy. |
20 | (E) The maintenance of the policy pursuant to |
21 | the terms of the policy or a rider to the policy, or |
22 | through life settlement contract. |
23 | (F) The maintenance of the policy through loans |
24 | issued by an insurer or a third party, using the |
25 | policy or the cash surrender value of the policy as |
26 | collateral for the loan. |
27 | (G) Conversion of the policy from a term policy |
28 | to a permanent policy. |
29 | (H) Conversion of the policy in order to obtain |
30 | long-term health care insurance coverage or a long- |
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1 | term care benefit plan. |
2 | (iv) A statement explaining that life insurance, |
3 | life settlements or other alternatives to the lapse or |
4 | surrender of the policy described in the notice may or |
5 | may not be available to a particular policy owner |
6 | depending on a number of circumstances, including the age |
7 | and health status of the insured or the terms of a life |
8 | insurance policy, and that policy owners should contact |
9 | their financial advisor, insurance agent or broker, or |
10 | attorney to obtain further advice and assistance. |
11 | Section 5. Section 8(e) of the act is amended by adding a |
12 | paragraph to read: |
13 | Section 8. General rules. |
14 | * * * |
15 | (e) Verification of coverage.-- |
16 | * * * |
17 | (4) The insurer shall not unreasonably delay effecting |
18 | change of ownership or beneficiary with a viatical settlement |
19 | contract lawfully entered into in this Commonwealth or with a |
20 | resident of this Commonwealth. |
21 | * * * |
22 | Section 6. Section 9(a) introductory paragraph of the act is |
23 | amended and the section is amended by adding subsections to |
24 | read: |
25 | Section 9. Prohibited practices. |
26 | (a) Violation.--It is a violation of this act for any person |
27 | to: |
28 | * * * |
29 | (b) Prohibition.--No insurer may: |
30 | (1) as a condition of responding to a request for |
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1 | verification of coverage or effecting the transfer of a |
2 | policy pursuant to a viatical settlement contract require the |
3 | viator, insured, viatical settlement provider or viatical |
4 | settlement broker sign a form, disclosure, consent or waiver |
5 | form that has not been expressly approved by the commissioner |
6 | for use in connection with viatical settlement contracts in |
7 | this Commonwealth; |
8 | (2) prohibit, restrict, limit or impair a life insurance |
9 | producer from lawfully negotiating a viatical settlement |
10 | contract on behalf of a viator, aiding and assisting a viator |
11 | with a viatical settlement contract, or otherwise |
12 | participating in a viatical settlement transaction under this |
13 | act; |
14 | (3) make a false or misleading statement as to the |
15 | business of viatical settlements or to a viator or insured |
16 | for the purpose of inducing or tending to induce the viator |
17 | or insured not to enter into a viatical settlement contract; |
18 | or |
19 | (4) engage in any transaction, act, practice or course |
20 | of business or dealing which restricts, limits or impairs the |
21 | lawful transfer of ownership, change of beneficiaries or |
22 | assignment of a policy. |
23 | (c) Effect of receipt of request and delay ban.--Upon |
24 | receipt of a properly completed request for change of ownership |
25 | or beneficiary of a policy, the insurer shall respond in writing |
26 | within five calendar days with written acknowledgment confirming |
27 | the change has been effected or specifying the reasons why the |
28 | requested change cannot be processed. The insurer shall not |
29 | unreasonably delay effecting change of ownership or beneficiary |
30 | and shall not otherwise seek to interfere with a viatical |
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1 | settlement contract lawfully entered into in this Commonwealth. |
2 | Section 7. The act is amended by adding a section to read: |
3 | Section 9.1. Additional prohibited practices; conflicts of |
4 | interest. |
5 | (a) Prohibitions.-- |
6 | (1) With respect to a viatical settlement contract or |
7 | insurance policy, no viatical settlement broker shall |
8 | knowingly solicit an offer from, effectuate a viatical |
9 | settlement with or make a sale to a viatical settlement |
10 | provider, viatical settlement purchaser, financing entity or |
11 | related provider trust that is controlling, controlled by or |
12 | under common control with the viatical settlement broker, |
13 | unless such relationship is disclosed to the owner and the |
14 | broker has attempted to solicit an offer from other licensed |
15 | viatical settlement providers. |
16 | (2) With respect to a viatical settlement contract or |
17 | insurance policy, no viatical settlement provider knowingly |
18 | may enter into a viatical settlement contract with a viator, |
19 | if, in connection with the viatical settlement contract, |
20 | anything of value will be paid to a viatical settlement |
21 | broker that is controlling, controlled by or under common |
22 | control with the viatical settlement provider or the viatical |
23 | settlement purchaser, financing entity or related provider |
24 | trust that is involved in the viatical settlement contract, |
25 | unless such relationship is disclosed to the owner. |
26 | (3) In no event shall marketing materials expressly |
27 | reference the insurance as free for a period of time. The |
28 | inclusion of a reference in the marketing materials that |
29 | would cause a viator to reasonably believe the insurance is |
30 | free for a period of time shall be considered a violation of |
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1 | this act. |
2 | (4) A life insurance producer, insurance company, |
3 | viatical settlement broker, viatical settlement provider or |
4 | viatical settlement investment agent shall not make a |
5 | statement or representation to the applicant or policyholder |
6 | in connection with the sale or financing of a life insurance |
7 | policy to the effect the insurance is free or without cost to |
8 | the policyholder for a period of time unless provided in the |
9 | policy. |
10 | (b) Violations.--A violation of this section shall be deemed |
11 | a fraudulent viatical settlement act. |
12 | Section 8. This act shall take effect in 60 days. |
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