No. 29167 (Amendment): R590-222. Viatical Settlements

DAR File No.: 29167
Filed: 10/30/2006, 11:11
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

This rule is being changed to eliminate one report, to simplify another, to eliminate the definition of one word that is no longer used in the rule, and to clarify requirements.

Summary of the rule or change:

In Section R590-222-2, the reference to the producer annual report is removed. In Section R590-222-3, the requirement to file Utah Producer of Viatical Settlement Annual Report Appendix is removed; renumbered the subsequent subsections, and Appendixes D, E, and F are reclassified as Appendixes C, D, and E. In Section R590-222-4, the definition of "net death benefit" is being eliminated since the term has been eliminated from the text of the rule. Subsection R590-222-5(2)(b) has been eliminated since Title 31A, Chapter 23a, provides all the necessary guidelines. In Section R590-222-6, the provider report is being revised to only require the information necessary to determine if the amount paid is compliant with the code. The producer report is being deleted because the information is no longer needed. This section also clarifies that an annual report is not needed if no transactions occur within the state. A typo in Subsection R590-222-11(17)(a) is being corrected. The word "license" is being changed to "licensee."

State statutory or constitutional authorization for this rule:

Sections 31A-2-201 and 31A-36-119, and Title 31A, Chapter 36

Anticipated cost or savings to:

the state budget:

The changes to this rule will reduce the department's workload by eliminating the requirement of licensees to file one report and by simplifying another. It is hoped that by simplifying the one report the department will receive fewer inquiries about it. The reduction in workload will not be enough to result in the reduction in workforce.

local governments:

This rule affects the relationship between the department and its licensees and will not affect local governments.

other persons:

The elimination of the one report and simplification of the other will save the viatical licensee time but not enough to reduce their workforce. The simplification of the one report will result in the elimination of private and confidential information from the report and will allow the department to share this information with interested parties.

Compliance costs for affected persons:

The elimination of the one report and simplification of the other will save the viatical licensee time but not enough to reduce their workforce. The simplification of the one report will result in the elimination of private and confidential information from the report and will allow the department to share this information with interested parties.

Comments by the department head on the fiscal impact the rule may have on businesses:

The changes to this rule will have no fiscal impact on Utah businesses. D. Kent Michie, Commissioner

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Insurance
Administration
Room 3110 STATE OFFICE BLDG
450 N MAIN ST
SALT LAKE CITY UT 84114-1201

Direct questions regarding this rule to:

Jilene Whitby at the above address, by phone at 801-538-3803, by FAX at 801-538-3829, or by Internet E-mail at [e-mail]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

12/15/2006

This rule may become effective on:

12/22/2006

Authorized by:

Jilene Whitby, Information Specialist

RULE TEXT

R590. Insurance, Administration.

R590-222. Viatical Settlements.

R590-222-2. Purpose and Scope.

The purpose of this rule is to implement procedures for licensure of providers and producers of viatical settlements, provider [and producer ]annual reports, disclosures, advertising, reporting of fraud, prohibited practices, standards for viatical settlement payments, and procedures for requests for verification of coverage.

This rule applies to all providers and producers of viatical settlements and to insurers whose policies are being viaticated.

 

R590-222-3. Incorporation by Reference.

The following appendices are hereby incorporated by reference within this rule and are available at http://www.insurance.utah.gov/ruleindex.html:

(1) Appendix A, Utah Provider of Viatical Settlement Application, dated 2003.

(2) Appendix B, Utah Provider of Viatical Settlement Annual Report, dated 200[3]6.

(3) Appendix C,[ Utah Producer of Viatical Settlement Annual Report, dated 2003.

(4) Appendix D,] NAIC Viatical Settlement brochure, dated 2002.

(5) Appendix [E]D, NAIC Verification of Coverage for Individual Policies, dated 2003.

(6) Appendix [F]E, NAIC Verification of Group Life Insurance Benefits, dated 2003.

 

R590-222-4. Definitions.

In addition to the definitions in Section 31A-1-301 and 31A-36-102, the following definitions apply to this rule:

(1) For purposes of this rule, "insured" means the person covered under the policy being considered for viatication.

(2) "Life expectancy" means the mean number of months the individual insured under the life insurance policy to be viaticated can be expected to live as determined by the provider of viatical settlements considering medical records and appropriate experiential data.

(3) ["Net death benefit" means the amount of the life insurance policy or certificate to be viaticated less any outstanding debts or liens.

(4) ]"Patient identifying information" means an insured's address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, or any other information that is likely to lead to the identification of the insured.

 

R590-222-5. License Requirements.

(1) Provider of Viatical Settlements License.

(a) A person may not perform, or advertise any service as a provider of viatical settlements in Utah, without a valid license.

(b) A provider of viatical settlements license shall be issued on an annual basis upon:

(i) the submission of a complete initial or renewal application; and

(ii) the payment of the applicable fees under Section 31A-3-103.

(c) An applicant for a license shall:

(i) use the application form prescribed by the commissioner and available on the department's website, see Appendix A;

(ii) provide a copy of the applicant's plan of operation that is to:

(A) describe the market the applicant intends to target;

(B) explain who will produce business for the applicant and how these people will be recruited, trained, and compensated;

(C) estimate the applicant's projected Utah business over the next 5 years;

(D) describe the corporate organizational structure of the applicant, its parent company, and all affiliates;

(E) describe the procedures used by the applicant to insure that viatical settlement proceeds will be sent to the viator within three business days as required by Subsection 31A-36-110 (3); and

(F) describe the procedures used by the applicant to insure that the identity, financial information, and medical information of an insured are not disclosed except as authorized under Section 31A-36-106;

(iii) provide the antifraud plan as required by Section 31A-36-117;

(iv) provide any other information requested by the commissioner; and

(v) provide evidence of financial responsibility in the amount of $50,000 in the form of a surety bond issued by an authorized corporate surety or a deposit of cash, certificates of deposit or securities or any combination thereof:

(A) The evidence of financial responsibility shall remain in force for as long as the license is active.

(B) The bond, deposit or combination thereof, shall not be terminated without 30 days prior written notice to the licensee and the commissioner.

(C) The commissioner may accept as evidence of financial responsibility, proof that a financial instrument, in accordance with the requirements in subsection 1(c)(v), has been filed with the commissioner of any other state where the provider of viatical settlements is licensed as a provider of viatical settlements.

(d) The commissioner may refuse to issue or renew a license of a provider of viatical settlements if any officer, one who is a holder of more than 10% of the provider's stock, partner, or director fails to meet the standards of Title 31A, Chapter 36.

(e) If a provider of viatical settlements fails to pay the renewal fee within the time prescribed or fails to submit the reports required in Section R590-222-6, the nonpayment or failure to submit the required reports shall:

(i) result in lapse of the license; and

(ii) subject the provider to administrative penalties and forfeitures.

(f) If a provider of viatical settlements has, at the time of license renewal, viatical settlements where the insured has not died, the provider of viatical settlements shall:

(i) renew or maintain its current license status until the earlier of the following events:

(A) the date the provider of viatical settlements properly assigns, sells, or otherwise transfers the viatical settlements where the insured has not died; or

(B) the date that the last insured covered by viatical settlement transaction has died;

(ii) designate, in writing, either the provider of viatical settlements that entered into the viatical settlement or the producer who received commission from the viatical settlement, if applicable, or any other provider or producer of viatical settlements licensed in this state, to make all inquiries to the viator, or the viator's designee, regarding health status of the insured or any other matters.

(g) The commissioner shall not issue a license to a nonresident provider of viatical settlements unless a written designation of an agent for service of process is filed and maintained with the commissioner.

(2) Producer of Viatical Settlements license.

[(a) ]Producers of viatical settlements [will]shall be licensed in accordance with Title 31A, Chapter 23a with a life insurance line of authority.[

(b) If a producer of viatical settlements fails to pay the renewal fee within the time prescribed or fails to submit the reports required in Section R590-222-6, the nonpayment or failure to submit the required reports shall:

(i) result in lapse of the license; and

(ii) subject the producer to administrative penalties and forfeitures.]

 

R590-222-6. Annual Report[s].

[(1) ]By March 1 of each calendar year, each provider of viatical settlements licensed in this state shall report to the commissioner all viatical settlement transactions where the viator is a resident of this state. A report is not required if there are no transactions to be reported. This report shall be submitted in the format in Appendix B and contain the following information for the previous calendar year:

([a]1) for viatical settlements contracted during the reporting period:

([i]a) [date of viatical settlement]a coded identifier for each viatical settlement;

([ii]b) [life expectancy of the insured at time of settlement in months]policy issue date;

([iii]c) [face amount of policy viaticated]date of the viatical settlement;

([iv]d) net death benefit viaticated;

([v]e) [estimated total premiums to keep policy in force for mean life expectancy]amount available under the terms of the policy;

([vi]f) net amount paid to viator;

[ (vii) contestable or within suicide period, or both, at the time of viatical settlement; and

(viii) name and address of the producer of the viatical settlement, if any, through whom the reporting provider purchased the policy.

(b) for viatical settlements where death has occurred during the reporting period:

(i) date of viatical settlement;

(ii) life expectancy of the insured at time of settlement in months;

(iii) net death benefit collected;

(iv) total premiums paid to maintain the policy (indicate as dollar amount and provide reason for zero amount, i.e. waiver of premium, paid-up policy, etc.);

(v) net amount paid to viator;

(vi) date of death;

(vii) amount of time between date of settlement and date of death in months;

(viii) difference between the number of months that passed between the date of settlement and the date of death and the life expectancy in months as determined by the reporting company; and

(ix) contestable or within suicide period, or both, at the time of viatical settlement.

] ([c]2) number of policies reviewed and rejected; and

([d]3) number of policies purchased from an individual or entity other than the original viator as a percentage of total policies purchased.[

(2) By March 1 of each calendar year, each producer of viatical settlements licensed in this state shall report to the commissioner all viatical settlement transactions where the viator is a resident of this state. This report shall be submitted in the format in Appendix C and contain the following information for the previous calendar year:

(a) date of viatical settlement;

(b) face amount of policy viaticated;

(c) net amount paid to viator;

(d) contestable or within suicide period, or both, at the time of the viatical settlement;

(e) provider's name and address for each transaction.]

 

R590-222-8. Disclosures.

(1) As required by Subsection 31A-36-108(1), the disclosure, which is to be provided no later than the time the application for the viatical settlement, shall be provided in a separate document that is signed by the viator and the provider of viatical settlements or producer of viatical settlements, and shall contain the following information:

(a) There are possible alternatives to a viatical settlement, including any accelerated death benefits or policy loans offered under the viator's life insurance policy.

(b) Some or all of the proceeds of the viatical settlement may be taxable under federal income tax and state franchise and income taxes, and assistance should be sought from a professional tax advisor.

(c) Proceeds of the viatical settlement could be subject to the claims of creditors.

(d) Receipt of the proceeds of a viatical settlement may adversely affect the viator's eligibility for Medicaid or other government benefits or entitlements, and advice should be obtained from the appropriate government agencies.

(e) The viator has the right to terminate a viatical settlement within 15 calendar days after the receipt of the viatical settlement proceeds by the viator as provided by Subsection 31A-36-109(7). If the insured dies during the 15 day period, the settlement is terminated, subject to repayment of all viatical settlement proceeds and any premiums, loans and loan interest to the viatical settlement provider or purchaser.

(f) Funds will be sent to the viator within three business days after the provider of viatical settlements has received the insurer or group administrator's acknowledgment that ownership of the policy or interest in the certificate has been transferred and the beneficiary has been designated.

(g) Entering into a viatical settlement may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy or certificate, to be forfeited by the viator. Assistance should be sought from a financial adviser.

(h) Disclosure to a viator shall include distribution of a copy of the National Association of Insurance Commissioners (NAIC) Viatical Settlement brochure, dated 2002, that describes the process of viatical settlements, see Appendix [D]C.

(i) The disclosure document shall contain the following language: "All medical, financial or personal information solicited or obtained by a provider of viatical settlements or producer of viatical settlements about an insured, including the insured's identity or the identity of family members, a spouse or a significant other may be disclosed as necessary to effect the viatical settlement between the viator and the provider of viatical settlements. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two years."

(j) The insured may be contacted by either the provider or producer of viatical settlements or its authorized representative for the purpose of determining the insured's health status. This contact is limited to once every three months if the insured has a life expectancy of more than one year, and no more than once per month if the insured has a life expectancy of one year or less.

(2) A provider of viatical settlements shall provide the viator with at least the following disclosures no later than the date the viatical settlement is signed by all parties. The disclosures shall be conspicuously displayed in the viatical settlement or in a separate document signed by the viator and the provider of viatical settlements or producer of viatical settlements, and provide the following information:

(a) State the affiliation, if any, between the provider of viatical settlements and the issuer of the insurance policy to be viaticated.

(b) The document shall include the name, address and telephone number of the provider of viatical settlements.

(c) A producer of viatical settlements shall disclose to a prospective viator the existence and source of the producer's compensation. The term "compensation" includes anything of value paid or given to a producer of viatical settlements for the placement of a policy.

(d) If an insurance policy to be viaticated has been issued as a joint policy or involves family riders or any coverage of a life other than the insured under the policy to be viaticated, the viator shall be informed of the possible loss of coverage on the other lives under the policy and shall be advised to consult with his or her insurance producer or the insurer issuing the policy for advice on the proposed viatical settlement.

(e) State the dollar amount of the current death benefit payable to the provider of viatical settlements under the policy or certificate. If known, the provider of viatical settlements shall also disclose the availability of any additional guaranteed insurance benefits, the dollar amount of any accidental death and dismemberment benefits under the policy or certificate and the provider of viatical settlements interest in those benefits.

(f) State the name, business address, and telephone number of the independent third party escrow agent, and the fact that the viator or owner may inspect or receive copies of the relevant escrow or trust agreements or documents.

(3) If the provider transfers ownership or changes the beneficiary of the insurance policy, the provider shall communicate the change in ownership or beneficiary to the insured within 20 days after the change.

 

R590-222-10. Requests for Verification of Coverage.

(1) Insurers, authorized to do business in this state, whose policies are being viaticated, shall respond to a request for verification of coverage from a provider of viatical settlements or a producer of viatical settlements within 30 calendar days of the date a request is received, subject to the following conditions:

(a) a current authorization consistent with applicable law, signed by the policyholder or certificate holder, accompanies the request;

(b) in the case of an individual policy, submission of a form substantially similar to the NAIC Verification of Coverage for Individual Policies, dated 2003, which has been completed by the provider of viatical settlements or the producer of viatical settlements in accordance with the instructions on the form, see Appendix [E]D;

(c) in the case of group insurance coverage:

(i) submission of a form substantially similar to the NAIC Verification of Group Life Insurance Benefits dated 2003, which has been completed by the provider of viatical settlements or producer of viatical settlements in accordance with the instructions on the form, see Appendix [F]E; and

(ii) which has previously been referred to the group policyholder and completed to the extent the information is available to the group policyholder.

(2) An insurer whose policy is being viaticated may not charge a fee for responding to a request for information from a provider of viatical settlements or producer of viatical settlements in compliance with this rule in excess of any usual and customary charges to policyholders, certificateholders or insureds for similar services.

(3) The insurer whose policy is being viaticated shall send an acknowledgment of receipt of the request for verification of coverage to the policyholder or certificateholder and, where the policyholder or certificateholder is other than the insured, to the insured. The acknowledgment may contain a general description of any accelerated death benefit or similar benefit that is available under a provision of or rider to the life insurance contract.

 

KEY: insurance, viatical

Date of Enactment or Last Substantive Amendment: [June 24, 2003]2006

Authorizing, and Implemented or Interpreted Law: 31A-2-201; 31A-36-119