Section 1 Purpose
The purpose of this regulation is to regulate the affairs of
persons and institutions engaged in viatical settlements in Vermont, to
encourage competition among them, and to protect the public against unfair and
unconscionable practices in the course of that business. This regulation sets
forth requirements pertaining to: licensing of viatical settlement providers
and viatical settlement brokers; viatical settlement contracts and payouts;
reporting; examination; marketing; advertising; disclosure; and, rules
applicable to life insurers which will facilitate viatical settlement
transactions.
Section 2
Authority
This regulation is issued pursuant to the authority vested in
the Commissioner of Banking, Insurance and Securities ("Commissioner") by Title
8 V.S.A., Sections 75 and 3833 and Chapter 129.
Section 3 Definitions
As used in this regulation:
A. "Viatical Settlement broker: means any
person or his or her agent who, for a fee, commission or other valuable
consideration, offers or advertises the availability of viatical settlements,
introduces viators to viatical settlement providers, or solicits for, or offers
or attempts to negotiate viatical settlements between a viator and one or more
viatical settlement providers. "Viatical settlement broker" does not include an
attorney, accountant or financial planner retained to represent the viator
whose compensation is not paid by the viatical settlement provider.
B. "Viatical settlement contract" means an
agreement between a viatical settlement provider and a person who owns,
controls or has rights to the benefits or values of a life insurance policy, or
who owns, is covered by, controls or has rights to the benefits or values of a
group policy, either of which insures the life of a person who has a
catastrophic or life threatening illness or condition and under which the
viatical settlement provider will pay compensation or anything of value, which
compensation or value is less than the expected death benefit of the insurance
policy or certificate, in return for the viator's assignment, transfer, sale,
devise or bequest of the death benefit or ownership of the insurance policy or
certificate to the viatical settlement provider.
C. "Viatical settlement provider" means any
person or entity which enters into an agreement with a person who owns, is
covered by, controls or has rights to the benefits or values of a life
insurance policy or who owns, controls or has rights to the benefits or values
of a group policy either of which insures the life of a person who has a
catastrophic or life threatening illness or condition, under the terms of which
the viatical settlement provider pays compensation or anything of value, which
compensation or value is less than the expected death benefit of the insurance
policy or certificate, in return for the assignment, transfer, sale, devise or
bequest of the death benefit or ownership of the insurance policy or
certificate to the viatical settlement provider. Viatical settlement provider
does not include:
1) Any bank, savings bank,
savings and loan association, credit union or other licensed lending
institution which takes an assignment of the subject life insurance policy as
collateral for a loan;
2) The
issuer of the subject life insurance policy providing accelerated
benefits;
3) Any natural person who
enters into no more than one agreement in a calendar year for the transfer of a
life insurance policy for any value less than the expected death benefit,
or,
4) Any corporation, partnership
or partner that purchases a life insurance contract of an employee or retiree
of the corporation of a partner. The settlement made on any contract exempt
under section
4
) of this regulation shall be reasonable and subject to the standards imposed
on viatical settlement providers in 8 V.S.A. sections 3831, 3832, and 3833 and
sections 9, 10, and 11 of this regulation.
D. "Viator" means any person who owns,
controls or has rights to the benefits or values of a life insurance policy or
who owns, is covered by, controls or has rights to the benefits or values of a
group policy, either of which insures the life of a person who has a
catastrophic or life threatening illness or condition; and, who enters into an
agreement under which the viatical settlement provider will pay compensation or
anything of value, which compensation or value is less than the expected death
benefit of the insurance policy or certificate, in return for the assignment,
transfer, sale, devise or bequest of the death benefit or ownership of the
insurance policy or certificate to the viatical settlement provider.
Section 4 License Requirements for
Viatical Settlement Providers
A. A viatical
settlement provider shall not solicit or enter into a viatical settlement
contract without first obtaining a license from the commissioner. Applicants
for a license shall complete and submit an application in a form approved by
the commissioner together with the required fee.
B. The commissioner may require such
additional information as is necessary to determine whether the applicant
complies with the requirements of 8 V.S.A. 3827(f). If the commissioner
determines that additional information is required, any cost related to
acquiring the information shall be borne by the applicant.
C. In any case where there are changes or
additions to the list of persons within the viatical settlement provider
organization who are authorized to offer or negotiate viatical settlement
contracts, the licensed viatical settlement provider must submit a list of
those persons for the commissioner's approval. No person added to the list may
offer or negotiate viatical settlement contracts until approved by the
Commissioner. Any persons authorized to offer or negotiate viatical settlement
contracts whose positions change within the organization must notify the
commissioner of such change no later than the next license renewal
date.
D. Viatical settlement
providers shall acquire and maintain an initial surety bond or letter of credit
for the benefit of the commissioner in the amount of $ 50,000. A copy of the
executed bond or letter of credit shall be filed with the commissioner at the
time of application for a license. On March 31 of each subsequent year of
licensing, the viatical settlement provider must file and maintain a surety
bond or letter of credit to the benefit of the commissioner equal to not less
than 5% of the sum of the prior year's total viatical settlement contracts
which were executed in Vermont, but not less than $ 50,000, or such other
amount as the commissioner may require.
E. In cases where the applicant is not a
resident of Vermont, the applicant must submit a written designation of a
resident of the state as his or her agent for service of process. This
designation shall be maintained at all times by the viatical settlement
provider.
F. The commissioner shall
have the right to suspend, revoke or refuse to renew the license of any
viatical settlement provider if the commissioner finds that:
1) there was any misrepresentation in the
application for the license;
2) the
holder of the license has engaged in fraudulent or dishonest practices, is
subject to a final administrative action in any state, or is otherwise shown to
be untrustworthy or incompetent to act as a viatical settlement
provider;
3) the license
demonstrates a pattern of unreasonable payments to viators;
4) the licensee has been convicted of a
misdemeanor involving moral turpitude or has been convicted of a felony;
or
5) the licensee has violated any
requirements of Title 8, including the requirements outlined in 8 V.S.A.
Chapter 103, Subchapter 5A, or this regulation.
G. Before the commissioner shall suspend,
revoke or refuse to issue or renew the license of a viatical settlement
provider, the licensee shall be entitled to notice and an opportunity to be
heard in accordance with 3 V.S.A. Chapter 25.
H. All licenses issued shall continue in
force not longer than 12 months, but shall expire as of 12:01 a.m. o'clock on
the first day of April of the year next following date of issuance unless the
licensee prior thereto has filed with the commissioner, on forms prescribed and
furnished by the commissioner, a request for renewal of such license for an
ensuring 12-month period. Such request must be accompanied by payment of the
required renewal fee. Failure to pay the fee within the terms prescribed shall
result in the automatic revocation of the license.
Section 5 License Requirements for Viatical
Settlement Brokers
A. A viatical settlement
broker shall not solicit a viatical settlement contract, or in any way engage
in the procurement of a contract, without first obtaining a license from the
commissioner. The license shall be a limited license which allows solicitation
and brokering of viatical settlements only.
B. The applicant shall follow the licensing
procedures as outlined in 8 V.S.A. Chapter 131 and related regulations and
bulletins. The applicant must take and pass the qualifying life insurance
examination and must have had two years experience as an insurance agent, or
comparable employment.
C. A
viatical settlement broker may not be an agent for, or employee of, a viatical
settlement provider. A viatical settlement broker who solicits a viatical
settlement contract has a fiduciary duty to represent the viator and not the
viatical settlement provider.
D. As
part of the application, the applicant shall include proof of acquisition of an
errors and omissions' policy with a value of $ 250,000, or such greater amount
as shall be required by the commissioner. In subsequent years of licensing, the
viatical settlement broker must forward continuing proof of coverage equal to
not less than 10% of the sum of the prior year's viaticated settlement
contracts brokered, but not less than $ 250,000, or such other amount as the
commissioner may require.
E. In
cases where the applicant is not a resident of Vermont, the applicant must
submit a written designation of a resident of the state as his or her agent for
service of process. This designation shall be maintained at all times by the
broker.
F. The commissioner shall
have the right to suspend, revoke or refuse to renew the license of any
viatical settlement broker if the commissioner finds that:
1) there was any misrepresentation in the
application for the license;
2) the
holder of the license has engaged in fraudulent or dishonest practices, is
subject to a final administrative action in any state or is otherwise shown to
be untrustworthy or incompetent to act as a viatical settlement
broker;
3) the licensee has been
convicted of a misdemeanor involving moral turpitude or has been convicted of a
felony;
4) the broker or applicant
has placed or attempted to place a viatical settlement with a viatical
settlement provider who is required to be, but is not, licensed in this state,
or,
5) the licensee has violated
any requirements of Title 8, including the requirements outlined in 8 V.S.A.
Chapter 131 and Chapter 103, Subchapter 5A or this regulation.
G. Before the commissioner shall
suspend, revoke or refuse to issue or renew the license of a viatical
settlement broker, the licensee shall be entitled to notice and an opportunity
to be heard in accordance with 3 V.S.A. Chapter 25 and 8 V.S.A. Chapter
131.
H. All licenses issued shall
continue in force not longer than 12 months, but shall expire as of 12:01 a.m.
o'clock on the first day of April of the year next following date of issuance
unless the licensee prior thereto has filed with the commissioner, on forms
prescribed and furnished by the commissioner, a request for renewal of such
license for an ensuing 12-month period. Such request must be accompanied by
payment of the required renewal fee. Failure to pay the fee within the terms
prescribed shall result in the automatic revocation of the license.
I. No viatical settlement broker may charge
or receive a fee, commission or other valuable consideration in excess of two
percent (2%) of the amount paid by the viatical settlement company to the
viator on a policy that is the subject of the viatical settlement broker's
services. Upon the written request of the viatical settlement broker, and after
conferring with the viator, the commissioner may approve another rate of
compensation as reasonable and appropriate under highly unusual
circumstances.
Section 6
Examination of Viatical Settlement Providers and Viatical Settlement Brokers
A. The commissioner may examine the business
and affairs of any licensee or applicant for a license whenever the
commissioner deems it to be prudent for the protection of policyholders or the
public.
B. The commissioner shall
have the authority to examine any person and to order the production of any
records, books, files or other information reasonably necessary to ascertain
whether or not the licensee or applicant is acting or has acted in violation of
the law or otherwise contrary to the interests of the public.
C. The expense incurred conducting any
examination shall be paid by the licensee or applicant.
D. The names and individual identification
data for all viators who have or may enter into a viatical settlement contract
shall be considered private and confidential information and shall not be
publicly disclosed by the commissioner, unless in furtherance of any legal or
regulatory action, as otherwise required by law, or with the consent of the
viator.
E. The records of all
transactions of viatical settlement contracts, including the records of
disclosure required under Title 8, V.S.A. Section 3831, shall be maintained by
the licensee and shall be available to the commissioner for inspection and
copying during normal business hours.
Section 7 Life Insurance Companies
Responsibilities and Relationships
A. No life
insurance company authorized to do business in Vermont may be required to pay a
viatical settlement provider under a viatical settlement contract or any viator
who is a resident of this state, or was a resident of this state on the date
the viatical settlement contract was signed, or was a resident of this state
except for having left the state for medical care or nursing home care, unless
the viatical settlement provider is licensed in this state or is exempt from
licensure.
B. No viatical
settlement provider may viaticate life insurance policies issued by any life
insurance company with which it is affiliated or of which it is a subsidiary,
unless the relationship between the life insurance provider and the viatical
settlement provider is fully disclosed, in writing, to the viator.
C. Upon direction of the viator, in the case
of a life insurance policy which has an accidental death provision or rider,
any additional payment in case of accidental death shall remain payable to the
viator or beneficiary last named by the viator prior to entering into the
viatical settlement agreement, or to such other beneficiary as the viator may
thereafter designate, or in the absence of a designation, to the estate of the
viator, notwithstanding the designation of the viatical settlement provider as
beneficiary of the other policy death benefits.
D. If the life insurance policy to be
viaticated provides a guaranteed option to purchase additional insurance, such
option may only be exercised for the benefit of a person who has an insurable
interest in the life to be insured, or such other person as the viator may
designate, in writing.
E. If a life
insurance policy is viaticated, that viatication does not alter any of the
policy terms and conditions except as contained in the policy in the event that
ownership is transferred.
F. A life
insurance company which receives an authorization signed by the viator to
release specified information regarding the policy or certificate to a named
viatical settlement provider or broker, shall release the information requested
within ten (10) business days of receipt of the authorization. The request to
release information must clearly indicate that the information is being
requested for the purpose of entering into a viatical settlement agreement, and
is covered by Vermont regulations which require the insurer to process the
request within ten (10) business days.
G. An issuer of a group life insurance policy
shall, within ten (10) business days of receipt of a written request from a
certificate holder for a conversion to an individual life insurance policy,
deliver the conversion policy to the certificate holder, where:
1) the request for conversion is in
compliance with the conversion provision in the policy, and,
2) the certificate holder has indicated that
the conversion is being requested for the purpose of entering into a viatical
settlement agreement.
The request to convert the subject coverage to an individual
life insurance policy must clearly indicate that the conversion is being
requested for the purpose of entering into a viatical settlement agreement and
is covered by Vermont regulations which require the insurer to process the
request within ten (10) business days.
Section 8 Standards for Evaluation of
Reasonable Payments
A. In order to assure that
viators receive a reasonable return for viaticating an insurance policy, the
following shall be minimum payouts:
|
Viator's or Insured Person's Remaining
Life
|
Minimum Percentage of
|
|
Expectancy at Time of
Viatication
|
Expected Death Benefit (Net of Loans and Any
Cash Surrender Value) to be Received by Viator
|
|
Less than 6 months
|
85%
|
|
At least 6, but less than 12 months
|
80%
|
|
At least 12, but less than 18 months
|
75%
|
|
At least 18, but less than 24 months
|
70%
|
|
At least 24, but less than 36 months
|
60%
|
|
Thirty-six months or more
|
50%
|
B.
The expected death benefit is the death benefit provided under the terms of the
policy being viaticated, assuming the death of the insured were to occur on the
date the viatical settlement contract is signed.
C. The payment shall be increased by 100% of
any net cash surrender value of the insurance at the time the viatical
settlement contract is issued.
D.
Payouts may be reduced by the minimum premium (including premiums payable for
additional benefits retained at the option of the viator), if any, required to
keep the contract in force for the duration of the viator's remaining life
expectancy. Other than this allowable reduction in payout, there shall be no
other retention for expenses or broker's fees.
At the time of settlement, the viatical settlement provider
shall place in trust a sum equal to the amount the payout was reduced for
future premiums. Sums placed in trust under this section shall only be reduced
by the viatical settlement provider upon payment of policy premiums as they
come due. If the viator dies with a sum held in trust under this section, the
sum remaining in trust shall become the property of the viatical settlement
provider.
E. If the viatical
settlement provider becomes insolvent or is the subject of a bankruptcy or
other insolvency proceeding during the life of the viator whose policy had
riders retained, the viatical settlement provider shall notify the viator and
other insureds of the insolvency or initiation of insolvency proceedings.
Persons with an interest in the continuation of riders retained may pay any
premiums required to keep riders retained in force.
F. In computing the minimum percentage of
expected death benefit (net of loans and cash surrender value) the death
benefit value of any accidental death benefit rider shall not be included.
There shall be no minimum percentage payment required for the transfer of an
accidental death benefit rider to the viatical settlement company.
G. Life expectancy shall be determined by a
physician selected by the viator, on the basis of medical records. The
physician selected will send life expectancy information to the viatical
settlement provider. If the viatical settlement provider disagrees with the
life expectancy estimate of the physician selected by the viator, the viator
will select a second physician to make an estimate of life expectancy, based on
medical records. The second physician's decision shall be final.
Section 9 Viatical Settlement
Contracts
A. All viatical settlement contracts
must be in writing, and must establish the terms under which the viatical
settlement provider will pay compensation to the viator and the terms of the
assignment, transfer, sale, devise or bequest of the death benefit or ownership
of the insurance policy or certificate to the viatical settlement
provider.
B. The contract must
contain and give notice of a seven-day unconditional right to cancel the
contract. The seven-day cancellation period shall begin the day after the date
of execution of the contract and shall end midnight seven days thereafter, or
the next business day, if the seventh day falls on a weekend or is a state or
federal holiday.
C. If the
potential viator or the person whose life is insured by the policy and who has
a life threatening illness or condition dies during the seven-day cancellation
period, the viatical settlement contract is considered rescinded.
D. The contract shall provide a method for
notice of cancellation. If notice of cancellation is given by mail, it shall be
deemed given when deposited in the United States mail, addressed and postage
prepaid.
E. After the expiration of
the cancellation period described above, and upon receipt from the viator of
documents to effect the transfer of the insurance policy:
1) the viatical settlement provider shall pay
the proceeds of the settlement to an escrow or trust account managed by a
trustee or escrow agent in a bank with which the viatical settlement provider
has no affiliation other than as a depositor, and approved by the commissioner,
pending acknowledgment of the transfer from the insurer;
2) payment shall be by means of wire transfer
or by cashier's check; and,
3) the
trustee or escrow agent shall transfer the proceeds due the viator immediately
upon receipt of acknowledgment of the transfer from the insurer.
F. Payment of the proceeds
pursuant to a viatical settlement shall be made in a lump sum. Neither
retention of a portion of the proceeds nor installment payments by the viatical
settlement provider are permissible. Installment payments by the trustee or
escrow agent shall not be made except at the written request of the viator and
unless the viator, in writing, has authorized the trustee or escrow agent to
purchase an annuity or similar financial instrument issued by a company
authorized to issue the type of instrument used. The viator's estate shall be
paid any amounts due under the annuity, should the viator die before the
annuity is fully paid.
G. Failure
to tender the proceeds of the viatical settlement by the date disclosed to the
viator renders the contract and the transfer of the policy null and void and
makes the viatical settlement provider and/or broker subject to administrative
action.
H. The viator has the right
to retain additional benefits or optional riders which were part of the life
insurance policy, including but not limited to: disability income, accidental
death and dismemberment, and spouse, children and family riders. Any premiums
payable on the viaticated insurance policy or certificate (including premiums
payable for additional benefits retained at the option of the viator) shall be
paid by the viatical settlement provider when due, for the remaining duration
of the viator's life.
I. If any
benefits are retained by the viator, the viatical settlement provider shall not
have to right to any cash surrender value unless all additional benefits,
either by rider, endorsement, or boiler plate, are in a paid-up-status. If
those additional benefits are in a paid-up-status and will be unaffected by any
change in cash surrender value, then the viatical settlement provider shall
have the right to any cash surrender value.
J. In any instance where the disposition of
additional benefits, riders, or endorsements is determined by the viatical
settlement contract, the contract must clearly delineate the disposition. Upon
signature of the viatical settlement contract, the contract shall be
transmitted to the life insurance company, with a summary of any provisions
made for the disposition of any additional benefits, riders, or
endorsements.
Section 10
Disclosures Required Prior to Signature of the Contract
A. Upon receipt of an application or other
notice of a request to viaticate, and after determining the value to be offered
in return for the assignment, transfer, sale, devise or bequest of the death
benefit or ownership of a life insurance policy or certificate to the viatical
settlement provider, the viatical settlement provider shall deliver a proposal
to the viator before the contract is required to be signed. The proposal shall
include a copy of Attachment A to this regulation, with the required specific
information filled in by the viatical settlement provider, or the same general
and specific information as is contained in Attachment A in substantially
similar form.
The commissioner reserves the right to update the list of
service and support agencies and their telephone numbers through the issuance
of Bulletins containing the current approved list.
B. The viatical settlement provider must keep
a copy of the disclosure statement in the provider's file on the contract,
along with an affidavit signed by the provider showing the date the disclosure
statement was delivered to the viator and attesting to the provider's belief
that the viator read and understood the disclosure statement. A copy of the
disclosure statement and the signed affidavit will be sent to the viatical
settlement broker, who will also retain the copies with the broker's files on
the contract.
Section 11
Rules of Conduct for Providers and Brokers
A.
A viatical settlement broker may not be an agent for, or employee of, a
viatical settlement provider. A viatical settlement broker who solicits a
viatical settlement contract has a fiduciary duty to represent the viator and
not the viator settlement provider.
B. A viatical settlement provider entering
into a viatical settlement contract with any viator shall first obtain a
statement signed in the presence of two witnesses in which:
1) the viator acknowledges the catastrophic
or life threatening illness or condition, represents that the viator has a full
and complete understanding of the viatical settlement contract and understands
the benefits of the life insurance that is to be sold or otherwise transferred;
and,
2) the viator acknowledges
that he or she has entered into the viatical settlement contract freely and
voluntarily.
C. Contracts
for the purpose of determining the health status of the viator or person whose
life is insured by the viatical settlement provider or broker after the
viatical settlement has occurred shall be limited to:
1) once every two (2) months in cases where
life expectancy is less than six months; and,
2) once every three (3) months in cases where
life expectancy is six months or more.
The provider or broker shall explain the procedure for these
contracts at the time the viatical settlement contract is executed.
D. A viatical settlement
provider or broker shall not pay or offer to pay any finder's fee, commission
or other compensation to any viator's physician, attorney, accountant or other
person providing medical, legal or financial planning services to the viator,
or to any other person acting as a representative or agent of the viator with
respect to the viatical settlement. For the purposes of this section,
"representative or agent" does not include a licensed viatical settlement
broker.
E. Viatical settlement
providers and brokers shall not solicit investors who could influence the
treatment of the illness of the viator or person whose life is insured and
whose coverage would be the subject of the investment.
F. No individual, partnership, corporation or
other entity acting as a viatical settlement provider or broker shall aid or
assist a health care facility or practitioner in coercing or requiring, or
attempting to coerce or require, a person to enter into a viatical settlement
contract as a condition of admission, on of providing a continuing
care.
G. Advertising shall be
truthful and not misleading in fact or by implication.
1) If the advertiser represents the speed
with which the viatication will occur, the advertising must disclose the
average time frame from the completed application to the date of offer and from
acceptance of the offer to receipt of funds by the viator/
2) If the advertising represents the dollar
amounts available to viators, the advertising shall disclose the average
purchase price as a percent of the face value obtained by viators contracting
with the advertiser during the past six (6) months and must indicate that
amounts may vary depending on life expectancy.
3) No advertisement shall indicate or imply
that viatical settlements are the only means of obtaining access to a policy's
values.
H. All medical
information solicited or obtained by any viatical settlement provider or
viatical settlement broker shall be confidential. Individual investors of
viatical settlement providers shall not have access to names or to
individually-identifiable information about viators, unless such information is
disclosed in the course of regulatory proceedings under 8 V.S.A., Section 3830.
The viatical settlement provider and the viatical settlement
broker shall not disclose any medical information acquired in the course of the
negotiation of a viatical settlement contract except as otherwise ordered by
the commissioner to assist in the investigation of a crime or violation of any
provision of Title 8 V.S.A. or regulations promulgated under that title.
The viatical settlement provider will pay any costs connected
with obtaining medical information required in the course of
negotiations.
I. A viatical
settlement provider or broker shall not unfairly discriminate in the making of
viatical settlements on the basis of race, age sex, national origin, creed,
religion, occupation, marital or family status or sexual orientation, or
discriminate between viators with dependents and viators without
dependents.
J. A violation of the
either Title 8 V.S.A., Chapter 103, Subchapter 5A, Viatical Settlements, or of
this regulation shall be considered an unfair trade practice under chapter 129
of Title 8 V.S.A. and shall subject the violator to the penalties contained in
that chapter. The penalties contained in that chapter shall be in addition to
any other penalties that may be imposed under Chapter 103, Subchapter 5A
Viatical Settlements.
Section
12 Approval of Contract Form and Related Forms
A. No viatical settlement provider may use
any viatical settlement contract form or related form in this state unless it
has been filed with and approved by the commissioner. Related forms include,
but are not necessarily limited to, any disclosure form containing the
information required by law and by Section 10 of this regulation, the viator's
statement of understanding form as required by Section 11 of this regulation,
any medical records release form to be used, any application form to be used by
the viator to request a contract, and any form describing how and when
contracts for the purpose of determining current health status may occur, as
found in Section 11 of this regulation.
B. Any viatical settlement contract form or
related form filed with the commissioner shall be deemed approved if it has not
been disapproved within 60 days of the filing. The commissioner may extend by
not more than 30 additional days the period within which affirmative approval
or disapproval of any such form may be given, by notifying the viatical
settlement provider of such extension before expiration of the initial 60-day
period.
C. All contracts and
related forms submitted for review must:
1)
include an explanatory paragraph related to each form, describing its intended
use and how it will accomplish its goal and the marketing targets and
techniques to be used for these forms.
2) supply a side-by-side comparison of the
new and the old forms, if replacement or revised forms are involved. The
submission shall show deleted material in brackets and new material underlined.
The submission shall describe what the new form intends to accomplish, how a
replacement form differs from its predecessor, and how the forms will
accomplish their goals.
3) use a
Department File number, once it has been assigned.
4) be accompanied by the required filing fee
and a 4" by 6" silver emulsion microfiche with completed header strip (see
Regulation 86-10), a postage-paid return envelope, and two copies of the cover
letter so that one copy can be stamped and returned.
D. Contracts and all forms must be written in
non-technical, readily understandable language, using words of common usage.
The viatical settlement provider must test the readability of its contracts and
forms by use of the Flesch Readability Formula, as set forth in Rudolf Flesch's
publication, "The Art of Readable Writing" (1949, revised 1974.) A total
readability score of forty (40) or more on the "Flesch" scale is required. A
certification that the viatical settlement provider has tested the contract and
forms under this section must be submitted with the contract for
approval.
E. At the request of the
viator, the viatical settlement provider must provide contracts and forms in
Braille, large print, or audiotape, or any other reasonable accommodation which
will allow the viator to fully comprehend the words and substance of the
form.
F. The commissioner may
withdraw approval of a previously approved contract form or related form. Any
order of the commissioner disapproving any such form or withdrawing a previous
approval shall state the grounds therefor and the particulars thereof in such
detail as reasonable to inform the viatical settlement provider thereof. Any
withdrawal of a previously approved form shall be effective at expiration of
such period as the commissioner shall in the notice prescribe.
G. Any request for a hearing relative to the
commissioner's withdrawal of approval of a form which has been received by the
commissioner prior to the effective date of such withdrawal shall stay such
action pending the hearing thereon.
H. The commissioner shall disapprove a
viatical settlement contract form if the contract or any provision contained
therein is unreasonable, contrary to the interests of the public, or otherwise
misleading or unfair to the policyholder, or contrary to the provisions of law
or this regulation.
I. Any viatical
settlement provider aggrieved by the disapproval or withdrawal of approval of
any form required to be filed under this section may file a written request for
a hearing within 30 days of the date of the notice of the disapproval or
withdrawal. Any hearing requested under this section shall be conducted
pursuant to chapter 25 of Title 3, V.S.A.
Section 13 Reporting Requirements
A. The commissioner may require each viatical
settlement provider and viatical settlement broker to report such information
at such intervals as the commissioner deems necessary.
B. On March 31 of each calendar year, each
viatical settlement provider licensed in this state shall make a report to the
commissioner as outlined in Attachment B to this regulation for the previous
calendar year.
Section 14
Separability Provision
Should a court hold any provision of this regulation invalid
in any circumstances, the invalidity shall not affect any other provisions or
circumstances of this regulation.
ATTACHMENT A NOTICE REGARDING VIATICATION OF YOUR LIFE
INSURANCE POLICY
Vermont law permits a terminally ill person to sell his or
her life insurance policy. This sale is referred to as "viatication" but for
ease of understanding, we will use the terms such as "sale", "sell", and "buy"
throughout this notice.
You should be aware of certain facts about viatication. You
should also know you have certain legal protections before you sell your life
insurance policy. This notice contains general information that will help you
make a decision. This notice also contains specific information about your
policy and the viatical settlement provider's offer. This information will help
you make a careful comparison of your life insurance policy benefits, and the
benefits you will receive if you sell your insurance policy.
We have tried to customize those parts of this notice that
apply to you. All of the sections should be checked with the appropriate
choice.
Part I : Some Basic Facts
About Your Life Insurance Policy
A. The
insurance policy you are proposing to sell is with the:
Company
Policy Number
B. The expected death benefit for this policy
is: ___
The expected death benefit is defined by the policy you are
considering selling, as of the date the viatical settlement contract is
signed.
C. __ Your expected
death benefit will remain stable for at least the next five years (If this
block is checked, you should skip to part D)
OR
__ Your expected death benefit will increase over the next
five years, if you do not sell the policy.
Current year death benefit: ___
Year __ death benefit: ___
Year __ death benefit: ___
Year __ death benefit: ___
Year __ death benefit: ___
Year __ death benefit: ___
D. __ Your policy does not have a cash
surrender value. (If this block is checked, you should skip to part 2, "The
Viatical Settlement Contract Proposal.")
OR
__ The current cash surrender value of your life insurance
policy is: ___
__ Because you have a loan on this policy, the net cash
surrender value is: ___
OR
__ Since you do not have a loan on this policy, the net cash
surrender value is the same as current cash surrender value.
E. If there is a net cash surrender value:
You can get a loan against the net cash surrender value from
the insurance company before you sell your policy. Interest would have to be
paid on the loan. In most instances, the interest you would have to pay on the
loan will be lower than the percentage that would be deducted from your
viatical settlement contract payment.
The amount that you would sell would be reduced to ___
OR
If you do not get a loan, the viatical settlement provider
will be required to give you 100% of the net cash surrender value in addition
to the viatical settlement proceeds.
Part 2. The Viatical Settlement Contract
Proposal
A. The viatical settlement provider
which is offering to buy your policy is:
Name: ___
Address: ___
Vermont License Number: ___
B. The contract you are considering entering
into would sell all or part of your death benefit
If part, the amount to be sold is: ___
C. The viatical settlement provider is
offering to buy your policy for (Amount)
This amount represents __% of the expected death
benefit
Important note: The amount the viatical settlement provider
is offering you depends on your remaining life expectancy, and is controlled by
Vermont state regulation. If you wish to know the life expectancy figure the
viatical settlement company is using and the minimum payment for that life
expectancy which is required by Vermont regulation, you have a right to that
information from the viatical settlement provider who completed this notice
form.
You should also know:
* Some of all of the proceeds of the viatical settlement may
be taxed under both income and estate tax laws. A personal tax advisor should
be consulted.
* The proceeds of the viatical settlement could be subject to
the claims of creditors;
* The receipt of proceeds from a viatical settlement may
adversely affect your eligibility for Medicaid or other government benefits or
entitlements. You should seek advice from the appropriate agencies.
Part 3. How Would
Viatication Work?
A. If you are using the
services of a viatical settlement broker that person will receive a fee of ___
This fee may not be greater than 2% of the amount the
viatical settlement provider pays you, and is paid by the viatical settlement
provider, not deducted from the amount you will receive.
Only a viatical settlement broker who is licensed in Vermont,
and who is acting on your behalf rather than in the interests of the viatical
settlement provider, may be paid a fee.
B. If decide to enter into the viatical
settlement contract, you have an unconditional right to cancel the contract
within seven business days of the date you and the viatical settlement provider
sign the contract. When you receive the contract, it will outline what you need
to do to cancel the viatical settlement contract.
If you were to die during this seven day period, the contract
would automatically be rescinded, and your beneficiaries would receive your
life insurance benefit.
C.
When you receive the contract, it will also tell you the date by which the
viatical settlement proceeds will be available to you and the source of the
proceeds, i.e. what bank or other trustee or escrow agent will be sending you
the money. The viatical settlement contract and transfer of the policy is null
and void if the viatical settlement provider fails to tender payment of the
proceeds as provided in the viatical settlement contract.
D. You will receive a wire transfer or
cashier's check for the proceeds of the contract. The payment will be in a lump
sum, but you may wish to make other arrangements for payment with the same (or
any other) bank, trustee, or escrow agent. The viatical settlement provider is
barred by Vermont law from offering you an installment payment plan, or other
annuity or settlement plan.
Part
4. Alternatives to Selling Your Life Insurance Policy
A. Some insurance policies have a provision
for an accelerated death benefit, which might be a good alternative to selling
your life insurance policy.
__ Your insurance policy does not have an accelerated death
benefit provision.
OR
__ Your insurance policy does have an accelerated death
benefit provision. You may wish to contact the insurance company to determine
what the accelerated death benefit provisions are and how much money would be
available to you.
The insurance company name is:
Address
Phone Number
B. You may wish to sell only the basic death
benefit and retain additional benefits or optional riders that are part of your
current policy.
__ You do not have any additional benefits or optional riders
attached to your policy.
(You may skip the rest of this section.)
OR
__ The following additional benefits or optional riders are
attached to your policy.
___
Important note: If you wish to retain any of these benefits
or riders, you will need to determine which those are, and negotiate an
adjustment to the amount the viatical settlement provider is offering you. The
viatical settlement provider has the right to adjust the offer they are making
to cover up the cost of the premiums they will pay to keep these additional
benefits or riders in force.
And, there are other options . . .
If you are thinking of entering into a viatical settlement
contract, the State of Vermont strongly encourages you to explore other options
before you make a decision. There may be services and support which could allow
you to meet your needs while keeping your life insurance policy in force for
your beneficiaries.
You can contact any of the following programs or agencies.
These agencies either administer programs you may be eligible for, or they can
refer you to other organizations that may be able to help you.
|
Medicaid (VT Dept of Social Welfare)
|
1-800-287-0589
|
|
Area Agencies on Aging
|
1-800-642-5119
|
|
Vermont AIDS Hotline
|
1-800-882-2437
|
|
Vermont Center for Independent Living
|
1-800-639-1522
|
|
American Cancer Society (Vermont
Division)
|
1-800-639-1888
|
If you have any questions about viatication, you may also
call the Vermont Department of Banking, Insurance, and Securities at (802)
828-3302.
Regulation 95-4 Viatical Settlements Attachment B Viatical
Settlement Provider Annual Report
Each viatical settlement provider licensed in the State of
Vermont, must submit this report to the Commissioner of Banking, Insurance and
Securities not later than March 31 of each calendar year.
Name of Licensed Viatical Settlement Provider: ___
Calendar Year Covered: ___
If the Viatical Settlement Provider has been licensed for
less than the full calendar year, please show the date of licensing, e.g.,
6/1/96 to 12/31/96.
Name, Address and Telephone No. of Contact Person for this
Report: ___
Part A: Statistical Information
1. Number of applications received,
viaticated and rejected:
|
Number AIDS/HIV Related
|
Cancer Related Other
|
|
|
Illnesses/Cond itions
|
|
Application Viaticated
|
|
Applications Rejected
|
|
Applications Pending
|
|
Total Applications
|
2.
Breakdown of life insurance policies viaticated by insurer and type:
For each answer, first show the type and the number of
policies viaticated. Then break down that total number by the paired
categories, e.g., how many of the total policies viaticated were individual
policies and how many were group policies, etc.
|
Insurer
|
Total
|
Individual
|
Term Life
|
Traditional
|
Fixed
|
Main Life Policy
|
|
Name
|
Number
|
Policies
|
Insurance
|
Life Insurance
|
Universal Fixed
|
|
|
|
Group
|
Whole Life
|
Universal
|
Variable
|
Rider on Main Policy
|
|
|
Policies
|
Insurance
|
Life Insurance
|
Universal Variable
|
|
|
|
Ind =
|
Term =
|
Trad =
|
Fixed =
|
Main =
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Fixed =
|
|
|
|
Grp =
|
Whole =
|
Univ =
|
Var =
|
Rider
|
|
|
|
|
|
|
=
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Var =
|
|
|
|
Ind =
|
Term =
|
Trad =
|
Fixed =
|
Main =
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Fixed =
|
|
|
|
Grp =
|
Whole =
|
Univ =
|
Var =
|
Rider
|
|
|
|
|
|
|
=
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Var =
|
|
|
|
Ind =
|
Term =
|
Trad =
|
Fixed =
|
Main =
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Fixed =
|
|
|
|
Grp =
|
Whole =
|
Univ =
|
Var =
|
Rider
|
|
|
|
|
|
|
=
|
|
|
|
|
|
Univ
|
|
|
|
|
|
|
Var =
|
|
3.
Financial Statistics:
a) Viatical settlement
contracts purchased/financed by the viatical settlement provider:
Number ___
Total settlement amount ___
Viatical settlement contracts which were resold or brokered
to independent investors:
Number ___
Total settlement amount ___
b) Viatical settlement provider portfolio
size ___
c) Amount of outside
borrowing ___
Part B: Individual Information
For each policy viaticated, provide the following
information:
Note: "VSC" means Viatical Settlement Contract
If the viator is not the person whose life is insured and who
has a life threatening illness or condition, provide the life expectancy and
date of death of the person whose life is insured and who has a life
threatening illness or condition.
DO NOT USE VIATORS' NAMES OR IDENTIFIERS WHICH CAN BE
CONNECTED TO INDIVIDUAL NAMES.
|
VSC Identifier
|
Date VSC Entered Into
|
Viator Life Expec- tancy at Time of
VSC
|
Value of Policy
|
Riders/Options Retained by
Viator
|
Amount Paid to Viator
|
Viator Date of Death
|
Premiums Paid to Maintain
Insurance
|
Rein-surer
|
|
|
|
Face Amt Death Benefit
|
|
|
|
|
|
|
|
|
CashS urrender
|
|
|
|
|
|
|
|
|
Outstanding Loans
|
|
|
|
|
|
DO NOT USE VIATORS' NAMES OR IDENTIFIERS WHICH CAN BE
CONNECTED TO INDIVIDUAL NAMES
|
VSC Identifier
|
Date VSC Entered Into
|
Viator Life Expec- tancy at Time of
VSC
|
Value of Policy
|
Riders/Options Retained by
Viator
|
Amount Paid to Viator
|
Viator Date of Death
|
Premiums Paid to Maintain
Insurance
|
Rein-surer
|
|
|
|
Face Amt Death Benefit
|
|
|
|
|
|
|
|
|
Cash Surrender
|
|
|
|
|
|
|
|
|
Outstanding Loans
|
|
|
|
|
|
|
VSC Identifier
|
Date VSC Entered Into
|
Viator Life Expec- tancy at Time of
VSC
|
Value of Policy
|
Riders/Options Retained by
Viator
|
Amount Paid to Viator
|
Viator Date of Death
|
Premiums Paid to Maintain
Insurance
|
Rein-surer
|
|
|
|
Face Amt Death Benefit
|
|
|
|
|
|
|
|
|
Cash Surrender
|
|
|
|
|
|
|
|
|
Outstanding Loans
|
|
|
|
|
|
