Members of the District of Columbia are considering a bill that would regulate the secondary life insurance market.
The bill, which would create the Viatical Settlements Licensing Act of 2007, would regulate individuals and organizations involved with offering, soliciting, negotiating, procuring, or implementing viatical and life settlement arrangements.
The D.C. City Council has adjourned for the summer, but the Life Insurance Settlement Association, Orlando, is praising the bill and saying it hopes the council takes a serious look at the bill this fall.
“This bill is reflective of the district’s growing reputation as one of the nation’s leading financial services regulators,” says LISA Executive Director Doug Head.
The bill would permit an individual who holds a life producer license or has held a resident license in his or her home state for at least 1 year to operate as a viatical settlement broker without obtaining an additional license.
The bill also would permit an individual certified as an attorney, certified public accountant or financial planner to negotiate a viatical agreement on behalf of a viator without obtaining a license.
Entities – and individuals who were not attorneys, CPAs, financial planners or life insurance agents – would have to apply for licenses within 30 days of conducting viatical settlement transactions.
Licensed viatical settlement providers would have to make disclosures at the time of a transaction.
Providers would have to explain to the policyholder that a policyholder may have alternatives to selling a policy; that selling a policy could affect the policyholder’s eligibility for Medicaid or other government benefits; and that some of the income gained from selling a policy may be subject to taxation.
The bill would bar insurers from considering legal forms of financing when deciding whether to accept or decline a life insurance applicant, but an insurer could disclose that a stranger would end up holding the insured’s policy after a sale. The insurer also could disclose that selling a policy could affect the insured’s future insurability.
The bill would prohibit an insured from selling a policy for 2 years after buying the policy, unless the insured qualifies for specific exceptions.
The bill would address concerns about “stranger-owned life insurance” “by ensuring that applicants for insurance certify that they have insurable interest, have not pre-arranged a settlement, and have not been improperly induced into renting out their insurance capacity,” Head says.