Capital Considers Viatical Measure

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.