After months of development since Gov. Schwarzenegger signed the California Life Settlement Act on Oct. 11, 2009, California has issued its “emergency rules” for the industry, which will take effect on July 29, 2010. Last-minute delays may interfere, but the consumers of California will at last be protected in settling their insurance policies.
But like allgood things, this issue full of potential problems if agents fail to clearly look at the Legislature’s intent and the details of the rules as developed. Here are a few noteworthy issues to pay attention to.
From now on, people who don’t have authority from California to act as life producers can’t act as brokers in the state unless they have an old-fashioned viatical settlement broker license (which very few have) or want to go through the fairly rigorous process of obtaining a viatical settlement broker license. Having a license as a producer is not enough, however; producers and agencies who wish to operate in this field for the benefit of their customers have to notify the department of insurance using form 2548.19 and pay a fee of $128.
The method for notifying the department is surprisingly straightforward (LIC 441-20N of the rules), but it does contain some clauses that state the professional insurance producer must certify that they are licensed and havereviewed 10113.1 through 10113.3 (the settlement law) and Title 10, Section 2548.1-2548.31 (the rule), and to say that they “thoroughly understand” the rule.
Given this complicated process, some may want to take the classroom route of obtaining a broker license. Anyone exercising California authority under the old law has a year to comply, but meanwhile, anybody who has not been licensed as a producer for at least one year in California should not engage in settlement transactions in California. Offering or attempting to negotiate a contract (successful or not) is the licensing trigger, so interested brokers should get those notification forms flowing and read the law and rule.
Business entities must, at a minimum, employ a producer with this authority and must themselves be registered as businesses in this space. They must file a business entity broker application (24548.23), supplemented by an endorsement of the agency of its personnel who are authorized and, themselves, qualified for this business.
Once a producer or agency reads the rule, they will find other issues.
Disclosures are required and the department offers a safe harbor in a document called the Life Settlement Licensee Disclosure to Life Settlement Applicant (Section 2548.27 of the rule) and the Life Settlement Broker Disclosure to Owner and Insured (Section 2548.28). These must be used together, or the broker must file antoher form of their own devise and have it approved . We recommend the default forms, which do many things to protect both the owner and the producer acting as a settlement broker – especially the exchange of information. These forms follow the laws as enacted.