SENATE Substitute for HOUSE BILL No

Document Sample
SENATE Substitute for HOUSE BILL No Powered By Docstoc
					       Session of 2008



                         SENATE Substitute for
                         HOUSE BILL No. 2110
                By Committee on Financial Institutions and Insurance

                                       3-25

10   AN ACT concerning viatical settlements; pertaining to stranger-origi-
11     nated life insurance; amending K.S.A. 2007 Supp. 40-5001, 40-5002,
12     40-5006, 40-5008 and 40-5010 and repealing the existing sections; also
13     repealing K.S.A. 2007 Supp. 40-5007, 40-5009 and 40-5012.
14
15   Be it enacted by the Legislature of the State of Kansas:
16      New Section 1. (a) (1) The commissioner may conduct an examina-
17   tion under this act of a licensee as often as the commissioner in such
18   commissioner’s sole discretion deems appropriate.
19      (2) For purposes of completing an examination of a licensee under
20   this act, the commissioner may examine or investigate any person, or the
21   business of any person, in so far as the examination or investigation, in
22   the sole discretion of the commissioner, is necessary or material to the
23   examination of the licensee.
24      (3) In lieu of an examination under this act of any foreign or alien
25   licensee licensed in this state, the commissioner, at the commissioner’s
26   discretion, may accept an examination report on the licensee as prepared
27   by the commissioner for the licensee’s state of domicile or port-of-entry
28   state.
29      (b) (1) Any person required to be licensed by this act shall for five
30   years retain copies of all:
31      (A) Proposed, offered or executed contracts, underwriting docu-
32   ments, policy forms, and applications from the date of the proposal, offer
33   or execution of the contract, whichever is later;
34      (B) all checks, drafts or other evidence and documentation related to
35   the payment, transfer, deposit or release of funds from the date of the
36   transaction; and
37      (C) all other records and documents related to the requirements of
38   this act.
39      (2) This section shall not relieve any person licensed under this act
40   of the obligation to produce these documents and provide copies thereof
41   to the commissioner after the retention period has expired if the person
42   has retained such documents.
43      (3) Records required to be retained by this section must be legible
     S Sub HB 2110
                                          2

 1   and complete and may be retained in paper, photograph, microprocess,
 2   magnetic, mechanical, electronic media or by any process that accurately
 3   reproduces or forms a durable medium for the reproduction of a record.
 4      (c) (1) Upon determining that an examination should be conducted,
 5   the commissioner shall issue an examination warrant appointing one or
 6   more examiners to perform the examination and instructing them as to
 7   the scope of the examination. The commissioner may also employ such
 8   other guidelines or procedures as the commissioner may deem
 9   appropriate.
10      (2) Every licensee or person from whom information is sought, its
11   officers, directors and agents shall provide to the examiners timely, con-
12   venient and free access at all reasonable hours at its offices to all books,
13   records, accounts, papers, documents, assets and computer or other re-
14   cordings relating to the property, assets, business and affairs of the li-
15   censee being examined. The officers, directors, employees and agents of
16   the licensee or person shall facilitate the examination and aid in the ex-
17   amination so far as it is in their power to do so. The refusal of a licensee,
18   by its officers, directors, employees or agents, to submit to examination
19   or to comply with any reasonable written request of the commissioner
20   shall be grounds for suspension or refusal of, or nonrenewal of any license
21   or authority held by the licensee to engage in the viatical settlement busi-
22   ness or other business subject to the commissioner’s jurisdiction. Any
23   proceedings for suspension, revocation or refusal of any license or au-
24   thority shall be conducted pursuant to the Kansas administrative proce-
25   dure act.
26      (3) The commissioner shall have the power to issue subpoenas, to
27   administer oaths and to examine under oath any person as to any matter
28   pertinent to the examination. Upon the failure or refusal of a person to
29   obey a subpoena, the commissioner may petition a court of competent
30   jurisdiction, and upon proper showing, the court may enter an order com-
31   pelling the witness to appear and testify or produce documentary evi-
32   dence. Failure to obey the court order shall be punishable as contempt
33   of court.
34      (4) When making an examination under this act, the commissioner
35   may retain attorneys, appraisers, independent actuaries, independent cer-
36   tified public accountants or other professionals and specialists as exam-
37   iners, the reasonable cost of which shall be borne by the licensee that is
38   the subject of the examination.
39      (5) Nothing contained in this act shall be construed to limit the com-
40   missioner’s authority to terminate or suspend an examination in order to
41   pursue other legal or regulatory action pursuant to the insurance laws of
42   this state. Findings of fact and conclusions made pursuant to any exami-
43   nation shall be prima facie evidence in any legal or regulatory action.
     S Sub HB 2110
                                          3

 1      (6) Nothing contained in this act shall be construed to limit the com-
 2   missioner’s authority to use and, if appropriate, to make public any final
 3   or preliminary examination report, any examiner or licensee work papers
 4   or other documents, or any other information discovered or developed
 5   during the course of any examination in the furtherance of any legal or
 6   regulatory action which the commissioner, in such commissioner’s sole
 7   discretion, may deem appropriate.
 8      (d) (1) Examination reports shall be comprised of only facts appear-
 9   ing upon the books, records or other documents of the licensee, its agents
10   or other persons examined, or as ascertained from the testimony of its
11   officers or agents or other persons examined concerning its affairs, and
12   such conclusions and recommendations as the examiners find reasonably
13   warranted from the facts.
14      (2) Not later than 60 days following completion of the examination,
15   the examiner in charge shall file with the commissioner a verified written
16   report of examination under oath. Upon receipt of the verified report,
17   the commissioner shall transmit the report to the licensee examined, to-
18   gether with a notice that shall afford the licensee examined a reasonable
19   opportunity of not more than 30 days to make a written submission or
20   rebuttal with respect to any matters contained in the examination report.
21      (3) In the event the commissioner determines that regulatory action
22   is appropriate as a result of an examination, the commissioner may initiate
23   any proceedings or actions provided by law.
24      (e) (1) Names and individual identification data for all viators shall
25   be considered private and confidential information and shall not be dis-
26   closed by the commissioner, unless required by law.
27      (2) Except as otherwise provided in this act, all examination reports,
28   working papers, recorded information, documents and copies thereof
29   produced by, obtained by or disclosed to the commissioner or any other
30   person in the course of an examination made under this act, or in the
31   course of analysis or investigation by the commissioner of the financial
32   condition or market conduct of a licensee shall be confidential by law and
33   privileged, shall not be subject to the provisions of the Kansas open re-
34   cords act, K.S.A. 45-215 et seq., and amendments thereto, shall not be
35   subject to subpoena, and shall not be subject to discovery or admissible
36   in evidence in any private civil action. The commissioner is authorized to
37   use the documents, materials or other information in the furtherance of
38   any regulatory or legal action brought as part of the commissioner’s of-
39   ficial duties.
40      (3) Documents, materials or other information, including, but not
41   limited to, all working papers, and copies thereof, in the possession or
42   control of the NAIC and its affiliates and subsidiaries shall be confidential
43   by law and privileged, shall not be subject to subpoena, and shall not be
     S Sub HB 2110
                                           4

 1   subject to discovery or admissible in evidence in any private civil action
 2   if they are:
 3      (A) Created, produced or obtained by or disclosed to the NAIC and
 4   its affiliates and subsidiaries in the course of assisting an examination
 5   made under this act, or assisting a commissioner in the analysis or inves-
 6   tigation of the financial condition or market conduct of a licensee; or
 7      (B) disclosed to the NAIC and its affiliates and subsidiaries under
 8   paragraph (4) of subsection (e) by the commissioner.
 9      For the purposes of paragraph (2) of subsection (e), the term ‘‘act’’
10   includes the law of another state or jurisdiction that is substantially similar
11   to this act.
12      (4) Neither the commissioner nor any person that received the doc-
13   uments, material or other information while acting under the authority
14   of the commissioner, including the NAIC and its affiliates and subsidia-
15   ries, shall be permitted to testify in any private civil action concerning any
16   confidential documents, materials or information subject to paragraph (1)
17   of subsection (e).
18      (5) In order to assist in the performance of the commissioner’s duties,
19   the commissioner may:
20      (A) Share documents, materials or other information, including the
21   confidential and privileged documents, materials or information subject
22   to paragraph (1) of subsection (e), with other state, federal and interna-
23   tional regulatory agencies, with the NAIC and its affiliates and subsidia-
24   ries, and with state, federal and international law enforcement authorities,
25   provided that the recipient agrees to maintain the confidentiality and
26   privileged status of the document, material, communication or other
27   information;
28      (B) receive documents, materials, communications or information,
29   including otherwise confidential and privileged documents, materials or
30   information, from the NAIC and its affiliates and subsidiaries, and from
31   regulatory and law enforcement officials of other foreign or domestic
32   jurisdictions, and shall maintain as confidential or privileged any docu-
33   ment, material or information received with notice or the understanding
34   that it is confidential or privileged under the laws of the jurisdiction that
35   is the source of the document, material or information; and
36      (C) enter into agreements governing sharing and use of information
37   consistent with this subsection.
38      (6) No waiver of any applicable privilege or claim of confidentiality
39   in the documents, materials or information shall occur as a result of dis-
40   closure to the commissioner under this section or as a result of sharing
41   as authorized in paragraph (4) of subsection (e).
42      (7) A privilege established under the law of any state or jurisdiction
43   that is substantially similar to the privilege established under this subsec-
     S Sub HB 2110
                                          5

 1   tion shall be available and enforced in any proceeding in, and in any court
 2   of, this state.
 3       (8) Nothing contained in this act shall prevent or be construed as
 4   prohibiting the commissioner from disclosing the content of an exami-
 5   nation report, preliminary examination report or results, or any matter
 6   relating thereto, to the commissioner of any other state or country, or to
 7   law enforcement officials of this or any other state or agency of the federal
 8   government at any time or to the NAIC, so long as such agency or office
 9   receiving the report or matters relating thereto agrees in writing to hold
10   it confidential and in a manner consistent with this act.
11       (9) The provisions of this subsection shall expire July 1, 2013, unless
12   the legislature acts to reenact such provisions. The provisions of this sec-
13   tion shall be reviewed by the legislature prior to July 1, 2013.
14       (f) (1) An examiner may not be appointed by the commissioner if the
15   examiner, either directly or indirectly, has a conflict of interest or is af-
16   filiated with the management of or owns a pecuniary interest in any per-
17   son subject to examination under this act. This section shall not be con-
18   strued to automatically preclude an examiner from being:
19       (A) A viator;
20       (B) an insured in a viaticated insurance policy; or
21       (C) a beneficiary in an insurance policy that is proposed to be
22   viaticated.
23       (2) Notwithstanding the requirements of this clause, the commis-
24   sioner may retain from time to time, on an individual basis, qualified
25   actuaries, certified public accountants or other similar individuals who are
26   independently practicing their professions, even though these persons
27   may from time to time be similarly employed or retained by persons
28   subject to examination under this act.
29       (g) Unless provided otherwise, all fees and procedures for examina-
30   tions under this act shall be in accordance with K.S.A. 40-223, and amend-
31   ments thereto.
32       (h) (1) No cause of action shall arise nor shall any liability be imposed
33   against the commissioner, the commissioner’s authorized representatives
34   or any examiner appointed by the commissioner for any statements made
35   or conduct performed in good faith while carrying out the provisions of
36   this act.
37       (2) No cause of action shall arise, nor shall any liability be imposed
38   against any person for the act of communicating or delivering information
39   or data to the commissioner or the commissioner’s authorized represen-
40   tative or examiner pursuant to an examination made under this act, if the
41   act of communication or delivery was performed in good faith and without
42   fraudulent intent or the intent to deceive. This paragraph does not ab-
43   rogate or modify in any way any common law or statutory privilege or
     S Sub HB 2110
                                          6

 1   immunity heretofore enjoyed by any person identified in paragraph (1).
 2      (3) A person identified in paragraph (1) or (2) shall be entitled to an
 3   award of attorney fees and costs if such person is the prevailing party in
 4   a civil cause of action for libel, slander or any other relevant tort arising
 5   out of activities in carrying out the provisions of this act and the party
 6   bringing the action was not substantially justified in doing so. For pur-
 7   poses of this section a proceeding is ‘‘substantially justified’’ if it had a
 8   reasonable basis in law or fact at the time that it was initiated.
 9      (i) The commissioner may investigate suspected fraudulent viatical
10   settlement acts and persons engaged in the business of viatical
11   settlements.
12      New Sec. 2. (a) (1) A viatical settlement provider entering into a
13   viatical settlement contract shall first obtain:
14      (A) If the viator is the insured, a written statement from a licensed
15   attending physician that the viator is of sound mind and under no con-
16   straint or undue influence to enter into a viatical settlement contract; and
17      (B) a document in which the insured consents to the release of such
18   insured’s medical records to a viatical settlement provider, viatical settle-
19   ment broker and the insurance company that issued the life insurance
20   policy covering the life of the insured.
21      (2) Within 20 days after a viator executes documents necessary to
22   transfer any rights under an insurance policy or within 20 days of entering
23   any agreement, option, promise or any other form of understanding, ex-
24   pressed or implied, to viaticate the policy, the viatical settlement provider
25   shall give written notice to the insurer that issued that insurance policy
26   that the policy has or will become a viaticated policy. The notice shall be
27   accompanied by the documents required by paragraph (3).
28      (3) The viatical settlement provider shall deliver a copy of the medical
29   release required under clause (B) of paragraph (1), a copy of the viator’s
30   application for the viatical settlement contract, the notice required under
31   paragraph (2) and a request for verification of coverage to the insurer
32   that issued the life policy that is the subject of the viatical transaction.
33   The form for verification shall be developed by the commissioner.
34      (4) The insurer shall respond to a request for verification of coverage
35   submitted on an approved form by a viatical settlement provider within
36   30 calendar days of the date the request is received and shall indicate
37   whether, based on the medical evidence and documents provided, the
38   insurer intends to pursue an investigation at this time regarding the va-
39   lidity of the insurance contract.
40      (5) Prior to or at the time of execution of the viatical settlement con-
41   tract, the viatical settlement provider shall obtain a witnessed document
42   in which the viator consents to the viatical settlement contract, represents
43   that the viator has a full and complete understanding of the viatical set-
     S Sub HB 2110
                                          7

 1   tlement contract, that such viator has a full and complete understanding
 2   of the benefits of the life insurance policy, acknowledges that such viator
 3   is entering into the viatical settlement contract freely and voluntarily and,
 4   for persons with a terminal or chronic illness or condition, acknowledges
 5   that the insured has a terminal or chronic illness and that the terminal or
 6   chronic illness or condition was diagnosed after the life insurance policy
 7   was issued.
 8      (6) If a viatical settlement broker performs any of these activities
 9   required of the viatical settlement provider, the viatical settlement pro-
10   vider is deemed to have fulfilled the requirements of this section.
11      (b) (1) All medical information solicited or obtained by any licensee
12   shall be subject to the applicable provisions of state law relating to con-
13   fidentiality of medical information.
14      (2) The provisions of this subsection shall expire July 1, 2013, unless
15   the legislature acts to reenact such provisions. The provisions of this sec-
16   tion shall be reviewed by the legislature prior to July 1, 2013.
17      (c) All viatical settlement contracts entered into in this state shall
18   provide the viator with an unconditional right to rescind the contract for
19   at least 15 calendar days from the receipt of the viatical settlement pro-
20   ceeds. If the insured dies during the rescission period, the viatical settle-
21   ment contract shall be deemed to have been rescinded, subject to repay-
22   ment to the viatical settlement provider or purchaser of all viatical
23   settlement proceeds, and any premiums, loans and loan interest that have
24   been paid by the viatical settlement provider or purchaser.
25      (d) The viatical settlement provider shall instruct the viator to send
26   the executed documents required to effect the change in ownership, as-
27   signment or change in beneficiary directly to the independent escrow
28   agent. Within three business days after the date the escrow agent receives
29   the document, or from the date the viatical settlement provider receives
30   the documents, if the viator erroneously provides the documents directly
31   to the provider, the provider shall pay or transfer the proceeds of the
32   viatical settlement into an escrow or trust account maintained in a state
33   or federally-chartered financial institution whose deposits are insured by
34   the federal deposit insurance corporation. Upon payment of the settle-
35   ment proceeds into the escrow account, the escrow agent shall deliver
36   the original change in ownership, assignment or change in beneficiary
37   forms to the viatical settlement provider or related provider trust. Upon
38   the escrow agent’s receipt of the acknowledgment of the properly com-
39   pleted transfer of ownership, assignment or designation of beneficiary
40   from the insurance company, the escrow agent shall pay the settlement
41   proceeds to the viator.
42      (e) Failure to tender consideration to the viator for the viatical set-
43   tlement contract within the time disclosed pursuant to clause (6) of sub-
     S Sub HB 2110
                                          8

 1   section (a) of K.S.A. 2007 Supp. 40-5008, and amendments thereto, ren-
 2   ders the viatical settlement contract voidable by the viator for lack of
 3   consideration until the time consideration is tendered to and accepted by
 4   the viator.
 5      (f) Contacts with the insured for the purpose of determining the
 6   health status of the insured by the viatical settlement provider or viatical
 7   settlement broker after the viatical settlement has occurred shall only be
 8   made by the viatical settlement provider or viatical settlement broker
 9   licensed in this state or its authorized representatives and shall be limited
10   to once every three months for insureds with a life expectancy of more
11   than one year, and to no more than once per month for insureds with a
12   life expectancy of one year or less. The viatical settlement provider or
13   viatical settlement broker shall explain the procedure for these contacts
14   at the time the viatical settlement contract is entered into. The limitations
15   set forth in this subsection shall not apply to any contacts with an insured
16   for reasons other than determining the insured’s health status. Viatical
17   settlement providers and viatical settlement brokers shall be responsible
18   for the actions of their authorized representatives.
19      New Sec. 3. (a) No person shall:
20      (1) Commit a fraudulent viatical settlement act.
21      (2) Knowingly or intentionally interfere with the enforcement of any
22   provision of this act or any investigation of suspected or actual violations
23   of this act.
24      (3) Knowingly or intentionally permit any person, employed by a per-
25   son in the business of viatical settlements, convicted of a felony involving
26   dishonesty or breach of trust to participate in the business of viatical
27   settlements. No person in the business of viatical settlements shall know-
28   ingly or intentionally permit any person convicted of a felony involving
29   dishonesty or breach of trust to participate in the business of viatical
30   settlements.
31      (4) Issue, solicit, market or otherwise promote the purchase of an
32   insurance policy for the sole purpose of or with the primary emphasis on
33   settling the policy.
34      (5) Employ any device, scheme or artifice in violation of K.S.A. 40-
35   450, and amendments thereto, in the solicitation, application or issuance
36   of a life insurance policy.
37      (6) Receive, when providing premium financing, any proceeds, fees
38   or other consideration from the policy or owner of the policy that are in
39   addition to the amounts required to pay the principal, interest and costs
40   or expenses incurred by the lender or borrower related to policy premi-
41   ums paid under the premium financing agreement, except for the event
42   of a default unless either the default on such loan or the transfer of the
43   policy in connection with such default occurs pursuant to an agreement
     S Sub HB 2110
                                          9

 1   or understanding with any other person for the purpose of evading reg-
 2   ulation under this act.
 3      (b) (1) Viatical settlements, contracts and applications for viatical set-
 4   tlements, regardless of the form of transmission, shall contain the follow-
 5   ing statement or a substantially similar statement:
 6      ‘‘Any person who knowingly presents false information in an application
 7   for insurance or viatical settlement contract is guilty of a crime and may
 8   be subject to fines and confinement in prison.’’
 9      (2) The lack of a statement as required in paragraph (1) shall not
10   constitute a defense in any prosecution for a fraudulent viatical settlement
11   act.
12      (c) (1) Any person engaged in the business of viatical settlements
13   having knowledge or a reasonable belief that a fraudulent viatical settle-
14   ment act is being, will be or has been committed shall provide to the
15   commissioner the information required by, and in a manner prescribed
16   by, the commissioner.
17      (2) Any other person having knowledge or a reasonable belief that a
18   fraudulent viatical settlement act is being, will be or has been committed
19   may provide to the commissioner the information required by, and in a
20   manner prescribed by, the commissioner.
21      (d) (1) No civil liability shall be imposed on and no cause of action
22   shall arise from a person’s furnishing information concerning suspected,
23   anticipated or completed fraudulent viatical settlement acts or suspected
24   or completed fraudulent insurance acts, if the information is provided to
25   or received from:
26      (A) The commissioner or the commissioner’s employees, agents or
27   representatives;
28      (B) federal, state or local law enforcement or regulatory officials or
29   their employees, agents or representatives;
30      (C) any person involved in the prevention and detection of fraudulent
31   viatical settlement acts or that person’s agents, employees or
32   representatives;
33      (D) the NAIC, national association of securities dealers, the North
34   American securities administrators association, or their employees, agents
35   or representatives, or other regulatory body overseeing life insurance,
36   viatical settlements, securities or investment fraud; or
37      (E) the life insurer that issued the life insurance policy covering the
38   life of the insured.
39      (2) Paragraph (1) shall not apply to statements made with actual mal-
40   ice. In an action brought against a person for filing a report or furnishing
41   other information concerning a fraudulent viatical settlement act or a
42   fraudulent insurance act, the party bringing the action shall plead specif-
43   ically any allegation that paragraph (1) does not apply because the person
     S Sub HB 2110
                                         10

 1   filing the report or furnishing the information did so with actual malice.
 2       (3) A person identified in paragraph (1) shall be entitled to an award
 3   of attorney fees and costs if such person is the prevailing party in a civil
 4   cause of action for libel, slander or any other relevant tort arising out of
 5   activities in carrying out the provisions of this act and the party bringing
 6   the action was not substantially justified in doing so. For purposes of this
 7   section a proceeding is substantially justified if it had a reasonable basis
 8   in law or fact at the time that it was initiated.
 9       (4) This section does not abrogate or modify common law or statutory
10   privileges or immunities enjoyed by a person described in paragraph (1).
11       (e) (1) The documents and evidence provided pursuant to subsection
12   (d) of this section or obtained by the commissioner in an investigation of
13   suspected or actual fraudulent viatical settlement acts shall be privileged
14   and confidential and shall not be a public record and shall not be subject
15   to discovery or subpoena in a civil or criminal action.
16       (2) Paragraph (1) of this subsection shall not prohibit release by the
17   commissioner of documents and evidence obtained in an investigation of
18   suspected or actual fraudulent viatical settlement acts:
19       (A) In administrative or judicial proceedings to enforce laws admin-
20   istered by the commissioner;
21       (B) to federal, state or local law enforcement or regulatory agencies,
22   to an organization established for the purpose of detecting and preventing
23   fraudulent viatical settlement acts or to the NAIC;
24       (C) at the discretion of the commissioner or pursuant to a court order,
25   to a person in the business of viatical settlements that is aggrieved by a
26   fraudulent viatical settlement act; or
27       (D) at the discretion of the commissioner or pursuant to a court or-
28   der, to a person that is aggrieved by a fraudulent viatical settlement act.
29       (3) Release of documents and evidence under subparagraphs (A) and
30   (B) of paragraph (2) of this subsection does not abrogate or modify the
31   privilege granted in paragraph (1).
32       (4) The provisions of this subsection shall expire July 1, 2013, unless
33   the legislature acts to reenact such provisions. The provisions of this sec-
34   tion shall be reviewed by the legislature prior to July 1, 2013.
35       (f) This act shall not:
36       (1) Preempt the authority or relieve the duty of other law enforce-
37   ment or regulatory agencies to investigate, examine and prosecute sus-
38   pected violations of law;
39       (2) prevent or prohibit a person from disclosing voluntarily infor-
40   mation concerning viatical settlement fraud to a law enforcement or reg-
41   ulatory agency other than the insurance department; or
42       (3) limit the powers granted elsewhere by the laws of this state to the
43   commissioner or an insurance fraud unit to investigate and examine pos-
     S Sub HB 2110
                                         11

 1   sible violations of law and to take appropriate action against wrongdoers.
 2      (g) Viatical settlement providers and viatical settlement brokers shall
 3   have in place antifraud initiatives reasonably calculated to detect, prose-
 4   cute and prevent fraudulent viatical settlement acts. At the discretion of
 5   the commissioner, the commissioner may order, or a licensee may request
 6   and the commissioner may grant, such modifications of the following
 7   required initiatives as necessary to ensure an effective antifraud program.
 8   The modifications may be more or less restrictive than the required ini-
 9   tiatives so long as the modifications reasonably may be expected to ac-
10   complish the purpose of this section. Antifraud initiatives shall include:
11      (1) Fraud investigators, who may be viatical settlement providers or
12   viatical settlement broker employees or independent contractors; and
13      (2) an antifraud plan, which shall be submitted to the commissioner.
14   The antifraud plan shall include, but not be limited to:
15      (A) A description of the procedures for detecting and investigating
16   possible fraudulent viatical settlement acts and procedures for resolving
17   material inconsistencies between medical records and insurance
18   applications;
19      (B) a description of the procedures for reporting possible fraudulent
20   viatical settlement acts to the commissioner;
21      (C) a description of the plan for antifraud education and training of
22   underwriters and other personnel; and
23      (D) a description or chart outlining the organizational arrangement
24   of the antifraud personnel who are responsible for the investigation and
25   reporting of possible fraudulent viatical settlement acts and investigating
26   unresolved material inconsistencies between medical records and insur-
27   ance applications; and
28      (3) antifraud plans submitted to the commissioner shall be privileged
29   and confidential and shall not be a public record and shall not be subject
30   to discovery or subpoena in a civil or criminal action.
31      Sec. 4. K.S.A. 2007 Supp. 40-5001 is hereby amended to read as
32   follows: 40-5001. K.S.A. 2007 Supp. 40-5001 through 40-5016 inclusive,
33   and sections 1, 2 and 3, and amendments thereto, may be cited as the
34   viatical settlements act of 2002.
35      Sec. 5. K.S.A. 2007 Supp. 40-5002 is hereby amended to read as
36   follows: 40-5002. As used in this act, the following words and phrases
37   shall have the meanings ascribed to them in this section:
38      (a) ‘‘Advertising’’ means any written, electronic or printed commu-
39   nication or any communication by means of recorded telephone messages
40   or transmitted on radio, television, the internet or similar communications
41   media, including film strips, motion pictures and videos, published, dis-
42   seminated, circulated or placed before the public, directly or indirectly,
43   for the purpose of creating an interest in or inducing a person to sell a
     S Sub HB 2110
                                          12

 1   life insurance policy pursuant to a viatical settlement contract.
 2      (b) ‘‘Business of viatical settlements’’ means an activity involved in,
 3   but not limited to, offering, soliciting, negotiating, procuring, effectua-
 4   tion, purchasing, investing, financing, monitoring, tracking, underwriting,
 5   selling, transferring, assigning, pledging or hypothecating any viatical set-
 6   tlement contract.
 7      (c) ‘‘Chronically ill’’ means:
 8      (1) Being unable to perform at least two activities of daily living in-
 9   cluding eating, toileting, transferring, bathing, dressing, continence or
10   such other activity as determined by rules and regulations adopted by the
11   commissioner; or
12      (2) requiring substantial supervision to protect the individual from
13   threats to health and safety due to severe cognitive impairment.
14      (d) ‘‘Commissioner’’ means the commissioner of insurance.
15      (e) ‘‘Financing entity’’ means any underwriter, placement agent,
16   lender, purchaser of securities, purchaser of a policy or certificate from
17   a viatical settlement provider, credit enhancer or any entity that has a
18   direct ownership in a policy or certificate which is the subject of a viatical
19   settlement contract, but:
20      (1) Whose principal activity related to the transaction is providing
21   funds to effect the viatical settlement or purchase of one or more viati-
22   cated policies; and
23      (2) who has an agreement in writing with one or more licensed vi-
24   atical settlement providers to finance the acquisition of viatical settlement
25   contracts.
26      Financing entity shall not include any nonaccredited investor or viatical
27   settlement purchaser.
28      (f) ‘‘Fraudulent viatical settlement act’’ means and includes:
29      (1) Any act or omission committed by any person who, knowingly or
30   with intent to defraud, for the purpose of depriving another of property
31   or for pecuniary gain, commits, or permits such person’s employees or
32   agents to engage in acts including:
33      (A) Presenting, causing to be presented or preparing with knowledge
34   or belief that it will be presented to or by a viatical settlement provider,
35   viatical settlement broker, viatical settlement purchaser, financing entity,
36   insurer, insurance producer or any other person, false material informa-
37   tion, or concealing material information, as part of, in support of or con-
38   cerning a fact material to one or more of the following:
39      (i) An application for the issuance of a viatical settlement contract or
40   insurance policy;
41      (ii) the underwriting of a viatical settlement contract or insurance
42   policy;
43      (iii) a claim for payment or benefit pursuant to a viatical settlement
     S Sub HB 2110
                                           13

 1   contract or insurance policy;
 2      (iv) premiums paid on an insurance policy;
 3      (v) payments and changes in ownership or beneficiary made in ac-
 4   cordance with the terms of a viatical settlement contract or insurance
 5   policy;
 6      (vi) the reinstatement or conversion of an insurance policy;
 7      (vii) in the solicitation, offer, effectuation or sale of a viatical settle-
 8   ment contract or insurance policy;
 9      (viii) the issuance of written evidence of viatical settlement contract
10   or insurance; or
11      (ix) a financing transaction.
12      (B) Employing any device, scheme or artifice to defraud related to
13   viaticated policies;
14      (2) any act done or committed in the furtherance of a fraud or to
15   prevent the detection of a fraud any person commits or permits its em-
16   ployees or its agents to:
17      (A) Remove, conceal, alter, destroy or sequester from the commis-
18   sioner the assets or records of a licensee or other person engaged in the
19   business of viatical settlements;
20      (B) misrepresent or conceal the financial condition of a licensee, fi-
21   nancing entity, insurer or other person;
22      (C) transact the business of viatical settlements in violation of laws
23   requiring a license, certificate of authority or other legal authority for the
24   transaction of the business of viatical settlements; or
25      (D) file with the commissioner or the chief insurance regulatory of-
26   ficial of another jurisdiction a document containing false information or
27   otherwise conceals information about a material fact from the
28   commissioner;
29      (3) commit embezzlement, theft, misappropriation or conversion of
30   moneys, funds, premiums, credits or other property of a viatical settle-
31   ment provider, insurer, insured, viator, insurance policy owner or any
32   other person engaged in the business of viatical settlements or insurance;
33   or
34      (4) recklessly entering into, brokering, otherwise dealing enter into,
35   broker or otherwise deal in a viatical settlement contract, the subject of
36   which is a life insurance policy that was obtained by presenting false
37   information concerning any fact material to the policy or by concealing,
38   for the purpose of misleading another, information concerning any fact
39   material to the policy, where the viator or the viator’s agent intended to
40   defraud the policy’s issuer. ‘‘Recklessly’’ means engaging in the conduct
41   in conscious and clearly unjustifiable disregard of a substantial likelihood
42   of the existence of the relevant facts or risks, such disregard involving a
43   gross deviation from acceptable standards of conduct;
     S Sub HB 2110
                                           14

 1      (5) stranger-originated life insurance; or
 2      (6) attempting to commit, assisting, aiding or abetting in the com-
 3   mission of, or conspiracy to commit the acts or omissions specified in this
 4   subsection. attempt to commit, assist, aid or abet in the commission of,
 5   or conspiracy to commit any act or omission specified in this subsection;
 6   or
 7      (7) fail to disclose to the insurer when requested by the insurer that
 8   the prospective insured has undergone a life expectancy evaluation by any
 9   person or entity other than the insurer or any authorized representative
10   of such insurer in connection with the issuance of the policy.
11      (g) ‘‘NAIC’’ means the national association of insurance
12   commissioners.
13      (h) ‘‘Person’’ means a natural person or a legal entity, including, but
14   not limited to, an individual, partnership, limited liability company, as-
15   sociation, trust or corporation.
16      (i) ‘‘Policy’’ means an individual or group policy, group certificate,
17   contract or arrangement of life insurance affecting the rights of a resident
18   of this state or bearing a reasonable relation to this state, regardless of
19   whether delivered or issued for delivery in this state.
20      (j) ‘‘Related provider trust’’ means a titling trust or other trust estab-
21   lished by a licensed viatical settlement provider or a financing entity for
22   the sole purpose of holding the ownership or beneficial interest in pur-
23   chased policies in connection with a financing transaction. The trust shall
24   have a written agreement with the licensed viatical settlement provider
25   under which the licensed viatical settlement provider is responsible for
26   ensuring compliance with all statutory and regulatory requirements and
27   under which the trust agrees to make all records and files related to
28   viatical settlement transactions available to the commissioner as if those
29   records and files were maintained directly by the licensed viatical settle-
30   ment provider.
31      (k) ‘‘Special purpose entity’’ means any corporation, partnership,
32   trust, limited liability company or other similar entity formed solely to
33   provide, either directly or indirectly, access to institutional capital markets
34   for a financing entity or licensed viatical settlement provider.
35      (l) ‘‘Stranger-originated life insurance’’ means an act, practice or ar-
36   rangement to initiate a life insurance policy for the benefit of a third party
37   investor who, at the time of policy origination, has no insurable interest
38   in the insured under K.S.A. 40-450 and amendments thereto. Stranger-
39   originated life insurance practices include, but are not limited to, cases in
40   which life insurance is purchased with resources or guarantees from or
41   through a person or entity who, at the time of policy inception, could not
42   lawfully initiate the policy, and where, at the time of policy inception,
43   there is an arrangement or agreement to directly or indirectly transfer
     S Sub HB 2110
                                          15

 1   the ownership of the policy or the policy benefits, or both, to a third party.
 2   Any trust that is created to give the appearance of insurable interest, and
 3   is used to initiate one or more policies for investors, violates K.S.A. 40-
 4   450, and amendments thereto, and the prohibition against wagering on
 5   human life. Stranger-originated life insurance arrangements do not in-
 6   clude those practices set forth in paragraph (3) of subsection (o).
 7      (m) ‘‘Terminally ill’’ means having an illness or sickness that can rea-
 8   sonably be expected to result in death in 24 months or less.
 9      (m) (n) ‘‘Viatical settlement broker’’ means a person that on behalf
10   of a viator and for a fee, commission or other valuable consideration offers
11   or attempts to negotiate viatical settlement contracts between a viator and
12   one or more viatical settlement providers. Notwithstanding the manner
13   in which the viatical settlement broker is compensated, a viatical settle-
14   ment broker is deemed to represent only the viator and owes a fiduciary
15   duty to the viator to act according to the viator’s instructions and in the
16   best interest of the viator. The term does not include an attorney, certified
17   public accountant or a financial planner accredited by a nationally rec-
18   ognized accreditation agency, who is retained to represent the viator and
19   whose compensation is not paid directly or indirectly by the viatical set-
20   tlement provider or purchaser.
21      (n) (o) (1) ‘‘Viatical settlement contract’’ means a written agreement
22   establishing the terms under which compensation or anything of value
23   will be paid, which compensation or value is less than the expected death
24   benefit of the insurance policy or certificate, in return for the viator’s
25   assignment, transfer, sale, devise or bequest of the death benefit or own-
26   ership of any portion of the insurance policy or certificate of insurance.
27   A viatical settlement contract also includes a contract for a loan or other
28   financing transaction with a viator secured primarily by an individual or
29   group life insurance policy, other than a loan by a life insurance company
30   pursuant to the terms of the life insurance contract, or a loan secured by
31   the cash value of a policy. A viatical settlement contract includes an agree-
32   ment with a viator to transfer ownership or change the beneficiary des-
33   ignation at a later date regardless of the date that compensation is paid
34   to the viator. between a viator and a viatical settlement provider estab-
35   lishing the terms under which compensation or anything of value is or
36   will be paid, which compensation or value is less than the expected death
37   benefits of the policy, in return for the viator’s present or future assign-
38   ment, transfer, sale, devise or bequest of the death benefit or ownership
39   of any portion of the insurance policy or certificate of insurance, except
40   that the minimum value for a viatical settlement contract shall be greater
41   than the cash surrender value or accelerated death benefit available at
42   the time of an application for a viatical settlement contract.
43      (2) Viatical settlement contract also includes:
     S Sub HB 2110
                                         16

 1      (A) The transfer for compensation or value of ownership or beneficial
 2   interest in a trust or other entity that owns such policy if the trust or
 3   other entity was formed or availed of for the principal purpose of acquir-
 4   ing one or more life insurance contracts, which life insurance contract
 5   insures the life of a person residing in this state.
 6      (B) A written agreement for a loan or other lending transaction, se-
 7   cured primarily by an individual or group life insurance policy, or a
 8   premium finance loan made for a policy on or before the date of issuance
 9   of the policy, where:
10      (i) The viator receives on the date of the premium finance loan a
11   guarantee of a future viatical settlement value of the policy; or
12      (ii) the viator agrees on the date of the premium finance loan to sell
13   the policy or any portion of its death benefit on any date following the
14   issuance of the policy.
15      (3) Viatical settlement contract does not include:
16      (A) A policy loan by a life insurance company pursuant to the terms
17   of the life insurance policy or accelerated death provisions contained in
18   the life insurance policy, whether issued with the original policy or as a
19   rider.
20      (B) Loan proceeds that are used solely to pay:
21      (i) Premiums for the policy; and
22      (ii) any costs or expenses incurred by the lender or the borrower in
23   connection with the financing.
24      (C) A premium finance loan or any loan made by a bank or other
25   licensed financial institution, provided that neither default on such loan
26   nor the transfer of the policy in connection with such default is pursuant
27   to an agreement or understanding with any other person for the purpose
28   of evading regulation under this act.
29      (D) A collateral assignment of a life insurance policy by a viator.
30      (E) A loan made by a lender that does not violate the Kansas insur-
31   ance premium finance company act, K.S.A. 40-2601 et seq., and acts
32   amendatory thereof or supplemental thereto, unless the premium finance
33   loan is described in subparagraph (B) of paragraph (2).
34      (F) An agreement where all the parties:
35      (i) Are closely related to the insured by blood or law; or
36      (ii) have a lawful substantial economic interest in the continued life,
37   health and bodily safety of the person insured, or are trusts established
38   primarily for the benefit of such parties;
39      (G) any designation, consent or agreement by an insured who is an
40   employee of an employer in connection with the purchase by the em-
41   ployer, or trust established by the employer, of life insurance on the life
42   of the employee;
43      (H) a bona fide business succession planning arrangement between
     S Sub HB 2110
                                          17

 1   one or more:
 2      (i) Shareholders in a corporation or between a corporation and one
 3   or more of its shareholders or one or more trusts established by its
 4   shareholders;
 5      (ii) partners in a partnership or between a partnership and one or
 6   more of its partners or one or more trusts established by its partners; or
 7      (iii) members in a limited liability company or between a limited li-
 8   ability company and one or more of its members or one or more trusts
 9   established by its members;
10      (I) an agreement entered into by a service recipient, or a trust estab-
11   lished by the service recipient, and a service provider, or a trust estab-
12   lished by the service provider, who performs significant services for the
13   service recipient’s trade or business; or
14      (J) any other contract, transaction or arrangement exempted from the
15   definition of viatical settlement contract by the commissioner based on a
16   determination that the contract, transaction or arrangement is not of the
17   type intended to be regulated by this act.
18      (o) (p) ‘‘Viatical settlement provider’’ means a person, other than a
19   viator, who enters into or effectuates a viatical settlement contract. Vi-
20   atical settlement provider does not include:
21      (1) A bank, savings bank, savings and loan association, credit union
22   or other licensed lending institution that takes an assignment of a life
23   insurance policy as collateral for a loan;
24      (2) the issuer of a life insurance policy providing accelerated benefits
25   under K.S.A. 40-401, and amendments thereto, and pursuant to the
26   contract;
27      (3) an authorized or eligible insurer that provides stop loss coverage
28   to a viatical settlement provider, purchaser, financing entity, special pur-
29   pose entity or related provider trust;
30      (4) a natural person who enters into or effectuates no more than one
31   agreement in a calendar year for the transfer of life insurance policies for
32   any value less than the expected death benefit;
33      (5) a financing entity;
34      (6) a special purpose entity;
35      (7) a related provider trust;
36      (8) a viatical settlement purchaser; or
37      (9) an accredited investor or qualified institutional buyer as such term
38   is defined respectively in regulation D, rule 501 or rule 144A of the fed-
39   eral securities act of 1933, as in effect upon the effective date of this act,
40   and who purchases a viaticated policy from a viatical settlement provider.
41      (p) (q) ‘‘Viator’’ means the owner of a life insurance policy or a cer-
42   tificate holder under a group policy who enters or seeks to enter into a
43   viatical settlement contract. For the purposes of this act, a viator shall not
     S Sub HB 2110
                                           18

 1   be limited to an owner of a life insurance policy or a certificate holder
 2   under a group policy insuring the life of an individual with a terminal or
 3   chronic illness or condition except where specifically addressed. Viator
 4   shall not include:
 5      (1) A licensee under this act;
 6      (2) an accredited investor or a qualified institutional buyer as such
 7   term is defined respectively in regulation D, rule 501 or in rule 144A of
 8   the federal securities act of 1933, as in effect upon the effective date of
 9   this act;
10      (3) a financing entity;
11      (4) a special purpose entity; or
12      (5) a related provider trust.
13      (q) (r) ‘‘Viaticated policy’’ means a life insurance policy or certificate
14   that has been acquired by a viatical settlement provider pursuant to a
15   viatical settlement contract.
16      (r) (s) ‘‘Viatical settlement purchaser’’ means a person who gives a
17   sum of money as consideration for a life insurance policy or an interest
18   in the death benefits of a life insurance policy, or a person who owns or
19   acquires or is entitled to a beneficial interest in a trust that owns a viatical
20   settlement contract or is the beneficiary of a life insurance policy that has
21   been or will be the subject of a viatical settlement contract, for the pur-
22   pose of deriving an economic benefit. Viatical settlement purchaser shall
23   not include:
24      (1) A licensee under this act;
25      (2) an accredited investor or qualified institutional buyer as such term
26   is defined respectively in regulation D, rule 501 or rule 144A of the fed-
27   eral securities act of 1933, as in effect upon the effective date of this act;
28      (3) a financing entity;
29      (4) a special purpose entity; or
30      (5) a related provider trust.
31      Sec. 6. K.S.A. 2007 Supp. 40-5006 is hereby amended to read as
32   follows: 40-5006. (a) (1) Each licensee shall file with the commissioner
33   on or before March 1 of each year an annual statement containing such
34   information as the commissioner may prescribe by rule and regulation.
35      (2) In addition to any other requirements, for any policy settled
36   within five years of such policy’s date of issuance, the annual statement
37   shall specify the total number, aggregate face amount and life settlement
38   proceeds of policies settled during the immediately preceding calendar
39   year, together with a break down of the information by policy issue year.
40   Such information shall be limited to only those transactions where the
41   insured is a resident of this state and shall not include individual trans-
42   action data regarding the business of viatical settlements or information
43   that there is a reasonable basis to believe could be used to identify the
     S Sub HB 2110
                                          19

 1   policy owner or the insured.
 2      (b) Except as otherwise allowed or required by law, a viatical settle-
 3   ment provider, viatical settlement broker, insurance company, insurance
 4   producer, information bureau, rating agency or company, or any other
 5   person with actual knowledge of an insured’s identity, shall not disclose
 6   that identity as an insured, or the insured’s financial or medical infor-
 7   mation to any other person unless the disclosure is:
 8      (1) Necessary to effect a viatical settlement between the viator and a
 9   viatical settlement provider and the viator and insured have provided
10   prior written consent to the disclosure;
11      (2) provided in response to an investigation or examination by the
12   commissioner or any other governmental officer or agency or pursuant
13   to the requirements of paragraph (c) of K.S.A. 2007 Supp. 40-5012, sec-
14   tion 3 and amendments thereto;
15      (3) a term of or condition to the transfer of a policy by one viatical
16   settlement provider to another viatical settlement provider;
17      (4) necessary to permit a financing entity, related provider trust or
18   special purpose entity to finance the purchase of policies by a viatical
19   settlement provider and the viator and insured have provided prior writ-
20   ten consent to the disclosure;
21      (5) necessary to allow the viatical settlement provider or viatical set-
22   tlement broker or their authorized representatives to make contacts for
23   the purpose of determining health status; or
24      (6) required to purchase stop loss coverage.
25      Sec. 7. K.S.A. 2007 Supp. 40-5008 is hereby amended to read as
26   follows: 40-5008. (a) With each application for a viatical settlement, a
27   viatical settlement provider or viatical settlement broker shall provide the
28   viator with at least the following disclosures no later than the time the
29   application for the viatical settlement contract is signed by all parties. The
30   disclosures shall be provided in a separate document that is signed by the
31   viator and the viatical settlement provider or viatical settlement broker,
32   and shall provide the following information:
33      (1) There are possible alternatives to viatical settlement contracts in-
34   cluding any accelerated death benefits or policy loans offered under the
35   viator’s life insurance policy.
36      (2) That a viatical settlement broker represents exclusively the viator
37   and not the insurer or the viatical settlement provider. Furthermore the
38   viatical settlement broker owes a fiduciary duty to the viator including
39   the duty to act according to the viator’s instructions and in the best in-
40   terest of the viator.
41      (2) (3) Some or all of the proceeds of the viatical settlement may be
42   taxable under federal income tax and state franchise and income taxes,
43   and assistance should be sought from a professional tax advisor.
     S Sub HB 2110
                                          20

 1      (3) (4) Proceeds of the viatical settlement could be subject to the
 2   claims of creditors.
 3      (4) (5) Receipt of the proceeds of a viatical settlement may adversely
 4   affect the viator’s eligibility for medicaid or other government benefits or
 5   entitlements, and advice should be obtained from the appropriate gov-
 6   ernment agencies.
 7      (5) (6) The viator has the right to rescind a viatical settlement contract
 8   for 15 calendar days after the receipt of the viatical settlement proceeds
 9   by the viator, as provided in subsection (c) of K.S.A. 2007 Supp. 40-5009,
10   section 2 and amendments thereto. If the insured dies during the rescis-
11   sion period, the settlement contract shall be deemed to have been re-
12   scinded, subject to repayment of all viatical settlement proceeds and any
13   premiums, loans and loan interest to the viatical settlement provider or
14   purchaser.
15      (6) (7) Funds will be sent to the viator within three business days
16   after the viatical settlement provider has received the insurer or group
17   administrator’s acknowledgment that ownership of the policy or interest
18   in the certificate has been transferred and the beneficiary has been
19   designated.
20      (7) (8) Entering into a viatical settlement contract may cause other
21   rights or benefits, including conversion rights and waiver of premium
22   benefits that may exist under the policy or certificate, to be forfeited by
23   the viator. Assistance should be sought from a financial adviser.
24      (8) (9) Disclosure to a viator shall include distribution of a brochure
25   describing the process of viatical settlements. The form for the brochure
26   shall be developed by the commissioner.
27      (9) (10) The disclosure document shall contain the following lan-
28   guage: ‘‘All medical, financial or personal information solicited or ob-
29   tained by a viatical settlement provider or viatical settlement broker about
30   an insured, including the insured’s identity or the identity of family mem-
31   bers, a spouse or a significant other may be disclosed as necessary to effect
32   the viatical settlement between the viator and the viatical settlement pro-
33   vider. If you are asked to provide this information, you will be asked to
34   consent to the disclosure. The information may be provided to someone
35   who buys the policy or provides funds for the purchase. You may be asked
36   to renew your permission to share information every two years.’’
37      (10) (11) The insured may be contacted by either the viatical settle-
38   ment provider or viatical settlement broker or such viatical settlement
39   provider’s or viatical settlement broker’s authorized representative for the
40   purpose of determining the insured’s health status. This contact is limited
41   to once every three months if the insured has a life expectancy of more
42   than one year, and no more than once per month if the insured has a life
43   expectancy of one year or less.
     S Sub HB 2110
                                          21

 1      (b) A viatical settlement provider shall provide the viator with at least
 2   the following disclosures no later than the date the viatical settlement
 3   contract is signed by all parties. The disclosures shall be conspicuously
 4   displayed in the viatical settlement contract or in a separate document
 5   signed by the viator and the viatical settlement provider or viatical settle-
 6   ment broker, and contain the following information:
 7      (1) The affiliation, if any, between the viatical settlement provider
 8   and the issuer of the insurance policy to be viaticated.
 9      (2) The name, address and telephone number of the viatical settle-
10   ment provider.
11      (3) A viatical settlement broker shall disclose to a prospective viator
12   the amount and method of calculating the broker’s compensation. The
13   term ‘‘compensation’’ includes anything of value paid or given to a viatical
14   settlement broker for the placement of a policy.
15      (4) If an insurance policy to be viaticated has been issued as a joint
16   policy or involves family riders or any coverage of a life other than the
17   insured under the policy to be viaticated, the viator shall be informed of
18   the possible loss of coverage on the other lives under the policy and shall
19   be advised to consult with such viator’s insurance producer or the insurer
20   issuing the policy for advice on the proposed viatical settlement.
21      (5) State the dollar amount of the current death benefit payable to
22   the viatical settlement provider under the policy or certificate. If known,
23   the viatical settlement provider shall also disclose the availability of any
24   additional guaranteed insurance benefits, the dollar amount of any acci-
25   dental death and dismemberment benefits under the policy or certificate
26   and the viatical settlement provider’s interest in those benefits.
27      (6) State the name, business address and telephone number of the
28   independent third party escrow agent, and the fact that the viator or
29   owner may inspect or receive copies of the relevant escrow or trust agree-
30   ments or documents.
31      (c) Without limiting the ability of an insurer from assessing the in-
32   surability of a policy applicant and determining whether or not to issue
33   the policy, and in addition to other questions an insurance carrier may
34   lawfully pose to a life insurance applicant, insurance carriers may inquire
35   in the application for insurance whether the proposed owner intends to
36   pay premiums with the assistance of financing from a lender that will use
37   the policy as collateral to support the financing.
38      (1) If, as described in paragraph (3) of subsection (o) of K.S.A. 40-
39   5002, and amendments thereto, the loan provides funds which can be used
40   for a purpose other than paying for the premiums, costs, and expenses
41   associated with obtaining and maintaining the life insurance policy and
42   loan, the application shall be rejected as a violation of this act.
43      (2) If the financing does not violate this section in this manner, the
     S Sub HB 2110
                                           22

 1   insurance carrier:
 2      (A) May make disclosures, including, but not limited to, such as the
 3   following, to the applicant and the insured, either on the application or
 4   an amendment to the application to be completed no later than the deliv-
 5   ery of the policy:
 6      ‘‘If you have entered into a loan arrangement where the policy is used
 7   as collateral, and the policy does change ownership at some point in the
 8   future in satisfaction of the loan, the following may be true:
 9      (i) A change of ownership could lead to a stranger owning an interest
10   in the insured’s life;
11      (ii) a change of ownership could in the future limit your ability to
12   purchase future insurance on the insured’s life because there is a limit to
13   how much coverage insurers will issue on one life;
14      (iii) should there be a change of ownership and you wish to obtain
15   more insurance coverage on the insured’s life in the future, the insured’s
16   higher issue age, a change in health status, or other factors, or both, may
17   reduce the ability to obtain coverage or may result in significantly higher
18   premiums or both;
19      (iv) you should consult a professional advisor, since a change in own-
20   ership in satisfaction of the loan may result in tax consequences to the
21   owner, depending on the structure of the loan;’’ and
22      (B) may require certifications, such as the following, from the appli-
23   cant or the insured or both:
24      ‘‘(i) I have not entered into any agreement or arrangement providing
25   for the future sale of this life insurance policy;
26      (ii) my loan arrangement for this policy provides funds sufficient to
27   pay for some or all of the premiums, costs, and expenses associated with
28   obtaining and maintaining my life insurance policy, but I have not entered
29   into any agreement by which I am to receive consideration in exchange
30   for procuring this policy; and
31      (iii) the borrower has an insurable interest in the insured.’’
32      Sec. 8. K.S.A. 2007 Supp. 40-5010 is hereby amended to read as
33   follows: 40-5010. It shall be a violation of this act for any person to enter
34   into a viatical settlement contract within a two-year period commencing
35   with the date of issuance of the insurance policy or certificate unless the
36   viator certifies to the viatical settlement provider that one or more of the
37   following conditions have been met within the two-year period: No person
38   at any time prior to, or at the time of, the application for or issuance of
39   a policy, or during a two-year period commencing with the date of issu-
40   ance of the policy, shall enter into a viatical settlement regardless of the
41   date the compensation is to be provided and regardless of the date the
42   assignment, transfer, sale, devise, bequest or surrender of the policy is to
43   occur. This prohibition shall not apply if the viator certifies to the viaticial
     S Sub HB 2110
                                          23

 1   settlement provider that:
 2      (a) The policy was issued upon the viator’s exercise of conversion
 3   rights arising out of a group or individual policy, provided the total of the
 4   time covered under the conversion policy plus the time covered under
 5   the prior policy is at least 24 months. The time covered under a group
 6   policy shall be calculated without regard to any change in insurance car-
 7   riers, provided the coverage has been continuous and under the same
 8   group sponsorship;
 9      (b) the viator is a charitable organization exempt from taxation under
10   26 U.S.C. §501 (c)(3);
11      (c) the viator is not a natural person;
12      (d) (1) The viator submits independent evidence to the viatical set-
13   tlement provider that one or more of the following conditions have been
14   met within the two-year period:
15      (A) (1) The viator or insured is terminally or chronically ill;
16      (B) (2) the viator’s spouse dies;
17      (C) (3) the viator divorces such viator’s spouse;
18      (D) (4) the viator retires from full-time employment;
19      (E) (5) the viator becomes physically or mentally disabled and a phy-
20   sician determines that the disability prevents the viator from maintaining
21   full-time employment;
22      (F) (6) the viator was the insured’s employer at the time the policy
23   or certificate was issued and the employment relationship terminated; a
24   final order, judgment or decree is entered by a court of competent juris-
25   diction, on the application of a creditor of the viator, adjudicating the
26   viator bankrupt or insolvent, or approving a petition seeking reorganiza-
27   tion of the viator or appointing a receiver, trustee or liquidator to all or
28   a substantial part of the viator’s assets; or
29      (G) (7) the beneficiary of the policy is a family member of the viator
30   and the beneficiary dies.
31      (H) the viator experiences a significant decrease in income that is
32   unexpected and that impairs the viator’s reasonable ability to pay the
33   policy premium; or
34      (I) the viator or insured disposes of such viator’s or insured’s own-
35   ership interests in a closely held corporation.
36      (2) (c) Copies of the independent evidence described in paragraph
37   (1) of this subsection (b) and documents required by subsection (a) of
38   K.S.A. 2007 Supp. 40-5009 section 2, and amendments thereto, shall be
39   submitted to the insurer when the viatical settlement provider submits a
40   request to the insurer for verification of coverage. The copies shall be
41   accompanied by a letter of attestation from the viatical settlement pro-
42   vider that the copies are true and correct copies of the documents re-
43   ceived by the viatical settlement provider. No provision in this section
     S Sub HB 2110
                                          24

 1   shall prohibit an insurer from exercising its right to contest the validity
 2   of any policy.
 3      (e) (d) If the viatical settlement provider submits to the insurer a copy
 4   of the owner or insured’s certification described in subsection (d) (b)
 5   when provider submits a request to the insurer to effect the transfer of
 6   the policy or certificate to the viatical settlement provider, the copy shall
 7   be deemed to conclusively establish that the viatical settlement contract
 8   satisfies the requirements of this section and the insurer shall timely re-
 9   spond to the request.
10      Sec. 9. K.S.A. 2007 Supp. 40-5001, 40-5002, 40-5006, 40-5007, 40-
11   5008, 40-5009, 40-5010 and 40-5012 are hereby repealed.
12      Sec. 10. This act shall take effect and be in force from and after its
13   publication in the statute book.

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:0
posted:5/29/2012
language:
pages:24