Current through Register Vol. 49, No. 2, February 2024
§ 1.
Purpose
The purpose of this rule is to implement Ark. Code Ann. §
23-81-501, et seq, known as 'The Viatical Settlements Act," as enacted by Act
490 of 1997. This rule sets forth requirements pertaining to the licensing of
viatical settlement providers, viatical settlement agents, and viatical
settlement brokers, as well as promulgates standards for minimum payments,
reporting, advertising and disclosure applicable to those persons and
organizations selling or facilitating viatica! settlement transactions in this
state.
§ 2.
Authority
This rule is issued pursuant to the authority vested in the
Commissioner by Ark. Code Ann. § 23-81-510 and Ark. Code. Ann. §
23-61-108, and
any other applicable provisions of Arkansas law.
§ 3.
Applicability and scope
This rule shall apply to ail new viatical settlement contracts
solicited, sold, issued, issued for delivery, or to be performed in this state
on and after March 1, 1998.
§
4.
Effective date
The effective date of this Rule is March 1. 1998.
§ 5.
Definitions
(A) A "viatical settlement provider' means
that person or organization defined in Ark. Code Ann. § 23-81-5020 );
(B) A "viatical settlement broker" means that
person or organization defined in Ark. Code Ann. § 23-81-502(h);
(C) A "viatical settlement agent" means that
person who is an authorized agent of a licensed viatical settlement provider or
viatical settlement broker who acts or aids in any manner in the solicitation
of a viatical settlement. A viatical settlement agent shall not Include:
(1) An attorney, an accountant, a financial
planner or any person exercising a power of attorney granted by a viator
or;
(2) Any person who is retained
to represent a viator and whose connpensation Is paid by or at the direction of
the viator regardless of whether the viatical settlement is
consummated.
§
6.
License requirements for viatical settlement
providers
A viatical settlement provider, as defined in Ark. Code Ann. §
23-81-5020 ), shall not enter into or solicit a viatical settlement contract
without first obtaining a license from the Commissioner.
(A) The application shall be on a form
required by the Commissioner.
(B)
Only those individuals named in the application may act as viatical settlement
providers.
(C) The Commissioner may
ask for such additional Information as is necessary to determine whether the
applicant complies with the requirements of Ark. Code Ann. § 23-81-5020 ) and
Ark. Code Ann. § 23-81-503.
(D) A
viatical settlement provider shall have ninety (90) days from the date of this
regulation or sixty (60) days from the time the insurance department prepares
an application form, whichever is later, to file for a license and still be
considered in compliance with this regulation.
§ 7.
License requirements for viatical
settlement brokers and agents
A viatical settlement broker or agent, who is not already
licensed by the Department to sell life or disability policies in this state,
shall not solicit a viatical settlement contract without first obtaining a
license from the Commissioner.
(A) A
viatical settlement broker or agent shall make application on a form required
by the Commissioner.
(B) The
application shall be accompanied by a fee of $100.00. The license may be
renewed yearly by payment of a fee of $100.00. Failure to pay the renewal fee
within the time prescribed shall result in automatic revocation of the
license.
(C) The license shall be a
limited license which allows solicitation only of viatical
settlements.
(D) A viatical
settlement broker or agent shall have ninety (90) days from the date of this
regulation or sixty (60) days from the time the insurance department prepares
an application form, whichever is later, to file for a license and still be
considered in compliance with this regulation
(E) Prelicensing education and continuing
education required of other agents and brokers shall not apply to viatical
settlement brokers or agents.
(F)
The Commissioner shall have the right to suspend, revoke or refuse to renew the
license of any viatical settlement broker or agent if the Commissioner finds
that:
(1) There was any misrepresentation in
the application for a license:
(2)
The broker or agent has been found guilty of fraudulent or dishonest practices,
has been found guilty of a felony or any misdemeanor of which criminal fraud is
an element, or is otherwise shown to be untrustworthy or incompetent;
(3) the licensee has placed or attempted to
place a viatical settlement with a viatical settlement provider not licensed in
this state; or
(4) The viatical
settlement agent or broker has violated any of the provisions of Ark. Code Ann.
§ 23-81-501, the Viatical Settlements Act, or this Rule.
(G) Before the Commissioner shall deny a
license application or suspend, revoke or fail to renew the license of a
viatical settlement broker or agent, the Commissioner shall conduct a hearing
in accordance with the Arkansas Administrative Procedure Act, in Ark. Code Ann.
§
25-15-201 et
seq.
§ 8.
Other
requirements for brokers and agents
Viatical settlement brokers or agents shall not, without the
written agreement of the viator obtained prior to performing any services in
connection with a viatical settlement, seek or obtain any compensation from the
viator.
§ 9.
Standards
for evaluation of reasonable payments
In order to assure that viators receive a reasonable return for
viaticating an insurance policy, the following shall be minimum
discounts:
|
Minimum Percentage Of Face Value Less Outstanding
Loan
|
|
Insured's Life Expetancy
|
Received by Viator
|
|
Less than 6 months
|
80%
|
|
At least 6 but less than 12 months
|
70%
|
|
At least 12 but less than 18 months
|
65%
|
|
At least 18 but less than 24 months
|
60%
|
|
At least 24 but less than 30 months
|
50%
|
|
Thirty months or more
|
No minimum
|
This percentage may be reduced by 5% for viaticating a policy
written by an insurer rated less than the highest 4 categories by A.M. Best, or
comparable rating by another rating agency.
§ 10.
Reporting requirements
Beginning on March 1, 1999, for the calendar year of 1998, each
viatical settlement provider licensed in this state shall make a report
containing the following information for the previous calendar year:
(A) For each policy viaticated:
(1) Date viatical settlement entered
into;
(2) Life expectancy of viator
at time of contract;
(3) Face
amount of policy;
(4) Amount paid
by the viatical settlement provider to viaticate the policy; and
(5) If the viator has died:
(a) Date of death; and
(b) Total insurance premiums paid by the
viatical settlement provider to maintain the policy in force;
(B) Breakdown of
applications received, accepted and rejected, by disease category;
(C) Breakdown of policies viaticated by
issuer and policy type;
(D) Number
of secondary market vs. primary market transactions;
(E) Portfolio size; and
(F) Amount of outside borrowings.
§11.
Disclosure
The following items supplement the disclosures required by Ark.
Code Ann. § 23-81-508:
(A) A viatical
settlement provider, viatical settlement agent or viatical settlement broker
shall disclose the following information to the viator no later than the time
of the application:
(1) Funds will be sent to
the viator within two (2) business days after the viatical settlement provider
has received the insurer or group administrator's acknowledgment that ownership
of the policy or interest in the certificate has been transferred and the
beneficiary has been designated pursuant to the viatical settlement contract;
and
(2) Entering into a viatical
settlement contract may cause other rights or benefits, including conversion
rights and waiver of premium benefits that may exist under the policy or
certificate, to be forfeited by the viator and assistance should be sought from
a financial adviser.
(B)
A viatical settlement provider shall disclose the following information to the
viator prior to the date the viatical settlement contract is signed by all
parties:
(1) The affiliation, if any, between
the viatical settlement provider and the issuer of an insurance policy to be
viaticated;
(2) If an insurance
policy to be viaticated has been issued as a joint policy or involves family
riders or any coverage of a life other than the insured under the policy to be
viaticated, the viator must be informed of the possible loss of coverage on the
other lives and be advised to consult with his or her insurance producer or the
company issuing the policy for advice on the proposed viatication;
and
(3) The dollar amount of the
current death benefit payable to the viatical settlement provider under the
policy or certificate. The viatical settlement provider shall also disclose the
availability of any additional guaranteed insurance benefits, the dollar amount
of any accidental death and dismemberment benefits under the policy or
certificate and the viatical settlement provider's interest In those
benefits.
§ 12.
General Rules
(A) With respect
to policies containing a provision for double or additional indemnity for
accidental death, the additional payment shall remain payable to the
beneficiary last named by the viator prior to entering into the viatical
settlement agreement, or to such other beneficiary, other than the viatical
settlement provider, as the viator may thereafter designate, or in the absence
of a designation, to the estate of the viator.
(B) Payment of the proceeds of a viatical
settlement pursuant to Ark. Code Ann. § 23-81-501, et seq, the Viatical
Settlements Act, shall be by means of wire transfer to the account of the
viator or by certified check.
(C)
Payment of the proceeds pursuant to a viatical settlement shall be made in a
lump sum. Retention of a portion of the proceeds by the viatical settlement
provider or escrow agent is not permissible. Installment payments shall not be
made unless the viatical settlement company has purchased an annuity or similar
financial instrument issued by a licensed insurance company or bank.
(D) A viatical settlement provider, broker,
and agent shall not 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 without.
(E) A
viatical settlement provider, broker, and agent 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 an agent of
the viator with respect to the viatical settlement.
(F) Contacts for the purpose of determining
the health status of the viator by the viatical settlement provider, broker, or
agent after the viatical settlement has occurred should be limited to once
every three (3) months for viators with a life expectancy of more than one
year, and to no more than one per month for viators with a life expectancy of
one year or less. The provider or broker shall explain the procedure for these
contacts at the time the viatical settlement contract is entered
into.
(G) Viatical settlement
providers, brokers and agents shall not solicit investors who could influence
the treatment of the illness of the insureds whose coverage would be the
subject of the investment.
(H)
Advertising standards:
(1) Advertising should
be truthful and not misleading by fact or implication.
(2) If the advertiser emphasizes the speed
with which the viatication will occur, the advertising must disclose the
average time frame from completed application to the date of offer and from
acceptance of the offer to receipt of the funds by the viator.
(3) If the advertising emphasizes the dollar
amounts available to viators, the advertising shall disclose the average
purchase price as a percent efface value obtained by viators contracting with
the advertiser during the past six (6) months.
(I) Failure to tender consideration to the
viator for the viatical settlement contract within the time disclosed renders
the viatical settlement contract voidable by the viator for lack of
consideration until the time consideration is tendered to and accepted by the
viator.
§ 13.
Severability
If any provision of this Rule or the application thereof to any
person or circumstances is for any reason held to be invalid, the remainder of
the Rule and the application of such provision to other persons or
circumstances shall not be affected thereby.
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SECTION
V.
Required
Exhibits
1. A
copy of the most recent audited financial statement (if available) or, if an
audited financial statement is not available, a financial statement confirmed
as true and correct by the treasurer or chief financial officer of the
applicant.
2. A copy of the plan of
operation which addresses the following items:
What markets does the applicant intend to target?
What geographical areas?
Who will produce business for the applicant and how will these
persons be trained?
What is the anticipated number of persons the applicant plans to
have marketing its products or services?
What is the total projected Arkansas business over the next five
years?]
Give a detailed description of the corporate organizational
structure of the applicant, its parent company and all affiliates.
Give a detailed description of the steps taken by the applicant
to ensure immediate access to viator funds.
Give a detailed description of the procedures used by the
applicant for keeping all medical information confidential?
3. A copy of the articles of incorporation,
partnership agreement, trust agreement or other such organizational document of
the applicant certified by the proper domiciliary official.
4. A copy of the by-laws of the applicant
certified as true and correct by the secretary of the company if a corporation,
a partner, if a partnership, or other appropriate person.
5. A copy of the domiciliary certificate of
authority or license certified by the proper domiciliary official. (To be
supplied only if viatical settlement providers are required to be licensed in
the state of domicile of the applicant).
6. Duplicate copies of al contract and
application forms intended for use in Arkansas.
7. Copies of all advertising or solicitation
materials that the applicant uses or plans to use to attract potential viators
or to otherwise market, promote or publicize its business or
services.
8. Copy of appointment of
agent for service of process form fully completed. The proper form is attached.
(Non-resident applicants only)
SECTION
VI.
Service of Process Information Service of
Regulatory Complaint Information
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