Rules & Regulations of the State of Tennessee
Title 0780 - Commerce and Insurance
Subtitle 0780-01 - Insurance Division
Chapter 0780-01-71 - Life Settlements
Section 0780-01-71-.08 - GENERAL RULES

Universal Citation: TN Comp Rules and Regs 0780-01-71-.08

Current through September 24, 2024

(1) 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 owner prior to entering into the life settlement contract, or to such other beneficiary, other than the life settlement trust, provider, or financing entity as the owner may thereafter designate, or in the absence of a beneficiary, to the estate of the owner.

(2) Payment of the proceeds of a life settlement pursuant to T.C.A. § 56-50-109 shall be by means of wire transfer to the account of the owner or by certified check or cashier's check.

(3) Payment of the proceeds to the owner pursuant to a life settlement contract shall be made in a lump sum except where the life settlement provider has purchased an annuity or similar financial instrument issued by a licensed insurance company or bank, or an affiliate of either. Retention of a portion of the proceeds by the life settlement provider or escrow agent is not permissible.

(4) A life settlement provider, life settlement broker or life settlement representative shall not discriminate in the making or solicitation of life settlements on the basis of race, age, sex, national origin, creed, religion, occupation, marital or family status or sexual orientation, or discriminate between owners with dependents and without.

(5) A life settlement provider, life settlement broker or life settlement representative shall not pay or offer to pay any finder's fee, commission or other compensation to any insured's physician, or to an attorney, accountant or other person providing medical, legal or financial planning services to the owner, or to any other person acting as an agent of the owner with respect to the life settlement.

(6) A life settlement provider, life settlement broker, or any officer, partner, member, employee, affiliate, agent, contractor or life settlement representative shall not solicit investors who have treated or have been asked to treat the illness of the insured whose coverage would be the subject of the investment.

(7) Within twenty (20) days after an owner or insured executes documents necessary to transfer any rights under a life insurance policy or within twenty (20) days of entering any agreement, option, promise or any other form of understanding, expressed or implied, relating to the business of life settlements, the life settlement provider shall give written notice to the insurer that issued the insurance policy that the policy has or will become a settled policy or otherwise be involved in the business of life settlements. The notice shall be accompanied by the documents required by Paragraph (8) below.

(8) The life settlement provider shall deliver a copy of the owner's certification pursuant to 0780-1-71-.04(1)(b) if applicable, a copy of a medical release, a copy of the owner's application for the life settlement contract, the notice required under paragraph (7) above and a request for verification of coverage (Appendices A or B to this rule) to the insurer that issued the life policy that is the subject of the transaction.

(9) The insurer shall respond to a request for verification of coverage (Appendices A or B to this rule) submitted by the life settlement provider within thirty (30) calendar days of the date the request is received and shall indicate whether, based upon the medical evidence and documents provided, the insurer intends to pursue an investigation at this time regarding the validity of the insurance contract.

(10) Advertising standards:

(a) Owners and insureds are to be provided with clear and unambiguous statements in the advertisement of life settlements and are to be assured in the receipt of clear, truthful and adequate disclosure of the benefits, risks, limitations and exclusions of any life settlement contract. The purpose of these guidelines and standards of permissible and impermissible conduct in the advertisement of life settlements is to assure that product descriptions are presented in a manner that prevents unfair, deceptive or misleading advertising and is conducive to accurate presentation and description of life settlements through the advertising media and material used by life settlement licensees.

(b) These standards shall apply to any advertising of life settlement contracts or related products or services intended for dissemination in this state, including Internet advertising viewed by persons located in this state.

(c) Every life settlement licensee shall establish and at all times maintain a system of control over the content, form and method of dissemination of all advertisements of its contracts, products and services. All advertisements, regardless of by whom written, created, designed or presented, shall be the responsibility of the life settlement licensee, as well as the individual who created or presented the advertisement. A system of control shall include regular routine notification, at least once a year, to agents and others authorized by the life settlement licensee who disseminate advertisements of the requirements and procedures for approval prior to the use of any advertisements not furnished by the life settlement licensee.

(d) rtisements shall be truthful and not misleading by fact or implication. The form and content of an advertisement of a life ettlement contract shall be sufficiently complete and clear so as to avoid deception. It shall not have the capacity or tendency to mislead or deceive.

(e) Certain life settlement advertisements are deemed false and misleading on their face and are prohibited. False and misleading life settlement advertisements include, but are not limited to, the following misrepresentations:
1. "Guaranteed," "safe," "secure," "backed by federal law," "backed by state law," or "state guaranty funds," or similar representations;

2. "No risk," "low risk," "minimal risk," or similar representations;

3. "No sales charges or fees" or similar representations;

4. "High yield," "superior return," "excellent return," "high return," "quick profit," or similar representations;

5. Purported favorable representations or testimonials about the benefits of life settlement contracts taken out of context from newspapers, magazines, trade papers, journals, radio and television programs, and all other forms of print and electronic media.

(f) The information required to be disclosed under this subsection shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be confusing or misleading.
1. An advertisement shall not omit material information or use words, phrases, statements, references or illustrations if the omission or use has the capacity, tendency or effect of misleading or deceiving as to the nature or extent of any benefit, loss covered, premium payable, or state or federal tax consequence. The fact that the life settlement contract offered is made available for inspection prior to consummation of the sale, or an offer is made to refund the payment if the owner is not satisfied or that the life settlement contract includes a "free look" period that satisfied or exceeds legal requirements, does not remedy misleading statements.

2. An advertisement shall not use the name or title of a life insurance company or a life insurance policy unless advertisement has been approved by the insurer.

3. An advertisement shall not represent that premium payments will not be required to be paid on the life insurance policy that is the subject of the life settlement contract in order to maintain that policy, unless that is the fact.

4. An advertisement shall not state or imply that interest charged on an accelerated death benefit or policy loan is unfair, inequitable or in any manner an incorrect or improper practice.

5. The words "free," "no cost," "without cost,' "no additional cost," "at no extra cost," or any words of similar import shall not be used with respect to any benefit or service unless true. An advertisement may specify the charge for a benefit or service or may state that a charge is included in the payment or use other appropriate language.

(g) Testimonials, appraisals or analysis used in advertisements must be genuine; represent current opinion of the author; be applicable to the life settlement contract, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective owners as to the nature or scope of the testimonials, appraisal, analysis or endorsement. In using testimonials, appraisals or analysis, the life settlement licensee makes as its own all the statements contained therein, and the statements are subject to all the provisions of this subsection.
1. If the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the life settlement provider or related entity as a stockholder, director, officer, employee or otherwise, or receives any benefit directly or indirectly other than required union scale wages, that fact shall be prominently disclosed in the advertisement.

2. An advertisement shall not state or imply that a life settlement contract benefit or service has been approved or endorsed by a group of individuals, society, association or other organization unless that is the fact and unless any relationship between an organization and the life settlement licensee is disclosed. If the entity making the endorsement or testimonial is owned, controlled or managed by the life settlement licensee, or receives any payment or other consideration from the life settlement licensee for making an endorsement or testimonial, that fact shall be disclosed in the advertisement.

3. When an endorsement refers to benefits received under a life settlement contract all pertinent information shall be retained for a period of five (5) years after its use.

(h) An advertisement shall not contain statistical information unless it accurately reflects recent and relevant facts. The source of all statistics used in an advertisement shall be identified.

(i) An advertisement shall not disparage insurers, life settlement providers, life settlement brokers, insurance producers, policies, services or methods of marketing.

(j) The name of a life settlement licensee shall be clearly identified in all advertisements about the licensee or its life settlement contract products or services, and if any specific life settlement contract is advertised, the life settlement contract shall be identified either by form number or some other appropriate description. If an application is part of the advertisement, the name of the life settlement provider shall be shown on the application.

(k) An advertisement shall not use a trade name, group designation, name of the parent company of a life settlement licensee, name of a particular division of the life settlement licensee, service mark, slogan, symbol or other device or reference without disclosing the name of the life settlement licensee, if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the life settlement licensee, or to create the impression that a company other than the life settlement licensee would have any responsibility for the financial obligation under a life settlement contract.

(l) An advertisement shall not use any combination of words, symbols or physical materials that by their content, phraseology, shape, color or other characteristics are so similar to a combination of words, symbols or physical materials used by a government program or agency or otherwise appear to be of such a nature that they tend to mislead owners or insureds into believing that the solicitation is in some manner connected with a government program or agency.

(m) An advertisement may state that a life settlement licensee is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that a competing life settlement licensee may not be so licensed. The advertisement may ask the audience to consult the licensee's web site or contact the Department of Commerce and Insurance to find out if the state requires licensing and, if so, whether the life settlement provider or life settlement broker is licensed.

(n) An advertisement shall not create the impression that the life settlement provider, its financial condition or status, the payment of claims or the merits, desirability, or advisability of its life settlement contracts are recommended or endorsed by any governmental entity.

(o) The name of the actual licensee shall be stated in all of its advertisements. An advertisement shall not use a trade name, any group designation, name of any affiliate or controlling entity of the licensee, service mark, slogan, symbol or other device in a manner that would have the capacity or tendency to mislead or deceive as to the true identity of the actual licensee or create the false impression that an affiliate or controlling entity would have any responsibility for the financial obligation of the licensee.

(p) An advertisement shall not directly or indirectly create the impression that any division or agency of the state or of the United States government endorses, approves or favors:
1. Any life settlement licensee or its business practices or methods of operation;

2. The merits, desirability or advisability of any life settlement contract;

3. Any life settlement contract; or

4. Any life insurance policy or life insurance company.

(q) If the advertisement emphasizes the speed with which the settlement will occur, the advertising must disclose the average time frame from completed application to the date of the offer and from acceptance of the offer to receipt of the funds by the owner;

(r) If the advertising emphasizes the dollar amounts available to owners, the advertising shall disclose the average purchase price as a percent of the face value obtained by owners contracting with the licensee during the past six (6) months.

(11) If a life settlement provider enters into a life settlement that allows the owner to retain an interest in the policy, the life settlement contract shall contain the following provisions:

(a) A provision that the life settlement provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount settled. Benefits in excess of the amount settled shall be paid directly to the owner's beneficiary by the insurance company;

(b) A provision that the life settlement provider will, upon acknowledgment of the perfection of the transfer, either;
1. Advise the insured, in writing, that the insurance company has confirmed the owner's interest in the policy; or

2. Send a copy of the instrument sent from the insurance company to the life settlement company that acknowledges the owner's interest in the policy; and

(c) A provision that apportions the premiums to be paid by the life settlement company and the owner. It is permissible for the life settlement contract to specify that all premiums shall be paid by the life settlement company.

Authority: T.C.A. §§ 56-50-102, 56-50-103, 56-50-105, 56-50-108, 56-50-109, and 56-50-110.

Disclaimer: These regulations may not be the most recent version. Tennessee may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
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