02-031 C.M.R. ch. 931
| Section 1. | Authority | 2 |
|---|---|---|
| Section 2. | Purpose | 2 |
| Section 3. | Applicability | 2 |
| Section 4. | Definitions | 2 |
| Section 5. | Standards for Evaluation of Reasonable Payments | 3 |
| Section 6. | Reporting Requirements | 4 |
| Section 7. | General Rules | 5 |
| Section 8. | Prohibited Practices | 6 |
| Section 9. | Advertising | 7 |
| Section 10. | Information Sharing | 11 |
| Section 11. | Severability | 12 |
| Section 12. | Effective Date | 12 |
The Superintendent adopts this rule pursuant to 24-A M.R.S.A. §§ 212, 6806, 6810, 6812, and 6817.
The purposes of this rule are to set forth standards and procedures for the viatication of life insurance policies through viatical and life settlements, to establish and maintain standards for reasonableness of payments to viators in the case of viatical settlements, to provide for procedures for disclosure of the identity of the viator or the insured, and to establish licensing requirements and standards of conduct for viatical and life settlement providers and producers.
This rule applies to settlement providers and settlement producers, as defined in 24-A M.R.S.A. §6802-A.
In addition to the definitions in 24-A M.R.S.A. §6802-A, the following definitions apply to this rule:
number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, Social Security number, or any other information that is likely to lead to the identification of the insured.
A. For viatical settlements, in which the insured is chronically or terminally ill, the compensation for viaticating a life insurance policy or certificate on which no future premium is due, whether because it is a paid-up policy, because of a disability waiver, or for any other reason, shall not be less than the following amounts:
| Insured's Life Expectancy | Minimum Percentage of Net Face Amount Received by Viator |
|---|---|
| Less than 6 months | (81%) |
| At least 6 but less than 12 months | (77%) |
| At least 12 but less than 18 months | (74%) |
| At least 18 but less than 24 months | (70%) |
| 24 months or more | (55%) |
B. A settlement producer or provider may not seek or obtain any compensation from the viator.
C. Except as provided in subsection E, the viator will not be responsible for any future premiums after the date of the settlement contract, and the amount of compensation received by the viator may not be reduced by the amount of premium required to keep the policy in force, except as provided in subsection D.
D. If the life expectancy is less than 30 months and future premium is due on the policy, the minimum amounts in Subsection A may be reduced by the amount of premium due during the insured's life expectancy.
E. If a settlement provider enters into a settlement contract that allows the viator to retain an interest in the policy, the settlement contract shall contain the following provisions:
(1) A provision that the settlement provider will effect the transfer of the amount of the death benefit only to the extent or portion of the amount viaticated. Benefits in excess of the amount viaticated shall be paid directly to the viator's beneficiary by the insurance company;
(2) A provision that the settlement provider will, upon acknowledgment of the perfection of the transfer, either;
(a) Advise the insured, in writing, that the insurance company has confirmed the viator's interest in the policy; or
(b) Send a copy of the instrument sent from the insurance company to the settlement provider that acknowledges the viator's interest in the policy; and
(3) A provision that apportions the premiums to be paid by the settlement provider and the viator. It is permissible for the viatical settlement contract to specify that all premiums shall be paid by the viatical settlement company. The contract may also require that the viator reimburse the viatical settlement provider for the premiums attributable to the retained interest.
On or before March 1 of each year, in accordance with 24-A M.R.S.A. §6806, each settlement provider licensed in this State shall make a report to the Superintendent. This report must be certified by an officer of the settlement provider, and must provide the following information:
A. For each settlement contract entered into in the preceding calendar year:
(1) Date the settlement contract was entered into;
(2) Life expectancy of the insured as of the date of the settlement contract;
(3) Face amount of the policy;
(4) Amount of compensation or anything of value paid to the viator by the settlement provider pursuant to the settlement contract;
(5) Name of the settlement producer involved; and
B. For each settlement contract entered into in this state at any time where the insured whose life was the subject of the policy that was viaticated has died in the preceding calendar year:
(1) Date of death of the insured;
(2) Amount of time that passed after the date of the settlement contract;
(3) Total insurance premiums paid by the settlement provider to maintain the policy in force pursuant to the settlement contract; and
C. A report of each application received, identified as a viatical settlement categorized by disease or as a life settlement, and whether it was accepted or rejected by the settlement provider or withdrawn by or on behalf of the insured;
D. An aggregate report of policies purchased by issuer and policy type;
E. The aggregate number and face amount of viaticated policies;
F. A report of funding sources for each policy; and
G. An annual audited financial report consistent with 24-A M.R.S.A. §221-A(4).
A. Payment of the proceeds to the viator pursuant to a settlement contract must be made in a lump sum. The settlement provider, settlement producer, trustee, or escrow agent may not retain any portion of the viator's proceeds.
B. A settlement provider or settlement producer must obtain from a person or entity that is provided with patient identifying information concerning an applicant or viator a signed affirmation that the person or entity will not further divulge the information without first procuring the express written consent of the insured in each instance in which the information is to be divulged. Notwithstanding the foregoing, if a settlement provider or settlement producer is served with a subpoena by a court or administrative officer with jurisdiction over the matter and compelled to produce records containing patient identifying information, it shall notify the viator and the insured within five (5) business days after receiving notice of the subpoena.
C. The standards related to advertising found in Section 9 of this rule and in 24-A M.R.S.A. §6817 applicable to viatical and life settlements must be followed.
This section shall apply to any advertising of viatical or life settlement contracts, products or services intended for dissemination in this State, including internet advertising viewed by persons located in this State. In addition to the specific requirements in 24-A M.R.S.A. §6817 and Section 10 of this rule, all such advertising must comply with the specific standards of this section.
A. No advertisement shall use the terms “investment,” “investment plan,” “founder’s plan,” “deposit,” “expansion plan,” “profit,” “profits,” “profit-sharing,” “interest plan,” “savings plan,” “private pension plan,” “retirement plan” or other similar terms in connection with a settlement contract in a context or under such circumstances or conditions as to have the capacity or tendency to mislead or deceive a viator, purchaser or prospective purchaser.
B. Certain advertisements are deemed false and misleading on their face and therefore prohibited. False and misleading settlement contract advertisements include, but are not limited to, the following representations:
(1) “Guaranteed,” “fully secured,” “100% secured,” “fully insured,” “secure,” “safe,” “backed by rated insurance company(ies),” “backed by federal law,” “backed by state law,” or “state guaranty funds,” or similar representations;
(2) “No risk,” “minimal risk,” “low risk,” “no speculation,” “no fluctuation,” or similar representations;
(3) “Qualified or approved for individual retirement accounts (IRAs), Roth IRAs, 401(k) plans, simplified employee pensions SEP, 403(b), Keogh plans, TSAs, other retirement account rollovers,” “tax deferred,” or similar representations;
(4) Use of the word “guaranteed” to describe the fixed return, annual return, principal, earnings, profits, investment, or similar representations;
(5) “No sales charges or fees” or similar representations;
(6) “High yield,” “superior return,” “excellent return,” “high return,” “quick profit,” or similar representations;
(7) Purported favorable representations or testimonials about the benefits of settlement contracts as an investment, taken out of context from newspapers, trade papers, journals, radio and television programs, and all other forms of print and electronic media.
C. The information required to be disclosed under this section shall not be presented in
any form or manner so as to be misleading or deceptive. Without limitation, such information shall not be minimized, rendered obscure, or presented in an ambiguous fashion or intermingled with the text of the advertisement so as to be misleading or deceptive, and shall meet the following specific standards.
(1) An advertisement shall not omit material information or use words, phrases, statements, references or illustrations if such omission or use has the capacity, tendency or effect of misleading or deceiving viators, purchasers or prospective purchasers as to the nature or extent of any benefit, loss covered, premium payable, or state or federal tax consequence. The fact that the contract offered is made available to a prospective viator for inspection prior to consummation of the sale, or an offer is made to refund the payment if the viator is not satisfied or that the contract includes a “free look” period that satisfies or exceeds legal requirements, does not remedy misleading or deceptive statements.
(2) An advertisement shall not use the name or title of a life insurance company or a life insurance policy unless accompanied by other language clearly indicating that the advertisement has not 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 which is the subject of a 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 a 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 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 a service, state that a charge is included in the payment, or use other appropriate language.
(6) Testimonials, appraisals or analysis used in advertisements must be genuine; represent the current opinion of the author; be applicable to the contract, product or service advertised, if any; and be accurately reproduced with sufficient completeness to avoid misleading or deceiving prospective viators as to the nature or scope of the testimonials, appraisal, analysis or endorsement. In using testimonials, appraisals or analysis, the settlement provider or producer makes as its own all the statements contained therein, and such statements are subject to all the provisions of this section.
(a) If the individual making a testimonial, appraisal, analysis or an endorsement has a financial interest in the 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, the advertisement must prominently disclose such fact.
shall not imply that any government entity has recommended or endorsed the settlement provider, its financial condition or status, the payment of its claims, or the merits, desirability or advisability of its contract forms.
I. An advertisement may state that the settlement provider is licensed in the state where the advertisement appears, provided it does not exaggerate that fact or suggest or imply that competing settlement providers may not be so licensed. The advertisement may ask the audience to consult the provider's website or contact or contact the Bureau of Insurance to find out if a license is required and, if so, whether the settlement provider is licensed.
J. An advertisement shall not create the impression that the settlement provider, its financial condition or status, the payment of its claims or the merits, desirability, or advisability of its contract forms are recommended or endorsed by any government entity.
K. The name of the actual settlement provider 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 settlement provider or create the false impression that an affiliate or controlling entity would have any responsibility for the financial obligation of the settlement provider.
L. An advertisement shall not directly or indirectly create the impression that any division or agency of the State or of the U.S. government endorses, approves or favors:
(1) Any viatical settlement licensee or its business practices or methods of operation;
(2) The merits, desirability or advisability of any settlement contract;
(3) Any settlement contract; or
(4) Any life insurance policy or life insurance company.
M. If an advertisement indicates the time in which the viatication will occur, the advertisement 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.
N. If an advertisement indicates the dollar amounts available to viators, the advertisement shall disclose the average purchase price as a percent of face value obtained by viators contracting with the settlement provider during the past six (6) months.
O. Each settlement provider shall maintain at its home or principal office a complete file containing a specimen copy of every printed, published or prepared advertisement of its contracts and specimen copies of every printed, published or prepared advertisements, hereafter disseminated in this State, with a notation indicating the manner and extent of distribution and the form number of any contract advertised. The monthly report must be made available to the Superintendent for examination at the producer's office location in the State at any time or by delivery to the Bureau upon 5 days' notice by the Superintendent. All advertisements shall be maintained in the file for a period of either six (6) years after discontinuance of its use or publication or until the filing of the next regular report on the examination of the organization, whichever is the longer period of time.
(1) If the Superintendent determines that an advertisement has the capacity or tendency to mislead or deceive the public, the Superintendent may require a settlement provider to submit all or any part of its advertising material for review or approval prior to use.
(2) Each settlement provider shall file with the Superintendent with its annual statement a certificate of compliance executed by an authorized officer of the settlement provider stating that to the best of his or her knowledge, information and belief, the advertisements which were disseminated or seen or heard in this State by or on behalf of the settlement provider during the preceding statement year complied or were made to comply in all respects with the provisions of this section.
A. In accordance with 24-A M.R.S.A. §6809(1)(C), for any policy issued less than 2 years from the date of application for a settlement contract, a settlement provider must obtain the insured's written consent to the release of the insured's medical records to the insurer that issued the policy covering the life of the insured.
B. Within three days of receipt of a signed application for a settlement, the settlement provider shall deliver to the life insurance company issuing the policy to be viaticated a copy of each of the following documents:
(1) The application for the settlement;
(2) The settlement contract being proposed;
(3) The witnessed document required under 24-A M.R.S.A. §6809(1)(B);
(4) The written statement required under 24-A M.R.S.A. §6809(1)(A) in which a licensed attending physician indicates that the viator or seller is of
sound mind and under no constraint or undue influence; and,
(5) The release of information form signed by the insured for the settlement provider required under Subsection A of this section.
If any section, subsection, term, provision, or application of this rule shall be adjudged invalid for any reason, such judgment shall not impair or invalidate any other section, term, provision, or application, and the remainder of this rule shall continue in full force and effect.
This rule became effective July 19, 2006.
APA Office Note: Chapter 931 repeals and replaces Chapter 930, Viatical Settlements, which became effective on September 22, 2000.