FINAL BILL REPORT

                  SSB 5780

                          C 161 L 95

                      Synopsis as Enacted

Brief Description:  Regulating viatical settlements.

Sponsors:  Senate Committee on Financial Institutions & Housing (originally sponsored by Senators Prentice, Deccio and C. Anderson).

Senate Committee on Financial Institutions & Housing

House Committee on Financial Institutions & Insurance

Background:  Viatical settlements are agreements allowing terminally ill people to obtain a portion of their life insurance benefits while they are still living.  The funds are often used to pay for medicine, medical treatment, or in-home care.  Many of those who enter into such agreements are persons with AIDS or cancer.

In general, a viatical settlement works as follows:  A viatical settlement provider buys a life insurance policy from a terminally ill insured person for a portion of the face value of the policy.  In return, the provider is named by the insured as the sole beneficiary of the policy.  Upon the death of the insured, the provider collects the full value of the policy.

The numbers of viatical settlements and viatical settlement providers have increased over the past few years.  There has been a number of publicized instances in which less than scrupulous companies have marketed viatical settlements as investments without fully explaining potential profits and risks to all  parties.  Because of the financial risks and also the privacy issues involved, it has been suggested that viatical settlements should be regulated.

Summary:  Persons or businesses involved in the process of buying the life insurance policy of a terminally ill person must be licensed by the Insurance Commissioner.  This includes those who offer or advertise the availability of viatical settlements, negotiate viatical settlements, or actually purchase the policies.  Licenses are issued to applicants who provide a detailed and adequate operation plan, and who have experience, education, or training in a relevant field.  The commissioner may suspend, revoke, or refuse to renew a license for cause.  The commissioner may examine the books and business records of licensees.  However, information about the owners of life insurance policies that are sold now or in the future is confidential and not subject to disclosure by the commissioner absent a court order.  Licensees must file annual reports.

All viatical settlement contract forms must be filed with and approved by the commissioner.  Compensation rates must also be filed with the commissioner.  Licensees must maintain records of all transactions and advertising.

Viatical settlement providers must disclose certain information to owners of life insurance policies, such as alternatives, potential tax implications, and the right of rescission, before the settlement contract is executed.  Viatical settlement providers must also obtain certain documents, such as statements from doctors and witnesses, before entering into a contract.

Insurance policies that are purchased by a viatical settlement provider may not be conveyed to an entity not licensed by the commissioner.

A violation of any provision of this act is a violation of the Consumer Protection Act.

Votes on Final Passage:

Senate    44 0

House     84 11

Effective:  July 23, 1995