AB1020: Bill Text

LRB-4858/1

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1995 - 1996 LEGISLATURE

1995 Assembly BILL 1020

March 13, 1996 - Introduced by Representatives Jensen, Baldwin, Ainsworth, Albers, Baldus, Bock, Brandemuehl, Carpenter, Coggs, Cullen, Duff, Foti, Gard, Goetsch, Gunderson, Hanson, Hasenohrl, Huebsch, Kelso, Klusman, Kreibich, Kreuser, Krug, F. Lasee, Lazich, Meyer, Murat, Musser, Notestein, Otte, Ourada, Owens, Plombon, R. Potter, Riley, Robson, Seratti, Springer, Underheim, Vrakas, Walker, Wasserman, Wood, L. Young, R. Young and Ziegelbauer, cosponsored by Senators Rosenzweig, Schultz, Buettner, Burke, Chvala, Clausing, Darling, Grobschmidt, Panzer, Risser and Rude. Referred to Joint survey committee on Tax Exemptions.

AB1020,1,6 An Act to renumber 71.26 (3) (a); and to create 71.05 (1) (f), 71.26 (3) (ag), 71.45 (2) (a) 14., 601.31 (1) (mm), 601.31 (1) (mp), 601.31 (1) (mr), 601.31 (1) (ms) and 632.68 of the statutes; relating to: regulation of viatical settlement contracts, exempting from the income tax income that is received from the sale of a life insurance policy under a viatical settlement contract and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill establishes standards and requirements for viatical settlements and viatical settlement contracts. A viatical settlement is defined in the bill as payment to the policyholder of a life insurance policy, or to the certificate holder of a group life insurance certificate, that insures the life of a person who has a catastrophic or life-threatening illness or condition in an amount that is less than the expected death benefit under the policy or certificate in exchange for the sale or other transfer of the ownership of the policy or certificate to the person making the payment. The person to whom the policy or certificate is sold is a viatical settlement provider. A viatical settlement broker is defined as a person who offers or advertises the availability of viatical settlement providers. A viatical settlement broker may also negotiate a viatical settlement between a viatical settlement provider and a policyholder or certificate holder.

Under the bill, both viatical settlement providers and viatical settlement brokers must be licensed on an annual basis by the office of the commissioner of insurance. The bill sets out the fees for initial issuance and renewal of a license, the requirements that a person must satisfy in order to obtain or renew a license and the bases upon which the commissioner of insurance (commissioner) may deny, revoke, suspend or refuse to renew a license. The bill also sets out certain requirements and prohibitions that apply to the activities of viatical settlement providers and brokers. For example, providers and brokers are prohibited from discriminating on the basis of such factors as race, age, sex, occupation and sexual orientation in the making of viatical settlements. Providers and brokers are prohibited from paying a finder's fee or other compensation to any person providing medical, legal or financial planning services to the policyholder or certificate holder of a policy or certificate that may be the subject of a viatical settlement contract. The maximum number of contacts that a provider or broker may have with the former policyholder or certificate holder after the viatical settlement has been paid are specified in the bill. Certain advertising requirements are provided.

The bill specifies certain criteria that viatical settlement contracts must satisfy. Any form that is used for a viatical settlement contract must be filed with and approved by the commissioner. If the policyholder or certificate holder is the person whose life is insured, before the contract may be executed the viatical settlement provider must obtain a written statement from the person's attending physician that the person is of sound mind and a written statement from the person that he or she acknowledges his or her catastrophic or life-threatening illness or condition, understands and consents to the viatical settlement contract, releases his or her medical records and has received financial advice regarding the effect of the settlement on creditor claims, income taxes and government benefits. The bill requires a viatical settlement provider or broker to make certain disclosures to the policyholder or certificate holder before the execution of the contract. The minimum payment that may be made under a contract is specified in the bill as a percentage of the face amount of the policy or certificate, depending on the life expectancy of the insured person.

The proceeds of a viatical settlement must be paid by the viatical settlement provider into a trust or escrow account in a bank approved by the commissioner. When the trustee or escrow agent receives acknowledgment from the insurer that the policy or certificate has been transferred to the viatical settlement provider, the trustee or escrow agent must transfer the proceeds in a lump sum to an account of the former policyholder or certificate holder. Any viatical settlement contract may be rescinded by the former policyholder or certificate holder within 30 days after the contract is entered into or 15 days after he or she has received the proceeds, whichever is sooner.

The bill exempts from the state income tax income that is received from the sale of a life insurance policy or certificate under a viatical settlement contract.

This bill will be referred to the joint survey committee on tax exemptions for a detailed analysis, which will be printed as an appendix to this bill.

For further information see the state and local fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB1020, s. 1 Section 1. 71.05 (1) (f) of the statutes is created to read:

AB1020,3,5 71.05 (1) (f) Income from the sales of certain insurance policies. Income received from the sale of a life insurance policy or certificate, or the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).

AB1020, s. 2 Section 2. 71.26 (3) (a) of the statutes is renumbered 71.26 (3) (ar).

AB1020, s. 3 Section 3. 71.26 (3) (ag) of the statutes is created to read:

AB1020,3,11 71.26 (3) (ag) Section 61 (relating to the definition of gross income) is modified to exclude income from the sale of a life insurance policy or certificate, or the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).

AB1020, s. 4 Section 4. 71.45 (2) (a) 14. of the statutes is created to read:

AB1020,3,16 71.45 (2) (a) 14. By subtracting from federal taxable income the amount that is included in that income from the sale of a life insurance policy or certificate, or the death benefit under a life insurance policy or certificate, under a viatical settlement contract, as defined in s. 632.68 (1) (d).

AB1020, s. 5 Section 5. 601.31 (1) (mm) of the statutes is created to read:

AB1020,3,19 601.31 (1) (mm) For initial issuance of a license as a viatical settlement provider under s. 632.68 (2), $750.

AB1020, s. 6 Section 6. 601.31 (1) (mp) of the statutes is created to read:

AB1020,3,22 601.31 (1) (mp) For each annual renewal of a license as a viatical settlement provider under s. 632.68 (2), $250.

AB1020, s. 7 Section 7. 601.31 (1) (mr) of the statutes is created to read:

AB1020,3,25 601.31 (1) (mr) For initial issuance of a license as a viatical settlement broker under s. 632.68 (4), $750.

AB1020, s. 8 Section 8. 601.31 (1) (ms) of the statutes is created to read:

AB1020,4,3 601.31 (1) (ms) For each annual renewal of a license as a viatical settlement broker under s. 632.68 (4), $250.

AB1020, s. 9 Section 9. 632.68 of the statutes is created to read:

AB1020,4,6 632.68 Regulation of viatical settlement contracts. (1) Definitions. In this section:

AB1020,4,8 (a) "Catastrophic or life-threatening illness or condition" includes AIDS, as defined in s. 49.486 (1) (a), and HIV infection, as defined in s. 49.486 (1) (d).

AB1020,4,15 (b) "Viatical settlement" means payment to the policyholder of a life insurance policy, or to the certificate holder of a group life insurance certificate, insuring the life of a person who has a catastrophic or life-threatening illness or condition, in an amount that is less than the expected death benefit under the policy or certificate, for assigning, selling, devising or otherwise transferring the ownership of or the death benefit under the policy or certificate to the person paying the viatical settlement.

AB1020,4,21 (c) "Viatical settlement broker" means a person that, for a fee, commission or other valuable consideration, offers or advertises the availability of viatical settlement providers or offers or attempts to negotiate viatical settlements between a life insurance policyholder or certificate holder and a viatical settlement provider. The term does not include an attorney, accountant or financial planner retained by a policyholder or certificate holder to represent the policyholder or certificate holder.

AB1020,4,23 (d) "Viatical settlement contract" means a written agreement providing for and establishing the terms of a viatical settlement.

AB1020,4,25 (e) "Viatical settlement provider" means a person that pays a viatical settlement. The term does not include any of the following:

AB1020,5,2 1. A financial institution, as defined in s. 705.01 (3), that takes an assignment of a life insurance policy or certificate as collateral for a loan.

AB1020,5,4 2. The issuer of a life insurance policy or certificate providing accelerated benefits under the policy or certificate.

AB1020,5,8 3. A natural person who enters into no more than one agreement in a year for the transfer of the ownership of or the death benefit under a life insurance policy or a group life insurance certificate for an amount that is less than the expected death benefit under the policy or certificate.

AB1020,5,13 4. A natural person who enters into an agreement for the transfer of the ownership of or the death benefit under a life insurance policy or a group life insurance certificate for an amount that is less than the expected death benefit under the policy or certificate and who is a member of the immediate family, as defined in s. 23.33 (1) (h), of the life insurance policyholder or certificate holder.

AB1020,5,20 (2) Viatical settlement provider license requirement. (a) Except as provided in sub. (1) (e) 3. and 4., no person may act as a viatical settlement provider, solicit or pay viatical settlements or enter into a viatical settlement contract with the policyholder of the life insurance policy, or the certificate holder of the group life insurance certificate, that is the subject of a viatical settlement contract unless the person obtains and has in effect a viatical settlement provider license under this subsection.

AB1020,6,2 (b) A person may apply to the commissioner for a viatical settlement provider license on a form prescribed by the commissioner for that purpose. The fee specified in s. 601.31 (1) (mm) shall accompany the application. After any investigation of the applicant that the commissioner determines is sufficient, the commissioner shall issue a viatical settlement provider license to an applicant that satisfies all of the following:

AB1020,6,3 1. Pays the applicable fee.

AB1020,6,4 2. Provides complete information on the application.

AB1020,6,5 3. Provides a detailed plan of operation.

AB1020,6,7 4. Fully discloses the identity of all stockholders, partners, officers and employes, if applicable.

AB1020,6,9 5. If a corporation, is incorporated under the laws of this state or is authorized to transact business in this state.

AB1020,6,10 6. Shows to the satisfaction of the commissioner all of the following: