LRB-5568/1
PJK&JS:kmg:ks
1995 - 1996 LEGISLATURE
March 13, 1996 - Introduced by Senators Rosenzweig, Schultz, Buettner, Rude,
Burke, Grobschmidt, Darling, Clausing, Panzer, Risser and Chvala,
cosponsored by Representatives
Baldwin, Jensen, Albers, Foti, Goetsch,
Gard, Underheim, Bock, Meyer, Ainsworth, Brandemuehl, Duff, Murat,
Wasserman, Walker, Wood, Gunderson, Hanson, Baldus, Musser, Ourada,
Carpenter, Coggs, Cullen, Hasenohrl, Huebsch, Kelso, Klusman, Kreibich,
Kreuser, Krug, F. Lasee, Lazich, Notestein, Otte, Owens, Plombon, R.
Potter, Riley, Robson, Seratti, Springer, Vrakas, L. Young, R. Young and
Ziegelbauer. Referred to Joint survey committee on Tax Exemptions.
SB621,1,6
1An Act to renumber 71.26 (3) (a); and
to create 71.05 (1) (f), 71.26 (3) (ag), 71.45
2(2) (a) 14., 601.31 (1) (mm), 601.31 (1) (mp), 601.31 (1) (mr), 601.31 (1) (ms) and
3632.68 of the statutes;
relating to: regulation of viatical settlement contracts,
4exempting from the income tax income that is received from the sale of a life
5insurance policy under a viatical settlement contract and granting
6rule-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:
SB621, s. 1
1Section
1. 71.05 (1) (f) of the statutes is created to read:
SB621,3,52
71.05
(1) (f)
Income from the sales of certain insurance policies. Income received
3from the sale of a life insurance policy or certificate, or the death benefit under a life
4insurance policy or certificate, under a viatical settlement contract, as defined in s.
5632.68 (1) (d).
SB621, s. 2
6Section
2. 71.26 (3) (a) of the statutes is renumbered 71.26 (3) (ar).
SB621, s. 3
7Section
3. 71.26 (3) (ag) of the statutes is created to read:
SB621,3,118
71.26
(3) (ag) Section 61 (relating to the definition of gross income) is modified
9to exclude income from the sale of a life insurance policy or certificate, or the death
10benefit under a life insurance policy or certificate, under a viatical settlement
11contract, as defined in s. 632.68 (1) (d).
SB621, s. 4
12Section
4. 71.45 (2) (a) 14. of the statutes is created to read:
SB621,3,1613
71.45
(2) (a) 14. By subtracting from federal taxable income the amount that
14is included in that income from the sale of a life insurance policy or certificate, or the
15death benefit under a life insurance policy or certificate, under a viatical settlement
16contract, as defined in s. 632.68 (1) (d).
SB621, s. 5
17Section
5. 601.31 (1) (mm) of the statutes is created to read:
SB621,3,1918
601.31
(1) (mm) For initial issuance of a license as a viatical settlement
19provider under s. 632.68 (2), $750.
SB621, s. 6
20Section
6. 601.31 (1) (mp) of the statutes is created to read:
SB621,3,2221
601.31
(1) (mp) For each annual renewal of a license as a viatical settlement
22provider under s. 632.68 (2), $250.
SB621, s. 7
23Section
7. 601.31 (1) (mr) of the statutes is created to read:
SB621,3,2524
601.31
(1) (mr) For initial issuance of a license as a viatical settlement broker
25under s. 632.68 (4), $750.
SB621, s. 8
1Section
8. 601.31 (1) (ms) of the statutes is created to read:
SB621,4,32
601.31
(1) (ms) For each annual renewal of a license as a viatical settlement
3broker under s. 632.68 (4), $250.
SB621, s. 9
4Section
9. 632.68 of the statutes is created to read:
SB621,4,6
5632.68 Regulation of viatical settlement contracts. (1) Definitions. In
6this section:
SB621,4,87
(a) "Catastrophic or life-threatening illness or condition" includes AIDS, as
8defined in s. 49.486 (1) (a), and HIV infection, as defined in s. 49.486 (1) (d).
SB621,4,159
(b) "Viatical settlement" means payment to the policyholder of a life insurance
10policy, or to the certificate holder of a group life insurance certificate, insuring the
11life of a person who has a catastrophic or life-threatening illness or condition, in an
12amount that is less than the expected death benefit under the policy or certificate,
13for assigning, selling, devising or otherwise transferring the ownership of or the
14death benefit under the policy or certificate to the person paying the viatical
15settlement.
SB621,4,2116
(c) "Viatical settlement broker" means a person that, for a fee, commission or
17other valuable consideration, offers or advertises the availability of viatical
18settlement providers or offers or attempts to negotiate viatical settlements between
19a life insurance policyholder or certificate holder and a viatical settlement provider.
20The term does not include an attorney, accountant or financial planner retained by
21a policyholder or certificate holder to represent the policyholder or certificate holder.
SB621,4,2322
(d) "Viatical settlement contract" means a written agreement providing for and
23establishing the terms of a viatical settlement.
SB621,4,2524
(e) "Viatical settlement provider" means a person that pays a viatical
25settlement. The term does not include any of the following:
SB621,5,2
11. A financial institution, as defined in s. 705.01 (3), that takes an assignment
2of a life insurance policy or certificate as collateral for a loan.
SB621,5,43
2. The issuer of a life insurance policy or certificate providing accelerated
4benefits under the policy or certificate.
SB621,5,85
3. A natural person who enters into no more than one agreement in a year for
6the transfer of the ownership of or the death benefit under a life insurance policy or
7a group life insurance certificate for an amount that is less than the expected death
8benefit under the policy or certificate.
SB621,5,139
4. A natural person who enters into an agreement for the transfer of the
10ownership of or the death benefit under a life insurance policy or a group life
11insurance certificate for an amount that is less than the expected death benefit under
12the policy or certificate and who is a member of the immediate family, as defined in
13s. 23.33 (1) (h), of the life insurance policyholder or certificate holder.
SB621,5,20
14(2) Viatical settlement provider license requirement. (a) Except as provided
15in sub. (1) (e) 3. and 4., no person may act as a viatical settlement provider, solicit or
16pay viatical settlements or enter into a viatical settlement contract with the
17policyholder of the life insurance policy, or the certificate holder of the group life
18insurance certificate, that is the subject of a viatical settlement contract unless the
19person obtains and has in effect a viatical settlement provider license under this
20subsection.
SB621,6,221
(b) A person may apply to the commissioner for a viatical settlement provider
22license on a form prescribed by the commissioner for that purpose. The fee specified
23in s. 601.31 (1) (mm) shall accompany the application. After any investigation of the
24applicant that the commissioner determines is sufficient, the commissioner shall
1issue a viatical settlement provider license to an applicant that satisfies all of the
2following:
SB621,6,33
1. Pays the applicable fee.
SB621,6,44
2. Provides complete information on the application.
SB621,6,55
3. Provides a detailed plan of operation.
SB621,6,76
4. Fully discloses the identity of all stockholders, partners, officers and
7employes, if applicable.
SB621,6,98
5. If a corporation, is incorporated under the laws of this state or is authorized
9to transact business in this state.
SB621,6,1010
6. Shows to the satisfaction of the commissioner all of the following:
SB621,6,1411
a. If a natural person, that the applicant is competent and trustworthy, or, if
12a partnership, corporation or limited liability company, that all partners, members,
13directors or principal officers or persons in fact having comparable powers are
14competent and trustworthy.
SB621,6,1815
b. If a natural person, that the applicant has the intent in good faith to do
16business as a viatical settlement provider, or, if a partnership, corporation or limited
17liability company, that the applicant has that intent and has included that purpose
18in the articles of association, incorporation or organization.
SB621,6,2419
c. That the applicant has a good business reputation and, if a natural person,
20has had experience, training or education that qualifies the applicant to be a viatical
21settlement provider, or, if a partnership, corporation or limited liability company,
22that all partners, members, directors or principal officers or persons in fact having
23comparable powers have had experience, training or education that qualifies the
24applicant to be a viatical settlement provider.
SB621,7,6
17. If a nonresident, files with the commissioner a written designation of the
2applicant's agent in this state for service of process or executes in a form acceptable
3to the commissioner an agreement to be subject to the jurisdiction of the
4commissioner and the courts of this state on any matter related to the applicant's
5viatical settlement activities in this state, on the basis of service of process under ss.
6601.72 and 601.73.
SB621,7,137
(c) If the commissioner denies an application for a license under this
8subsection, the applicant may, within 20 days after receiving notice of the denial,
9demand a hearing. The demand shall be in writing and shall be served on the
10commissioner by delivering a copy to the commissioner or by leaving it at the
11commissioner's office. The commissioner shall hold a hearing not less than 10 days
12nor more than 30 days after service of the demand. Failure to demand a hearing
13within the required time constitutes waiver of a hearing.
SB621,7,1914
(d) A license issued under this subsection to a partnership, corporation or
15limited liability company authorizes all partners, members, directors or principal
16officers or persons in fact having comparable powers to act as a viatical settlement
17provider under the license. All persons acquiring authority under this paragraph to
18act under the license shall be named in the application and any supplements to the
19application.
SB621,7,2220
(e) Except as provided in sub. (3), a license issued under this subsection shall
21be renewed annually on the anniversary date upon payment of the fee specified in
22s. 601.31 (1) (mp).
SB621,7,25
23(3) Viatical settlement provider license revocation. The commissioner may
24revoke, suspend or refuse to renew a viatical settlement provider license if, after a
25hearing, the commissioner finds any of the following:
SB621,8,1
1(a) That the licensee misrepresented information in the application.
SB621,8,42
(b) That the licensee has engaged in fraudulent or dishonest practices or is
3otherwise shown to be untrustworthy or incompetent to act as a viatical settlement
4provider.
SB621,8,75
(c) That the licensee has failed to meet the minimum settlement payment
6requirements under sub. (9) (c) or has demonstrated a pattern of making
7unreasonable payments to policyholders or certificate holders.
SB621,8,108
(d) Notwithstanding ss. 111.321, 111.322 and 111.335, that the licensee has
9been convicted of a misdemeanor or felony involving fraud, deceit or
10misrepresentation.
SB621,8,1111
(e) That the licensee has violated any provision of this section.
SB621,8,15
12(4) Viatical settlement broker license and other requirements. (a) Except
13as provided in sub. (1) (c), no person may act as a viatical settlement broker unless
14the person obtains and has in effect a viatical settlement broker license under this
15subsection.
SB621,8,1816
(b) A person may apply to the commissioner for a viatical settlement broker
17license on a form prescribed by the commissioner for that purpose. The fee specified
18in s. 601.31 (1) (mr) shall accompany the application.