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2. At the time the disclosures in subd. 1. are provided, the broker or provider
17shall provide to the owner a brochure describing the process of life settlements that
18is approved by the commissioner.
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(b) A provider shall disclose to the owner, either conspicuously displayed in the
20life settlement contract or in a separate document signed by the owner, at least all
21of the following information no later than the date the life settlement contract is
22signed by all parties:
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1. The affiliation, if any, between the provider and the issuer of the policy to be
24settled.
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2. The name, business address, and telephone number of the provider.
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13. Any affiliation or contractual arrangements between the provider and the
2purchaser.
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4. If a policy to be settled has been issued as a joint policy or involves family
4riders or any coverage of a life other than that of the insured under the policy to be
5settled, the possible loss of coverage on the other lives under the policy, together with
6a statement advising the owner to consult with the insurer issuing the policy for
7advice concerning the proposed life settlement.
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5. The dollar amount of the current death benefit that will be payable to the
9provider under the policy. If known, the provider shall also disclose the availability
10of any additional guaranteed insurance benefits, the dollar amount of any accidental
11death and dismemberment benefits under the policy, and the extent to which the
12owner's interest in those benefits will be transferred as a result of the life settlement
13contract.
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6. That the funds will be escrowed with an independent 3rd party during the
15transfer process; the name, business address, and telephone number of the
16independent 3rd party escrow agent; and that the owner may inspect or receive
17copies of the relevant escrow or trust agreements or documents.
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(c) A broker shall disclose to the owner, either conspicuously displayed in the
19life settlement contract or in a separate document signed by the owner, at least all
20of the following information no later than the date the life settlement contract is
21signed by all parties:
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1. The name, business address, and telephone number of the broker.
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2. A full, complete, and accurate description of all offers, counteroffers,
24acceptances, and rejections related to the proposed life settlement contract.
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13. A written statement of any affiliation or contractual arrangement between
2the broker and any person making an offer in connection with the proposed life
3settlement contract.
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4. The amount of the broker's compensation, including anything of value paid
5or given to the broker for the placement of the policy.
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5. If any portion of the broker's compensation is taken from a proposed life
7settlement, the total amount of the life settlement offer and the percentage of the life
8settlement comprised by the broker's compensation.
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(d) If the provider transfers ownership or changes the beneficiary of the policy,
10the provider shall communicate in writing the change in ownership or beneficiary to
11the insured within 20 days after the change.
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12(9) Disclosures to purchaser. (a) 1. A provider shall disclose to a purchaser,
13conspicuously displayed in the purchase agreement or in a separate document signed
14by the purchaser and provider, at least all of the following information prior to the
15date the purchase agreement is signed by all parties:
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a. That the purchaser will receive no returns, including dividends and interest,
17until the insured dies and a death claim payment is made.
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b. That the actual rate of return on a life settlement contract is dependent upon
19an accurate projection of the insured's life expectancy and the actual date of the
20insured's death and that an annual guaranteed rate of return is not determinable.
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c. That the settled policy should not be considered a liquid purchase since it is
22impossible to predict the exact timing of its maturity and the funds are not available
23until the death of the insured and that there is no established secondary market for
24resale of a settled policy by the purchaser.
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1d. That the purchaser may lose all benefits or may receive substantially
2reduced benefits if the insurer goes out of business during the contract term of the
3life settlement investment.
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e. That the purchaser is responsible for payment of the insurance premiums
5or other costs related to the policy, if required by the terms of the purchase
6agreement, even if the insured returns to health, and that the payments may reduce
7the purchaser's return. If a party other than the purchaser is responsible for the
8payment, the name and address of the party responsible for payment shall be
9disclosed.
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f. The amount of the premiums, if applicable.
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g. The name, business address, and telephone number of the independent 3rd
12party providing escrow services and any relationship to the broker.
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h. The amount of any trust fees or expenses to be charged the purchaser.
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i. Whether the purchaser is entitled to a refund of all or part of the purchaser's
15investment under the purchase agreement if the policy is later determined to be null
16and void.
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j. That group policies may contain limitations or caps in the conversion rights,
18that additional premiums may have to be paid if the policy is converted, the name
19of the party responsible for payment of any additional premiums, and that if a group
20policy is terminated and replaced by another group policy, there may be no right to
21convert the original coverage.
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k. The risks associated with policy contestability, including the risk that the
23purchaser will have no claim or only a partial claim to death benefits should the
24insurer rescind the policy within the contestability period.
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1L. Whether the purchaser will be the owner of the policy in addition to being
2the beneficiary, and if the purchaser is the beneficiary only and not also the owner,
3the special risks associated with that status, including the risk that the beneficiary
4may be changed or the premium may not be paid.
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m. The experience and qualifications of the person who determines the life
6expectancy of the insured, including in-house staff, independent physicians, and
7specialty firms that weigh medical and actuarial data, the information the projection
8is based on, and the relationship of the projection maker to the provider, if any.
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2. At the time the disclosures in subd. 1. are provided, the provider shall provide
10to the purchaser a brochure approved by the commissioner describing the process of
11the purchase of a settled policy.
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(b) A provider shall disclose to a purchaser, in a document signed by the
13purchaser and provider, at least all of the following no later than at the time of the
14assignment, transfer, or sale of all of or an interest in a policy:
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1. All the life expectancy certifications obtained by the provider in the process
16of determining the price to be paid to the owner.
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2. Whether the premium payments or other costs related to the policy have
18been escrowed and, if so, the date upon which the escrowed funds will be depleted,
19whether the purchaser will be responsible for payment of premiums after the
20depletion of escrowed funds, and the amount of the premium if the purchaser is
21responsible for payment.
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3. Whether the premiums or other costs related to the policy have been waived
23and, if so, whether the purchaser will be responsible for payment of the premiums
24if the insurer that issued the policy terminates the waiver after purchase and, if so,
25the amount of the premiums.
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14. Whether the type of policy offered or sold is whole life, term life, universal
2life, a group policy, or another type of policy, any additional benefits contained in the
3policy, and the current status of the policy.
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5. If the policy is term insurance, the special risks associated with term
5insurance including the purchaser's responsibility for additional premiums if the
6owner continues the term policy at the end of the current term.
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6. Whether the policy is contestable.
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7. Whether the insurer that issued the policy has any additional rights that
9could negatively affect or extinguish the purchaser's rights under the purchase
10agreement and, if so, what those rights are and under what conditions those rights
11are activated.
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8. The name and address of the person responsible for monitoring the insured's
13condition, how often the monitoring is done, how the date of death is determined, and
14how and when the information will be transmitted to the purchaser.
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15(10) Disclosure to insurer. Before initiating a plan, transaction, or series of
16transactions, a broker or provider shall fully disclose to the insurer a plan,
17transaction, or series of transactions to which the broker or provider is a party to
18originate, renew, continue, or finance a policy with the insurer for the purpose of
19engaging in the business of life settlements at any time prior to, or during the first
205 years after, issuance of the policy.
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21(11) General requirements. (a) 1. Before entering into a life settlement
22contract, a provider shall obtain all of the following:
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a. If the owner is the insured, a written statement from a licensed attending
24physician that the owner is of sound mind and under no constraint or undue
25influence to enter into a life settlement contract.
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1b. A document in which the insured consents to the release of his or her medical
2records to a licensed provider, licensed broker, and the insurer that issued the policy
3covering the life of the insured.
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2. Within 20 days after an owner executes documents necessary to transfer any
5rights under a policy or within 20 days after the owner enters any agreement, option,
6promise, or any other form of understanding, express or implied, to settle the policy,
7the provider shall give written notice to the insurer that issued the policy that the
8policy has or will become a settled policy.
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3. The provider shall deliver a copy of the medical release required under subd.
101. b., a copy of the owner's application for the life settlement contract, the notice
11required under subd 2., and a request for verification of coverage to the insurer that
12issued the policy that is the subject of the life settlement. The provider shall use a
13form created by the National Association of Insurance Commissioners for
14verification of coverage unless the commissioner develops and approves another
15form.
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4. The insurer shall respond to a request for verification of coverage that is
17submitted on an approved form by a provider or broker within 30 calendar days after
18the date the request is received and shall indicate whether, based on the medical
19evidence and documents provided, the insurer intends to pursue an investigation
20regarding the validity of the insurance contract or possible fraud. The insurer shall
21accept a request for verification of coverage made on a form created by the National
22Association of Insurance Commissioners or any other form approved by the
23commissioner, and shall accept an original, facsimile, or electronic copy of the
24request and any accompanying signed authorization.
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15. Before or at the time of execution of the life settlement contract, the provider
2shall obtain a witnessed document in which the owner does all of the following:
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a. Consents to the life settlement contract.
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b. Represents that he or she has a complete understanding of the life settlement
5contract.
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c. Represents that he or she has a complete understanding of the benefits of the
7policy.
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d. Acknowledges that he or she is entering into the life settlement contract
9freely and voluntarily.
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e. If applicable, acknowledges that the insured has a terminal or chronic illness
11and that the terminal or chronic illness or condition was diagnosed after the policy
12was issued.
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6. If a broker performs any of the activities required in subd. 1., 2., 3., or 5., the
14provider shall be considered to have performed that activity.
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(b) All medical information solicited or obtained by any licensee shall be subject
16to the applicable provisions of state law relating to confidentiality of medical
17information, including s. 610.70.
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(c) All life settlement contracts entered into in this state shall provide the
19owner with an absolute right to rescind the contract before the earlier of 30 calendar
20days after the date on which the life settlement contract is executed by all parties or
2115 calendar days after the life settlement proceeds have been sent to the owner as
22provided in par. (d). Rescission by the owner may be conditioned upon the owner both
23giving notice and repaying to the provider, within the rescission period, all proceeds
24of the settlement and any premiums, loans, and loan interest paid by or on behalf of
25the provider in connection with or as a consequence of the life settlement. If the
1insured dies during the rescission period, the life settlement contract is rescinded,
2subject to repayment, within 60 calendar days after the death of the insured, by the
3owner or the owner's estate to the provider or purchaser of all life settlement
4proceeds and any premiums, loans, and loan interest that have been paid by the
5provider or purchaser. If a life settlement contract is rescinded under this
6paragraph, ownership of the policy shall revert to the owner or the owner's estate if
7the owner is deceased, irrespective of any transfer of ownership of the policy by the
8owner, provider, or any other person. In the event of any rescission, if the provider
9has paid commissions or other compensation to a broker in connection with the
10rescinded life settlement contract, the broker shall refund the commissions and
11compensation to the provider within 5 business days following receipt of written
12demand from the provider, which demand shall be accompanied by the applicable
13document initiating the rescission within the rescission period, either the owner's
14notice of rescission or the notice of death of the insured.
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(d) The provider shall instruct the owner to send the executed documents
16required to effect the change in ownership, assignment, or change in beneficiary
17directly to the independent escrow agent. Within 3 business days after the date the
18independent escrow agent receives the documents, or after the date the provider
19receives the documents if the owner erroneously provides the documents directly to
20the provider, the provider shall pay or transfer the proceeds of the life settlement into
21an escrow or trust account that is maintained in a state or federally chartered
22financial institution whose deposits are insured by the Federal Deposit Insurance
23Corporation and managed by an independent trustee or escrow agent. Upon
24payment of the life settlement proceeds into the escrow account, the independent
25escrow agent shall deliver the original change in ownership, assignment, or change
1in beneficiary form to the provider or related provider trust or other designated
2representative of the provider. Upon the escrow agent's receipt of acknowledgement
3of the properly completed transfer of ownership, assignment, or designation of
4beneficiary from the insurer, the independent escrow agent shall pay the life
5settlement proceeds to the owner.
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(e) Failure to tender the life settlement proceeds to the owner within the time
7set forth in the disclosure under sub. (8) (a) 1. g., renders the life settlement contract
8voidable by the owner for lack of consideration until the time the proceeds are
9tendered to and accepted by the owner. Funds are sent by a provider to an owner as
10of the date that the escrow agent either releases funds for wire transfer to the owner
11or places a check for delivery to the owner via the U.S. postal service or other
12nationally recognized delivery service.
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(f) For the purpose of determining the health status of the insured after the life
14settlement has occurred, only the provider or broker licensed in this state or a person
15it authorizes may contact the insured. Contact with the insured shall be limited to
16once every 3 months for an insured with a life expectancy of more than one year, and
17to no more than once per month for an insured with a life expectancy or one year or
18less. The provider or broker shall explain the procedure for the contacts to the owner
19at the time the life settlement contract is entered into. The limitations in this
20paragraph do not apply to any contacts with an insured for reasons other than
21determining the insured's health status. Providers and brokers shall be responsible
22for the actions of a person they authorize to make the contact.
SB513,42,2
23(12) Prohibited contracts; required form; acknowledgement; fiduciary duty. 24(a) No person may enter into a life settlement contract at any time before the
25application or issuance of a policy that is the subject of a life settlement contract or
1within a 5-year period commencing with the date of issuance of the policy unless any
2of the following conditions have been met:
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1. The owner certifies to the provider that, within the 5-year period, the policy
4was issued upon the owner's exercise of conversion rights arising out of a group or
5individual policy, provided the total of the time covered under the conversion policy
6plus the time covered under the prior policy is at least 60 months. The time covered
7under the group policy shall be calculated without regard to any change in insurance
8carriers, if the coverage has been continuous and under the same group sponsorship.
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2. The owner submits independent evidence to the provider that any of the
10following conditions have been met within the 5-year period:
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a. The owner or insured is terminally or chronically ill.
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b. The owner's spouse or child dies.
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c. The owner divorces his or her spouse.
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d. The owner retires from full-time employment.
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e. The owner becomes physically or mentally disabled and a physician
16determines that the disability prevents the owner from maintaining full-time
17employment.
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f. A final order, judgment, or decree is entered by a court of competent
19jurisdiction, on the application of a creditor of the owner, adjudicating the owner
20bankrupt or insolvent, approving a petition seeking reorganization of the owner, or
21appointing a receiver, trustee, or liquidator to all or a substantial part of the owner's
22assets.
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g. The sole beneficiary of the policy is a family member of the owner and the
24beneficiary dies.
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1h. The owner is a charitable organization with an insurable interest that has
2received from the federal Internal Revenue Service a determination letter that is
3currently in effect stating that the charitable organization is described in section
501 4(c) (3) of the Internal Revenue Code and is exempt from federal income taxation
5under section
501 (a) of the Internal Revenue Code.
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i. The owner or insured disposes of ownership interests in a closely held
7corporation pursuant to the terms of a buyout or other similar agreement in effect
8at the time the policy was initially issued.
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j. Other circumstances exist that are established as eligible exemptions by the
10commissioner by rule, including substantial adverse financial circumstances or
11other factors substantially affecting the owner.
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3. The owner certifies to the provider that the owner is entering into a life
13settlement contract more than 2 years after the date of issuance of a policy and, with
14respect to the policy, at all times before the date that is 2 years after policy issuance
15all of the following conditions are met:
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a. Policy premiums are funded exclusively with unencumbered assets,
17including an interest in the policy being financed only to the extent of its net cash
18surrender value, provided by, or full recourse liability incurred by, the owner or a
19person described in sub. (1) (j) 2. e.
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b. There is no agreement or understanding with any other person to guarantee
21any liability or to purchase, or stand ready to purchase, the policy, including through
22an assumption or forgiveness of a loan.
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c. Neither the insured nor the policy has been evaluated for settlement.
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(b) Copies of the independent evidence described in par. (a) 2. and documents
25required by sub. (11) (a) shall be submitted to the insurer when the provider entering
1into a life settlement contract with an owner submits a request to the insurer for
2verification of coverage. The provider shall submit, along with the copies, a letter of
3attestation from the provider that the copies are true and correct copies of the
4documents received by the provider.
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(c) If the provider submits to the insurer a copy of the owner's certification
6under par. (a) 1. or 3. or independent evidence under par. (a) 2. when the provider
7submits a request to the insurer to effect the transfer of the policy to the provider,
8the copy conclusively establishes that the life settlement contract satisfies the
9requirements of this subsection and the insurer shall timely respond to the request.
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(d) No insurer may, as a condition of responding to a request for verification of
11coverage or effecting the transfer of a policy pursuant to a life settlement contract,
12require that the owner, insured, provider, or broker sign any form, disclosure,
13consent, or waiver that has not been expressly approved by the commissioner for use
14in connection with life settlement contracts in this state.
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(e) Upon receipt of a properly completed request for change of ownership or
16beneficiary of a policy, the insurer shall respond in writing within 30 calendar days
17with acknowledgement confirming that the change has been effected or specifying
18the reasons why the requested change cannot be processed.
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(f) A broker represents only the owner and owes a fiduciary duty to the owner
20to act according to the owner's instructions and in the best interest of the owner,
21notwithstanding the manner in which the broker is compensated.
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22(13) Prohibited practices and conflicts of interest. (a) No person may enter
23into a life settlement contract if the person knows or reasonably should have known
24that the policy that is the subject of the life settlement contract was obtained by
25means of a false, deceptive, or misleading application for the policy.
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1(b) No person may engage in any transaction, practice, or course of business if
2the person knows or reasonably should know that the intent is to avoid the notice
3requirements of this section.
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(c) No person may engage in any fraudulent act or practice in connection with
5any transaction relating to any life settlement involving an owner.
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(d) No person may issue, solicit, market, or otherwise promote the purchase of
7a policy for the primary purpose of or with a primary emphasis on settling the policy.
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(e) No person may enter into a premium finance agreement with any person
9or agency, or any person affiliated with such person or agency, pursuant to which the
10person who is providing premium financing receives any proceeds, fees, or other
11consideration, directly or indirectly, from the policy or owner of the policy or any other
12person with respect to the premium finance agreement or any life settlement
13contract or other transaction related to the policy that is in addition to the amounts
14required to pay the principal, interest, and service charges related to policy
15premiums pursuant to the premium finance agreement or subsequent sale of the
16agreement. Any payments, charges, fees, or other amounts in addition to the
17amounts required to pay the principal, interest, and service charges related to policy
18premiums paid under the premium finance agreement shall be remitted to the
19original owner of the policy or to the owner's estate if the owner is not living at the
20time of the determination of the overpayment.
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(f) With respect to any life settlement contract or policy, no broker may
22knowingly solicit an offer from, effectuate a life settlement with, or make a sale to
23any provider, purchaser, financing entity, or related provider trust that is controlling,
24controlled by, or under common control with the broker unless the relationship is
25disclosed to the owner.
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1(g) With respect to any life settlement contract or policy, no provider may
2knowingly enter into a life settlement contract with an owner, if, in connection with
3the life settlement contract, anything of value will be paid to a broker that is
4controlling, controlled by, or under common control with the provider or the
5purchaser, financing entity, or related provider trust that is involved in the life
6settlement contract unless the relationship is disclosed to the owner.
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(h) No life settlement promotional, advertising, or marketing materials may
8represent that the insurance is "free" for any period of time, or include any reference
9that would cause an owner to reasonably believe that the insurance is free for any
10period of time.
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(i) No producer, insurer, broker, or provider may make any statement or
12representation to an applicant or policyholder in connection with the sale or
13financing of a policy to the effect that the insurance is free or without cost to the
14policyholder for any period of time unless provided in the policy.