CCS/SCS/HB 259 - This act regulates "viatical settlements", which are the sale of life insurance policies by people who have life-threatening illnesses.

LICENSES - The Department of Insurance shall license persons and businesses who buy life insurance policies from people who have a catastrophic or life-threatening illness or condition. License fees for providers, brokers and representatives are $100 per year. The Director shall investigate applicants, and shall issue license if requirements met. Nonresident applicants must file written designation of agent for service of process or written irrevocable consent that actions against applicant may be commenced by service of process on the Director.

The Director shall maintain list of all viatical providers, brokers and representatives with licenses or pending licensure applications, which shall be available for public inspection. Places responsibility of a viatical representative on the provider or broker under whose license the representative works. The Director may suspend, revoke or refuse to renew licenses, provided a hearing is first conducted. Licenses may be refused if the Director finds that the applicant does not meet the standards set (honest, good business reputation, no criminal convictions involving fraud, no violation of statutes).

CONTRACT APPROVAL - No viatical settlement provider may use a contract unless it is first filed with and approved by the Director, who must act within sixty days. Contracts shall be disapproved if provisions are unreasonable, not in compliance or otherwise misleading or unfair.

ANNUAL STATEMENTS - Licensees must file annual statements by March 31.

EXAMINATIONS - The Director may examine any licensee or applicant. Expenses shall be paid by the licensee or applicant. Data collected shall be confidential. Records of all viatical settlement transactions shall be maintained.

DISCLOSURES - The viatical settlement provider shall disclose certain information to the viator, including possible alternatives, tax consequences, possible effect on public assistance, and the right to rescind within 30 days.

PROCEDURES - The provider buying the life insurance policy must obtain a physician's statement and the knowledgeable consent of the policy owner as documented in a witnessed document. Medical records that are released must be kept confidential. A refund provision shall be included in the contract. Settlement proceeds shall be handled by an escrow agent. Failure to tender payment by the date disclosed voids the contract. Funds received by viator are not Missouri taxable income.

VIOLATIONS - Violations of this act shall be considered unfair trade practices and punished accordingly. The Director may prosecute violations in consultation with the Director of Securities.

EXISTING PROVIDERS - An existing viatical settlement provider or broker may continue to operate pending review of the applicant's license, if an application is filed with the Director prior to September 1, 1997. No existing viatical settlement provider may continue to operate after August 28, 1997, unless it is in compliance with statutes.

EXEMPTIONS - Exempts variable life insurance, individual and group annuity contracts, credit life insurance and life insurance policies with no individual illustrated death benefits in excess of ten thousand dollars.

ILLUSTRATION FORMS - Insurers shall notify Department whether policy forms are to be marketed with illustration. Potential enrollees of nonterm group life shall be furnished a quotation with enrollment materials. Illustrations used in sales of life insurance policy shall contain certain information. Insurer shall not engage in certain conduct, including misrepresenting policy, using misleading illustration, the term "vanishing premium" or an illustration that is not "self- supporting".

Contains requirements for basic illustrations, which include identification of the following: assumed payments on which the benefits are based, guaranteed death benefits and values available upon surrender, nonguaranteed elements, accumulation value of a policy, policy benefits and values in chart form, and charge required to allow policy charges to be paid using nonguaranteed values. Basic illustrations shall contain a narrative summary as well as a numeric summary of the death benefits and values. Numeric summary page shall also contain statement signed by applicant indicating understanding of nonguaranteed elements. Supplemental illustrations may be provided as long as it is accompanied by basic illustration, and information is consistent with basic illustration.

A copy of a basic illustration used in sale of policy must be submitted to the insurer and provided to the applicant at the time of policy application. If policy issued differs from one applied for, revised basic illustration must be submitted. If no illustration is used, form shall be signed by both parties and basic illustration shall be sent with the policy. Insurer shall provide annual report to each owner of policy with illustrations, containing certain required information. If no illustration is included, notice stating that owner should require more detailed information shall be included.

The Board of Directors for each insurer shall appoint one or more illustration actuaries, who shall meet standards set (competent, trustworthy, good business reputation). Duties of illustration actuary shall include informing Director of action taken in another state against the actuary; disclose inconsistencies in current payable scales, nonguaranteed elements, method used to allocated expenses; and file certifications with board and Director or notify both why unable to certify. Another responsible officer shall annually certify that the illustration formats and scales are correct and that the expense allocation method has been disclosed. Violations of the statutes shall be considered unfair trade practices.

SECURITIES - Transactions in a viatical settlement contract are included in the definition of a security.

DATE OF ISSUANCE - The Director may change a broker/agent's anniversary date of issuance of one license one time to coincide with the date of issuance of the other license.

RULES - Substantive rulemaking authority under this section and rules promulgated under such authority shall expire on August 31, 1998. If challenged, the agency must demonstrate by a preponderance of the evidence that the rule is valid, authorized by law, not in conflict with any law and is not arbitrary and capricious. This provision shall terminate if legislation amending Section 536.024 has been signed into law prior to effective date of this act.

Portions of this act are similar to the original version of SB 31.
JOAN GUMMELS