The life insurance settlement industry is highly regulated to protect the interest of investors, as well as those insured. However, strict governance also comes with a very fluid regulatory landscape that can be difficult to keep up with. In this blog, we’ll discuss legislation that has been passed concerning life settlements in 2021, as well as other trends and changes we expect to see for the rest of the year.
State Life Settlement Laws & Trends
There are currently six states within the union that have no regulation surrounding viatical and life settlements - Alabama, Hawaii, South Carolina, South Dakota, Wyoming, and Missouri. Even though there are no state regulations, those engaging in the practice must abide by all federal legislation. There are a few states that have introduced new life settlement laws in 2021.
New York Insurance Law § 7801
The New York Office of General Counsel oversees insurance of all forms within the state. Recently, the office has created a few guidelines surrounding the marketing and advertising of viatical settlement. Specifically, viators must confirm to the following standards:
- All advertising material by viatical settlement companies or brokers shall be subject to the applicable provisions of Part 219 of this Title
- Advertising material by viatical settlement companies or brokers which presents any statement identifying or describing any advantage or benefit of making a contract of viatical settlement shall:
- Include a statement that receipt of payment associated with a viatical settlement may affect eligibility for public assistance
- Include a statement that receipt of payment associated with a viatical settlement may be taxable
- Include a statement that the viator has a right to rescind a viatical settlement within 15 days of receipt of the settlement proceeds
To comply with these local laws, viatical settlement companies must follow the above guidelines in order to avoid fees or additional consequences.
Iowa Code 508E.10
As of 2021, state law requires that viatical settlement providers must first obtain the following before entering into a viatical settlement contract:
- A letter from a licensed physician from a licensed attending physician that the viator is of sound mind and under no constraint or undue influence to enter into a viatical settlement contract.
- A document in which the insured consents to the release of the insured’s medical records to a licensed viatical settlement provider, viatical settlement broker, and if the policy was issued less than two years from the date of application for a viatical settlement contract, the insurance company that issued the life insurance policy covering the life of the insured.
Ultimately, this legislation protects those going into viatical and life settlements from being coerced or agree to a settlement under otherwise unfavorable conditions.
Federal Life Settlement Laws & Trends
While life and viatical settlement companies are generally more impacted by state legislation, it is important to keep an eye on changing federal laws as well. However, new legislation has not been introduced so far in 2021. May states have introduced a waiting period from when you purchase a policy to when you’re allowed to sell it. This period ranges from two years to five years, depending on the specific state. However, it can be waived under certain circumstances. It is possible that the federal government may impose a standardized federal waiting period to avoid confusion across state lines.
For the interest of everyone involved, viators and viatical settlement companies will need to ensure they are in accordance with state and federal law at all times. Staying up to date with these regulatory laws will ensure compliance across all fronts. Be sure to read the LISA blog for more information about changing life settlement federally, as well as law changes in states across the country.
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