Viatical and Life Settlement Laws, Legislation and Regulation
Life settlement industry was formed on the extension of Viatical Industry and was evolved in the late 1990s. Life settlement according to the Conning study was referred as the sale and purchase or transfer of the existing life insurance policy to a new owner in exchange of huge lump sum amount under the circumstances where the owner of the policy or the insured individual has an impaired life expectancy.
Currently some states fall under the laws of the life settlement but yet there have been no uniform regulation implemented for the life settlement industry. Currently the regulation used by the industry is based on the model issued by National Conference of Insurance Legislators and The National Association of Insurance Commissioners. This model was regulated and later amended in the year 2004, and the implication it includes are as follows:
- A separate provision is required for the license of the life settlement investment agent or for those who sell life settlements.
- The broker of life settlement transaction need to complete 24 hrs of education before the licensing is issued to, to maintain the ethics and continue the education on biennium basis.
- A provision is required to disclose the options to the policy holders regarding the life settlement transaction done under some circumstances.
- A provision is also required for the prohibition of the person to enter into a transaction if the policy that is obtained and kept on sale is acquired by false or deceptive means.
Life Settlement Regulation By States:
Life Settlement Regulation is implemented on each state but they vary from state to state on the basis of the conditions and circumstances prevailing in each state. In the state if any financial representative that is acting on behalf of the seller of the policy then he must be licensed from the state where the policy owner resides. On the other condition if the policy is owned by a trust, the required licensing and regulations that is implicated by the state are to be followed by the current trust and where is resides or the trust is domiciled. Each state has it own procedures and rules to allow one to practice the transaction procedure done for life settlement and they differ from state to state. But still a non resident of a particular state can obtain the license of that state if their home state government allows a non resident of their state to obtain the license on the same basis.
How life settlement brokers, providers and advisors are regulated?
There are several aspects that surround the agents of the life settlement transaction. Before they start working on as an agent in the form of either as advisor or broker or provider they have to follow some procedures regulated on them and thus get through training to get a license so that they can assist the policy owners if they desire for a life settlement transaction. The regulation specifies the duties of the agents and the restriction created on their work area. It also includes regulation for examination, bond or letter of credit, their fees, contracts, record retention how to maintain the standard of conduct. The regulation also claims that the agent can only act or bid on the benefit of the policy owner if it claims to do so.