The Commissioner of Insurance adopts amendments to §§3.1701 - 3.1703, 3.1705, 3.1707 - 3.1715, and new §§3.1704, 3.1706, 3.1716, and 3.1717 concerning regulation of viatical and life settlements. The sections are adopted with changes to the proposed text as published in the August 11, 2000 issue of the Texas Register (25 TexReg 7465).
The amendments and new sections are necessary to implement the provisions of Texas Insurance Code Article 3.50-6A, as amended by Acts 1999, 76th Legislature, in House Bill (HB) 792. Prior to HB 792, Code Article 3.50-6A applied only to viatical settlements, the sale of a life insurance policy on an individual with a catastrophic or life-threatening illness or condition. House Bill 792 amended Article 3.50-6A by addressing life settlements, which are defined as the sale of life insurance policies on individuals who do not have a catastrophic or life-threatening illness or condition. The adopted rule adds language to address life settlements, clarifies filing requirements, and requires additional disclosures, contract provisions, and reporting requirements.
The adopted sections are necessary to provide additional consumer protections; establish requirements for registration, disclosure, and form approval for persons engaged in the business of viatical and life settlements; streamline the process for renewal and registration, disclosure, and form approval; more clearly define prohibited practices; ensure that a viator´s, life settlor´s, and owner´s rights remain protected in the event the life insurance policy or certificate is re-sold or transferred to another person, or when the viatical or life settlement provider, provider representative, or broker elects to no longer engage in the business; protect the confidentiality of the personal information of viators, life settlors, and owners; designate the responsibilities of viatical or life settlement providers, provider representatives, and brokers; and provide enforcement mechanisms to ensure compliance with the Insurance Code and this subchapter.
While all of the adopted sections (§§3.1701 - 3.1717) become effective 20 days after the date the rule is filed with the office of the Secretary of State, the department recognizes the need for preliminary actions to be undertaken by viatical and life settlement providers, provider representatives, and brokers to implement the reporting requirements of §3.1705, and to implement other sections of the rule including, but not limited to §§3.1706 - 3.1710, that will require changes to some forms used to effect viatical or life settlements. Therefore, providers, provider representatives, and brokers must begin collecting data pursuant to §3.1705 not later than May 1, 2001, and include such data in any report filed on or after May 1, 2001, as well as file any such report in the format prescribed by §3.1705. Additionally, any forms used, issued, or delivered on or after May 1, 2001, must comply with the new regulations. Filings received by the department on or after May 1, 2001 must be accompanied by the completed transmittal checklist prescribed by the department.
The commissioner held a public hearing on the proposed rule on September 27, 2000, under Docket No. 2460.
In response to comments, the following changes have been made to the sections: §3.1702 - The term "captive broker" has been deleted throughout the rule and has been replaced with the term "viatical or life settlement provider representative," and a definition of that term has been added. This change necessitated deletion of the term "independent broker" which was previously needed due to the existence of "captive broker" in the rule. The terms "viatical settlement company" and "life settlement company" have been changed throughout the rule to "viatical settlement provider" and "life settlement provider." The definition of "business of viatical or life settlements" has been changed to include language addressing persons who perform the acts of a viatical or life settlement provider, provider representative, or broker. The definition of "catastrophic or life-threatening illness" was changed to be more consistent with similar definitions relating to viatical and life settlements in the Internal Revenue Code. The definition of "certificate holder" was changed for clarification. The definition of "mature or matured" was changed to remove the word "matured," and to add language to the definition necessitated by changes in §3.1704(e) - (g). The definition of "owner" was changed to more accurately describe the rights that an owner has under a policy or certificate. The definition of "referral agent" was reinstated and changed to address persons who make viatical or life settlement referrals, including referrals for a fee. This change also necessitated a change to §3.1703(a) to recognize that a person is not required to obtain a certificate of registration with the department when that person´s sole involvement in a viatical or life settlement is restricted to the acts of a referral agent, and any fee received for the referral consists of a nominal, fixed, one-time fee that is not contingent upon the purchase or sale of the product for which the referral is made. The definition of "viatical or life settlement broker" was changed to include language that indicates that brokers represent the viator, life settlor, or owner in a viatical or life settlement, and negotiate the settlement on the viator´s, life settlor´s or owner´s behalf. Language relating to referring or introducing a viator, life settlor, or owner was removed. The definition of "viatical or life settlement provider" was changed to recognize that an authorized or eligible insurer that issues stop loss coverage to a viatical or life settlement provider is not included within the definition of "viatical or life settlement provider." A definition of "provider representative" was added in response to comments to delete the term "captive broker". Many of the definitions in this section were renumbered in response to removal and addition of other definitions. §3.1703 - Language was added to subsection (j) to clarify that the secretary of state is the applicant´s domiciliary secretary of state. Subsections (l) and (m) were changed to clarify that the secretary of state in those provisions means the Texas Secretary of State, and to simplify the application process by requesting a copy of the applicant´s certificate of existence from the Texas Secretary of State. §3.1704 - Subsection (e) was changed to give viatical or life settlement providers the option to appoint a Texas registered broker or one of their provider representatives when the provider has viatical or life settlements that will not mature by the date the provider´s current certificate of registration expires, or is surrendered, and the provider does not intend to renew its registration. Language was also added where necessary regarding brokers and provider representatives when they surrender or nonrenew their certificate of registration. §3.1705 - Subsections (a) and (c) were changed to require persons submitting a report under §3.1705 to only file an electronic copy. Subsection (c)(1)(C) was changed to require the A.M. Best rating "at the time of settlement contract." Subsections (c)(1)(M) and (c)(2)(H) were changed to require the primary ICD Diagnosis Code "at the time of settlement contract." Subsection (c)(4) was added to require the name and address of any person who was given a fee for a referral. Subsection (c)(9) was changed to allow a viatical or life settlement provider conducting in-house tracking to use the abbreviation "IH" in the report. §3.1706 - Subsection (g) was changed to remove language referring to a company or broker being "lawfully registered in this state to conduct both viatical and life settlement business," as such language is no longer necessary since the department will not issue separate registrations, but will only distinguish between registrations for providers, provider representatives, and brokers. The phrase "to the best of their knowledge" was added to this subsection and §3.1709(c)(11) since it will not always be apparent when some forms are used whether the transaction will be a viatical settlement or life settlement. §3.1708 - Subsection (b)(2)(E) was changed to permit a general description or identification of the type of person to whom confidential information will be released, as opposed to the specific name or identity of the person to whom such information may be released. A similar change was made to §3.1714(a) since financing entities could ultimately obtain confidential information pursuant to a consent form. Subsection (b)(2)(F) was changed to require disclosure that a medical release form may be used to track ongoing health status of the viator, life settlor, or owner, and that the viator, life settlor, or owner may withdraw their consent pursuant to applicable law. Subsection (b)(2)(M) was changed to remove language referring to a future increase in the death benefit. This change was necessary to remain consistent with model laws which allow future increases in the death benefit to be purchased as part of a viatical or life settlement. Similar changes were made to § §3.1709(e) and 3.1710(d). In lieu of a prohibition of the sale of such a benefit, the department opted for disclosure in paragraph (L) informing a viator, life settlor, or owner that he/she may wish to inquire if his/her policy contains such a provision, and whether the price paid for the policy includes the value of the provision. Remaining paragraphs were renumbered. Paragraph (P) was changed to use language that is more consistent with the definitions of "viatical or life settlement broker," and "viatical or life settlement provider representative." §3.1709 - The reference to "executive officer" in subsection (c)(1) was changed to recognize executive officer "designated in the settlement contract with authority to bind the provider." Subsection (c)(7) was changed to only require a viatical or life settlement provider to disclose that the provider has the right to assign, sell, or otherwise transfer the policy without the viator´s, life settlor´s, or owner´s consent. Language was added to subsection (f) to clarify that viatical and life settlement contracts must contain the name of the insurance company underwriting the policy "at the time of contract." A similar change was made to subsection (g) in relation to escrow/trust agreements. §3.1710 - Subsection (c)(2) was changed to recognize that a viatical or life settlement provider, provider representative, or broker may need to obtain the name of a viator´s, life settlor´s, or owner´s family member (for later use to obtain a death certificate) by removing the prohibition against obtaining such information. In lieu of an outright prohibition against obtaining such information, the department instead prohibited use of the information to directly or indirectly contact such family members unless the family member is designated as a contact person under §3.1709(c)(5). A change was made to subsection (c)(6) to clarify that the criteria used to determine if a payment is "just" includes data that is submitted in t he reports required by §3.1705. Subsection (c)(12) was changed to allow use of a power-of-attorney form if the form is a special or limited power-of-attorney and is restricted only to purposes related to the settlement. §3.1712 - A change was made to subsection (b) to remove reference to the language "as determined at the time of viatical or life settlement contract" since a viator´s or life settlor´s life expectancy may change. §3.1713 - Language was added to subsection (b) to allow providers to continue to track a viator´s or life settlor´s health status, even after assigning, selling, or otherwise transferring its interest in a policy. §3.1714 - Subsection (b) was changed to remove a restriction prohibiting written consent forms from providing for the release of information for any period greater than 12 months, and prohibiting the use of such forms for tracking purposes. In lieu of a prohibition, the department has opted for a disclosure requirement in this section and in §3.1708(b)(2)(F). §3.1715 - The prohibitions in subsections (b) and (c) concerning escrow agent licensure were deleted. §3.1717 - Subsection (b) was changed to require providers, provider representatives, and brokers to maintain records of each viatical or life settlement in which it participates, until three years after the "date the viatical or life settlement has matured."
The department has determined that the following grammatical or clarification changes are also necessary.§3.1702 - The definition of "escrow agent or trustee" was changed to more accurately address persons who are licensed to provide escrow or trust services. §3.1703 - Language was added to subsection (e) to clarify that any name, not just such persons' assumed names, used by a viatical or life settlement provider, provider representatives, or broker is subject to the requirement of §19.901. §3.1706 - The date of December 1, 2000 was changed to May 1, 2001. §§3.1708(b) and 3.1709(c) - Changes were made to clarify that if the viator or life settlor dies at any time prior to the end of the rescission period, the viatical or life settlement contract will be deemed to have been rescinded. §3.1709 - The word "owner" was added to subsection (c)(10) where it had been inadvertently omitted. §3.1710 - A change was made to subsection (c)(8) to clarify that a provider, provider representative, or broker is prohibited from entering into any settlement with a viator, life settlor, or owner in this state in which any form used to effect the settlement contains a provision requiring or limiting such person to specify a particular city, county, or locality in Texas or elsewhere as the legal forum for resolving a dispute. As elderly persons and sick persons are commonly solicited for viatical and life settlements, it was the department´s intent to prohibit forms that contain clauses that require viators, life settlors, or owners to resolve a legal dispute in a locality far removed from their residence at the time of contract. Other non-substantive changes were made throughout the rule for grammar, consistency, or clarity. Contemporaneous with the adoption of these amendments and new sections, the repeal of §§3.1704, 3.1706, and 3.1716 - 3.1718 is published elsewhere in this issue of the Texas Register.
Section 3.1701 applies the subchapter to life settlors, life settlements, and owners. Section 3.1702 adds, deletes, or modifies various definitions. The definition of "owner" in this section clarifies that, in some situations, the owner, viator, or life settlor are separate persons under an insurance policy. Section 3.1703 sets forth requirements for obtaining a certificate of registration to operate as a viatical or life settlement provider, provider representative, or broker, including doing business under an assumed name, or having more than one business location. Amendments to this section create a new structure for paying fees to obtain a certificate of registration, and change the certificate of registration from a one-year certificate to a two-year certificate. Prior to the amendment fees were paid annually at a rate of $250.00 for company registrations and $125.00 for broker registrations. Under the amendments, the same fee is charged, but payment of the fee is made every two years since the certificate will be valid for two years. As such, a provider will pay $500.00 every two years and a provider representative or broker will pay $250.00 every two years. The amendment also sets forth requirements for notifying the department of a change in information both during the application process and any time a change occurs in the application thereafter. Section 3.1704 sets forth the requirements for renewing, nonrenewing, or surrendering a certificate of registration. Amendments to §3.1705 modify the content and format of the reports required to be filed with the department.
Section 3.1706 sets forth the requirements for the filing of viatical or life settlement forms, and the process for departmental action on forms filed with the department. Section 3.1707 addresses life settlements in the filing requirements for advertising, sales, and solicitation materials. Section 3.1708 modifies existing requirements, and adds new required disclosure materials. The amendments to §3.1709 both modify existing, and add new, mandatory contract and application provisions, including those provisions that allow the owner of a policy to retain an interest in the policy. The section also addresses acknowledgement forms, escrow and/or trust agreements, and the provisions that must be contained in those forms.
Additional prohibitions are added in §3.1710 to the current list of prohibited practices related to advertising and solicitation of applications and contracts for viatical and life settlements. The amendments to §3.1711 address prohibited practices relating to the payment of commissions and other forms of compensation, modify the section to add life settlement terminology, and create a fiduciary duty between a viatical or life settlement broker and the viator, life settlor, or owner whom the broker represents.
Section 3.1712 sets forth new guidelines outlining prohibited practices when contacting a viator, life settlor, or owner for personal information, including contacts for health status inquiries after the settlement contract has been entered into and the proceeds have been paid to viators, life settlors, or owners. Section 3.1713 is amended to address the assignment, sale, or transfer of insurance policies subsequent to the initial purchase of the policy by the viatical or life settlement provider. Amendments to §3.1714 set forth the limits and practices relating to obtaining confidential information, such as prohibiting the disclosure of an owner´s, viator´s, or life settlor´s confidential information without first obtaining proper written consent.
Section 3.1716 sets forth the authority and the procedures for the commissioner to deny, suspend, or revoke a certificate of registration, or take other enforcement action. Section 3.1717 authorizes the department to examine the business and affairs of any provider, provider representative, or broker engaged in the business of viatical or life settlements in this state, with expenses for such examinations to be paid by such persons.
In conjunction with these amendments and new sections, the commissioner is repealing existing §§3.1704, 3.1706 and 3.1716 - 3.1718. Adoption of the repeal is published elsewhere in this issue of the Texas Register.
Comment: Two commenters requested additional time to submit additional comments.
Agency Response: The 30-day comment period ended September 11, 2000, and a hearing on the rules was held September 27, at which time additional comments were received. It is not appropriate to extend the comment deadline past the time already provided.
Comment: Commenters supported the proposed rule generally, and appreciated the work done by the department. A commenter requested the department consider providing an exemption from regulations for life settlements for policies with a face value in excess of $250,000 as these policies are usually owned by financially sophisticated individuals or by corporations as "key-man" policies. The commenter believed these persons may not require the same level of protection as individuals with policies below the suggested amount, and may desire more flexibility than is permitted under the proposed rule.
Agency Response: The department disagrees, as it is the department´s position that Article 3.50-6A does not provide regulatory authority to exempt certain policies or persons from the consumer protection provisions of the statute.
Comment: A commenter suggested that the rule contain a provision requiring a non-captive broker to present an offer to the seller within a reasonable time (five to seven days). The commenter also suggested a provision requiring a non-captive broker to seek counter-offers from lower bidders to ensure that the viator, life settlor, or owner is receiving the highest offer from the market.
Agency Response: The department understands the commenter´s concerns regarding brokers, but disagrees with the commenter´s suggested remedy. The department agrees that brokers must present all offers to the owner, viator, or life settlor within a reasonable time after the offer is made, which will vary depending upon circumstances. The department has not received, and is not aware of, any complaints regarding this issue and does not agree that a specific time frame be established at this time. The department will monitor this matter, and if a time frame is needed, one will be proposed. Section 3.1711(c) imposes a fiduciary duty upon brokers. The department interprets this fiduciary duty to require brokers to exercise due diligence to obtain the best offer possible for the owners, viators, or life settlors, and to present all offers to viators, life settlors, or owners in a timely manner.
Comment: A commenter urged the department to adopt a program or procedure for extensive searching into the background of companies' officers and directors, including the parent and ultimate parent of all applicant companies.
Agency Response: All applicants, including all officers, directors, and shareholders with 10% or more ownership interest who are required to be listed in the application for a certificate of registration provided to the department, are submitted for a criminal background check through both the Texas Crime Information Center and the National Crime Information Center. The department will continue to research the potential use of any other background searches as they are made available.
Public Benefit/Cost Note
Comment: A commenter, referencing §3.1706, stated that the projected costs of $9 - $11 for annual report preparation and filing are highly understated, and estimated the number of hours required per year for form filing activities to be 200 hours.
Agency Response: As stated in the preamble to the proposed rule, the hourly projected costs of $9 - $11 were in relation to submitting reports pursuant to §3.1705 and not form fillings under §3.1706. The estimated cost to file forms was $1 - $5 per page. Article 3.50-6A requires the commissioner to adopt rules relating to approval of contract forms. The form filing requirement has been in effect since initial adoption of the viatical settlement rule in 1996. This rule will reduce the costs associated with form approval by streamlining the process for filing and approval, setting forth provisions which must be included in each settlement contract, and providing certain sample forms for use which will reduce form development time and which are not required to be filed for approval.
§3.1701
Comment: A commenter questioned whether deletion of the word "scope" in the title of this section affects the rule. The commenter also questioned the difference between "enacting rules" and "implementing subchapters" and whether these phrases have different significance in Texas.
Agency Response: The word "purpose" in the title encompasses "scope" and thus does not substantively affect the rule. There is no difference between the two phrases regarding "implementing" and "enacting". The department made the changes to conform to Texas Register general style and format requirements.
§3.1701(a)(1)
Comment: A commenter stated that the death benefit assigned by the owner is the entire gross benefit, not a "net" benefit. The commenter also stated that the reference to "life" insurance policy should not be deleted, and suggested addition of the following language: "transfers a life insurance policy or certificate issued pursuant to a group life insurance policy, or who attempts to do so."
Agency Response: The department understands the commenter´s reasoning behind the suggested language, but the commenter´s concerns are addressed in the definitions of "net death benefit" and "policy" when read in conjunction with §3.1701(a). The benefit assigned is not a gross amount, but rather the amount or value of the policy less any outstanding debts or liens already encumbering the policy amount that could be viaticated or sold. The intent is to address the actual amount assignable.
§3.1701(a)(3)
Comment: A commenter asked what effect the broader meaning of the phrase "or life" has on the scope of this regulation.
Agency Response: The intent of this subsection is to include "life settlements" as added by Acts 1999, 76th Legislature, HB 792.
§3.1701(a)(4) and (5)
Comment: A commenter believed that although the insured has a continuing right to privacy and to reasonable tracking parameters, the owner has no further rights in the policy after it is sold, and is in fact giving up all rights in the policy for an agreed upon cash amount.
Agency Response: The department disagrees, as Article 3.50-6A provides for consumer protection for a person who may sell or otherwise transfer the person's life insurance policy including maintenance of appropriate confidentiality of personal and medical information. This section addresses the purpose of the subchapter and summarizes the requirements of Article 3.50-6A.
§§3.1701(a)(6), 3.1703(n), and 3.1710(a)
Comment: Several commenters suggested that the department delete the phrase, "or the United States," because the department does not have authority to enforce a federal law. A few commenters requested that the reference to "other applicable law" specify the applicable laws so that industry participants may comply. Another commenter requested that the department replace the phrase, "...or any other applicable law," with "or any other State of Texas applicable law."
Agency Response: The department disagrees with the commenters' suggested changes. The phrase "other applicable law" is needed to encompass new laws or modifications to existing laws that affect the viatical or life settlement industry. Reference to "laws of the United States" and "other applicable law" both in the sections referenced by the commenters and elsewhere in the rule are included to address those state and federal laws, both present and future, which may apply to the viatical and life settlement industry. Additionally, the department notes that these types of phrases are commonly used in statutes and regulations.
§3.1702(a)(1)
Comment: Three commenters questioned the definition of "advertisement," and requested that the questioned language be deleted. One commenter stated that prepared sales talks are often created with limited notice. Another commenter questioned the meaning of the phrase, "and those representations made to members of the public." Another commenter asked what constitutes "direct or indirect communications."
Agency Response: The department disagrees that the questioned language should be deleted. The definition of "advertisement" is almost identical to the definition of "advertisement" in the department´s advertising rules, 28 TAC Chapter 21, Subchapter B, and has been applicable to the viatical settlement industry since 1996. The use of this definition is also appropriate because Chapter 21, Subchapter B is written under the authority of Insurance Code Article 21.21 which is made expressly applicable to the viatical and life settlement industry by Article 3.50-6A, §3. The adopted definition, as compared to the definition in Chapter 21, varies only by those changes necessary to apply to the viatical and life settlement industry, and to confirm applicability of the term to the Internet and Internet advertisements. The meaning of the phrase for which the commenters requested clarification will vary depending upon the facts of a given situation. The department does not believe the phrases are ambiguous, over-broad, or vague. This definition is also necessary to provide adequate consumer protection, a requirement of Article 3.50-6A. To apply a lesser definition to the viatical or life settlement industry than to the insurance industry would result in an unequal application of the law.
Comment: A commenter stated that for clarity, the language, "materials used to solicit policies for viatical or life settlements" should read, "materials used to solicit viatical or life settlements."
Agency Response: The department agrees and has made the commenter´s suggested change.
Comment: Another commenter stated that the phrase, "material included with a viatical or life settlement," should be "material included with the solicitation of a viatical or life settlement."
Agency Response: The department disagrees. The rule´s subsequent language, "or any application for a viatical or life settlement, when the settlement is solicited or when the contract is delivered," clarifies that this material is not limited solely to material utilized during the solicitation of the settlement, but also to material utilized in the delivery of the settlement contract.
§3.1702(a)(2) and (26)
Comment: A few commenters believed that the definitions for "business of viatical or life settlements" and "viatical or life settlement brokers" contain language that includes persons that should not otherwise be required to obtain a certificate of registration. One commenter believed the language includes persons engaged in "tracking" services. By way of example, the commenter asked if a viatical or life settlement company that does tracking must be licensed as a broker as well. If not, the commenter believed tracking entities must be expressly excluded. Similarly, a few commenters stated that it should be sufficient if the contact person is a full-time employee of the company or broker under an administrative contract to perform tracking services on behalf of the viatical or life settlement company.
A few commenters suggested adding language to the definition of "business of viatical or life settlements" to include those companies that track the health status of viators or life settlors for companies. Another commenter believed this definition is unnecessary and confusing, because it is a restatement of definitions covered by other definitions in the rule. These commenters stated that under the National Association of Insurance Commissioners (NAIC) model act, these aforementioned activities are included within the definition of the "business of viatical or life settlements" because they are integral to it. A commenter pointed out that the Texas definition of "viatical settlement broker" delegated the "tracking services" tasks to brokers, which is inconsistent with the NAIC model definition.
Agency Response: The department understands the commenters' concerns, and has made a change to address tracking in the definitions of "business of viatical or life settlements," and "viatical or life settlement provider representative." The department clarifies that the definition of "viatical or life settlement broker" at §3.1702(a)(26) does not limit the performance of tracking functions to persons who do broker activities. Providers, provider representatives, and brokers are all permitted to perform tracking in accordance with the rule.
§§3.1702(a)(26) and (28); 3.1703(h) and (i); 3.1708(b)(2)(P); and 3.1710(c)(1)
Comment: Several commenters expressed concern with the use of the term, and the concept of, "captive broker" in the proposed rule. These commenters stated that inherent in the industry is the idea that a "broker" represents the owner and has a fiduciary duty to the owner in his or her effort to sell a policy. The commenters stated that this is the national model, and that the Texas rules will confuse Texas consumers regarding their representation and rights. These commenters suggested use of the term "representative" instead. Two commenters stated that if a captive broker is to only deal with one company, these brokers should operate under the company´s license. One commenter stated these individuals should not have to hold individual broker licenses as this would not only prevent confusion between captive and independent brokers, but would also reduce a regulatory burden on both the captive broker and TDI. A commenter felt the provision at §3.1708(b)(2)(P) would be unnecessary if the commenter´s suggestions regarding removing the concept of "captive broker" are implemented.
Agency Response: The department agrees in part and disagrees in part. The department has changed the term "captive broker" to "provider representative" in this section and throughout the rule as necessary. The definition of "independent broker" has also been deleted because it is encompassed by the definition of "broker." The department does not agree that a captive broker (now provider representative) should operate under the viatical or life settlement provider's license. Article 3.50-6A requires TDI to provide consumer protection, which is accomplished in part by registering individuals engaged in the business of viatical or life settlements. The department has made no other changes to §3.1708(b)(2)(P) because disclosures are needed for consumer protection. Viators, life settlors, and owners need to understand the difference between brokers and provider representatives, in that brokers have a duty to offer the policy to more than one provider, whereas representatives secure an offer exclusively from the provider with whom they are employed or contracted.
Comment: A commenter asked: Does a captive broker become an independent broker when an appointment is terminated or withdrawn, and then revert back to a captive broker upon another appointment? When a designation is terminated, does the captive broker lose the registration and thus require such reporting to other states?
Agency Response: If a person holds a certificate of registration as a captive broker (now provider representative), and the provider he or she exclusively represents terminates his/her contract or appointment, the certificate of registration is considered "in suspense" until either the individual submits a new notice of exclusive representation with another registered viatical or life settlement provider, or the person submits a change to his or her certificate of registration to reflect registration as a broker, as required by §3.1703.
§3.1702(a)(3)
Comment: A few commenters stated that the definition of "catastrophic or life-threatening illness" is ambiguous, and suggested that it be modified. One commenter suggested using a definition relating to the inability to perform two activities of daily living to indicate "catastrophic illness," and death within 24 months to indicate "terminal illness." Another commenter suggested that the definition be altered to correspond to the federal tax code definition.
Agency Response: The department agrees in part and disagrees in part. Article 3.50-6A uses the terminology "catastrophic or life-threatening illness," whereas the Internal Revenue Code (26 USC §101(g)(4)) (IRC) uses "terminally ill" and "chronically ill." The department has changed the definition for "catastrophic or life-threatening illness" to be consistent with the IRC. As a result of changing the definition of "catastrophic or life-threatening illness," and in an effort to streamline the licensing process, the department has combined registration for doing both the business of viatical and life settlements.
§3.1702(a)(4)
Comment: Two commenters stated that the certificate holder of a group life insurance policy is the only person with the power to dispose of the certificate, and that including dependents in the definition complicates the categories. One of the commenters suggested a definition.
Agency Response: The department agrees with the commenters' suggestion, and has changed the definition to include the commenter´s language with modification.
§3.1702(a)(5)
Comment: A commenter expressed concern that the definition of "confidential information" is in conflict with recent federal privacy legislation. The commenter suggested removing the current wording and relying on the more detailed federal requirements.
Agency Response: The department recognizes that non-public personal information is a category of information that must be afforded specific treatment by financial institutions subject to Title V of the Gramm Leach Bliley Act (GLBA). However, the department has the authority, as a result of the consumer protection provisions of Article 3.50-6A, to protect the confidentiality of medical and personal information utilized in viatical and life settlement transactions. The department will continue to monitor GLBA and other developments in state and federal law for any potential impact on the viatical and life settlement industry.
§3.1702(a)(10)
Comment: A few commenters stated that the definition of "financing entity" should be revised to include the possibility of financing transactions involving certificates under a group policy, and suggested that the correct phrasing would be "purchaser of a policy or a certificate issued pursuant to a group insurance policy." Another commenter stated that the definition of "financing entity" is extremely broad and wanted to confirm that the definition does not create a large loophole for individual non-accredited investors.
Agency Response: The department disagrees because the language pertaining to group certificates is included within the definition of "policy." The definition of "financing entity" is designed to comply with Article 3.50-6A's prohibition that the commissioner may not adopt rules that regulate the actions of an investor providing funds to a viatical or life settlement provider. The department believes the definition is adequate.
§3.1702(a)(16) and (30)
Comment: Several commenters stated that the definitions of "life settlor" and "viator" must be modified to reflect the fact that the owner enters into the life settlement contract, and suggested "insured under" should be replaced with "owner of."
Agency Response: The department disagrees. The definition of "owner" takes into consideration the fact that the owner and life settlor may not always be the same person under the policy.
§3.1702(a)(17)
Comment: Some commenters stated that it was confusing to have two different definitions for the words "mature and matured," depending on whether or not the words are used in connection with brokers or companies, and suggested using a single definition to address when the insured under the subject policy has died and the proceeds are payable.
Agency Response: The department agrees that both words are unnecessary, and has deleted the words "or matured" from the definition. The department disagrees with the suggestion to use a different single definition because "mature" has different meanings depending upon where the term is used in the rule. The department has also made other changes to the definition to avoid any confusion with use of the terms in §§3.1704(e) and 3.1717(b).
§3.1702(a)(19)
Comment: A commenter suggested that, for clarification, the definition of "owner" should read: "The person who has the right to assign, sell or otherwise transfer the life insurance policy or certificate issued pursuant to a group life insurance policy." The commenter also stated that the exclusionary language in the definition should be clearer, and noted that the definition contains the statement, "the definition recognizes that, in some cases, the owner and viator or life settlor may not be the same person," but does not allow for differentiation of the treatment of individuals who fall into one category or the other.
Agency Response: The department agrees that owners under a policy have the right to assign, sell, or transfer their rights and benefits, and has clarified the definition by using the commenter´s suggested language, with modification. The department notes that the differentiation between owners and viators or life settlors is addressed throughout the rule, and is not needed in the definition.
§3.1702(a)(22)
Comment: Several commenters stated that the removal of the definition of "referral agent," when read in conjunction with the proposed definition of "viatical or life settlement broker," will require a person (a neighbor or a life insurance agent assisting their customer) who refers just one owner for a settlement (with or without a fee being paid) to be licensed as a broker. Several suggestions were submitted to address this issue, including: (1) reinstating the definition of "referral agent;" (2) allowing life insurance agents to make referrals without requiring a broker's license; and (3) allowing life insurance agents to broker less than five transactions in a calendar year without being required to obtain a broker's license. One of these commenters suggested that the life insurance agent be required to submit a report to the department within 30 days of each transaction.
Agency Response: The department agrees in part and disagrees in part. The department has reinstated the definition of "referral agent" with deletion of the limitation of five "free" referrals, and has added language to §3.1703(a) to recognize the allowance of payment of nominal, fixed, one-time referral fees not contingent on the purchase or sale of the product. The department does not agree with providing for an outright exclusion of any person, including a life insurance agent, who actually negotiates a transaction because the department believes that such an exclusion is in conflict with the consumer protection provisions of Article 3.50-6A. In addition, the life insurance agent´s licensing law does not authorize an agent to conduct the business of viatical or life settlements as a line of business under that license. Therefore, all persons performing the acts of a broker or provider representative, whether licensed as an insurance agent or not, are required to obtain a certificate of registration from the department.
§3.1702(a)(25)
Comment: A commenter stated that the definition of "trust" is too narrow and excludes other more common trust documents involved in a viatical or life settlement. The commenter suggested that the defined term be "viatical or life settlement trust" to avoid this confusion. The commenter believed that this concept is amply covered in the "escrow account" definition.
Agency Response: The department disagrees, and directs the commenter to the definition of "escrow account," which is almost identical to the definition of "trust," both of which are broad enough to address the commenter´s concerns.
§§3.1702(a)(26) and 3.1712(a) and (b)
Comment: Several commenters stated that the process for licensing a life insurance agent as a broker should be streamlined. One commenter stated that if a life insurance agent wishes to become a broker, the procedure should be simple and require only completion of an application and payment of necessary fees. Another commenter stated that, when applying for a life insurance agent's license, if one pays the fees and provides the required information to the department, a broker´s license could be issued at the same time. Commenters stated this would be consistent with the current policy of the department to streamline licensing procedures and consolidate licenses. One commenter stated that this would draw qualified insurance professionals into the broker's market, and that any conflict-of-interest or fraud concerns could be dealt with under current law. A few commenters suggested the department consider consolidation of viatical and life settlement licenses as is being "done with agent licenses in Texas. " One of these commenters also requested clarification of when a person is acting as a referral agent and when a person is acting as a broker.
Agency Response: The department agrees that the process of applying for a viatical or life settlement certificate of registration should be simple, and believes part of the commenters' concerns are already addressed in the rule and application process. A Texas life insurance agent may obtain registration as a broker by completing applicable sections of the viatical/life settlement application provided by the department, and by paying the necessary fee(s). An agent, like any person doing the acts of a viatical or life settlement broker or provider representative, is required to comply with applicable requirements of the rule (e.g. obtain registration, have forms approved by the department, provide required disclosures, etc.). The department disagrees that life insurance agents should be exempt from these requirements. Although life insurance agents have knowledge about the needs and concerns of consumers purchasing life insurance, viators and life settlors do not have the same financial or insurance needs as persons purchasing insurance. Therefore, persons acting as brokers and provider representatives are required to obtain registration and meet the applicable rule requirements before engaging in the business of viatical or life settlements. The department is committed to amending the application process to allow for application of both agents licensure and viatical/life settlement registration at the same time. The difference between a referral agent and a broker is outlined in the definitions of each.
Comment: A commenter noted that the definition of "viatical and life settlement broker" is triggered by the word "hope" which is ambiguous. Additionally, the commenter noted that subparagraphs (A) through (D) are not identified by either "and" or "or." The commenter stated that if it is the intent to have the definition apply only when any of these items apply, the word "or" should be inserted.
Agency Response: The department has changed "hope" to "intent," along with other grammatical changes. In response to other comments to retain a definition of referral agent, the department has deleted proposed paragraph (26)(C) to avoid any confusion between the definition of "viatical or life settlement broker," and the definition of "referral agent." As such, the commenter´s concerns about "and" and "or" are no longer applicable.
Comment: A few commenters expressed concern that the definition of "viatical and life settlement broker" excludes from the definition attorneys or accountants representing the viator, life settlor, or owner in relation to the viatical or life settlement, who receive a contingent fee from the viator, life settlor, or owner. These commenters believed that such an exclusion will allow attorneys and/or accountants who receive a contingent fee to perform all of the functions of a viatical or life settlement broker without being required to obtain a certificate of registration, nor comply with all other consumer protection requirements imposed on non-attorney/non-accountant persons who perform viatical or life settlement broker functions.
Agency Response: The department does not believe the section requires changing, nor has this language been problematic in the past. The language excluding attorneys and accountants has been in the rule since 1996. This exclusion merely encompasses those persons who are representing their own clients in the context of a viatical or life settlement transaction where their primary role is that of representing the legal or financial interests of the viator, life settlor, or owner, and where their fees are paid by the viator, life settlor, or owner, not by the viatical or life settlement provider, provider representative, or broker. Neither an attorney nor an accountant, for example, could ethically accept a fee from a viatical or life settlement provider while at the same time representing his or her client in the transaction, as this would constitute a conflict of interest. As such, the exclusions in the rule merely recognize traditional professional relationships that exist separate and apart from the viatical or life settlement transaction, so that viators, life settlors, and owners may seek the legal or financial representation they may need when conducting legal and business affairs. The department clarifies that attorneys and accountants who are performing the functions of a broker or provider representative in a transaction, and not the functions of an attorney or an accountant, are required to obtain a certificate of registration for the viatical or life settlement business to avoid violation of the rule.
Comment: A commenter stated that there is a conflict between the proposed definition of "viatical or life settlement broker" and the existing definition of "viatical broker."
Agency Response: No conflict exists since the adopted definition replaces the definition in effect at the time these sections were proposed.
§3.1702(a)(27)
Comment: A commenter suggested that in lieu of "viatical and life settlement company" the department use the more commonly used industry term "viatical or life settlement provider" throughout the rule to avoid confusion.
Agency Response: The department agrees, and has changed the term from "company" to "provider" throughout the rule where appropriate.
Comment: A few commenters suggested that, in addition to the existing exclusions from the definition, the following exclusions which are a part of the NAIC model regulations should be added: "(E) an authorized or eligible insurer that provides stop loss coverage to a viatical and/or life settlement company;" and "(F) a natural person who enters into or effectuates no more than one (1) agreement in a calendar year for the transfer of a life insurance policy for any value less than the expected death benefit."
Agency Response: The department agrees, and has added the commenters' suggested language as subparagraph (E), with modification; however, the department has not added the suggested subparagraph (F). It is the department's position that any person performing the acts of a broker or provider representative in this state must obtain a certificate of registration because the statute and rule provide various consumer safeguards (e.g. consumer disclosures) which serve as the basis for requiring registration in this state.
§3.1703(b)
Comment: A few commenters questioned whether the language of this subsection was meant to prevent a company or individual from registering under two different entities or names at the same time, and stated that if that is the intent, this is not what the rule says.
Agency Response: This section is meant to prevent persons from obtaining duplicate registrations from the department. The department offers the following example for clarification: John Doe could not obtain two certificates of registration to operate as a life settlement broker, so that, if the department revoked one, he could attempt to rely on the other one and continue doing life settlement business even though the other registration has been revoked. This provision is consistent with 28 TAC §19.902 (One Agent, One License).
§3.1703(j), (l) and (m)
Comment: A few commenters stated that subsection (j) appears to offer licensing/registration reciprocity, and requested that the section be clarified to explain specifically how Texas will apply reciprocity to licensees from other states through use of these documents. Another commenter requested clarification of the requirement that a letter of good standing from the secretary of state must be sent to the department. The commenter asked whether "secretary of state" means the Texas Secretary of State, or the state of formation for the applicant´s resident state.
Agency Response: The department clarifies that the rule does not provide for reciprocity. Subsection (j) sets forth the procedures that an applicant domiciled in another state needs to follow to obtain a certificate of registration in this state. The applicant is required to submit the documentation (i.e. certificate of good standing) from the applicant´s domiciliary state´s secretary of state. To clarify, the department has made a change to subsection (j). The department also recognizes that the least intrusive and least costly method to verify compliance with Texas business and corporations law under §3.1703(l) and (m) (i.e. certificate of authority, articles of incorporation, etc.) is to require applicants to submit a copy of their certificate of existence from the Texas Secretary of State, and the department has made a change to paragraphs (l) and (m) to accomplish this.
§3.1703(o)
Comment: A commenter suggested that the requirements of subsection (o) should apply to "any material information," not necessarily any change in information.
Agency Response: The department disagrees. The department has developed, and will continue to develop, applications for a certificate of registration that ask only for information that the department believes is material. As such, any change in the information submitted in the application is a material change that must be reported to the department.
§3.1703(p)
Comment: A commenter stated that the reference to a copy of "any applicable judgment" is not adequately defined. Another commenter stated that while notification of any suspension or revocation of the right to do business in any state should be reported to the department, it is not appropriate for a show cause order because at the point a show cause order is issued, there has been no determination as to any wrongdoing by the licensed person.
Agency Response: The department does not believe that it is necessary to define "judgment." Words not defined in a regulation are given their ordinary meaning and common usage, including any meanings of a trade or profession in which they are used. Some jurisdictions commence their enforcement actions with a preliminary order known as a "show cause" order. Failure of the party to appear pursuant to a show cause order operates as a default, allowing the ordering party to take an action. It is the department´s understanding that these orders are based upon evidence that the licensee or registrant has engaged in conduct which violates the law. Any information or evidence of wrongdoing is necessary for consumer protection and should be reported to the department.
§3.1703(q)
Comment: A commenter believed that the fingerprint card requirements of 28 TAC Chapter 19 do not apply to the viatical or life settlement industry, and also believed this requirement does not address who should be fingerprinted if an applicant is a business entity instead of an individual. The commenter believed the department´s requirements are very broad and should be clarified so as not to require dozens of officers or directors of a company to furnish fingerprint cards. Another commenter was pleased that the rule includes a fingerprint requirement.
Agency Response: The department clarifies that the provision expressly makes Chapter 19 applicable to the business of viatical and life settlements. The department also clarifies that if the applicant is a business entity (i.e. partnership or corporation, etc.) each person listed in the application for certificate of registration as key personnel or a shareholder with 10% or more control is required to submit a fingerprint card unless the officer/shareholder has previously submitted a fingerprint card as specified in §§19.1804 and 19.1805.
§3.1704(e) - (g)
Comment: A commenter stated that the renewal requirements are too stringent, and suggested allowing a viatical or life settlement company which chooses not to renew its registration to retain an administrative company which is registered to perform these functions for the viatical or life settlement company until the remaining transactions reach final maturity or are transferred to a new broker. Some commenters stated that this language is complicated and can be simplified. Another commenter stated that this section is inconsistent with the provision requiring a broker´s registration to perform tracking duties.
Agency Response: The requirements of subsections (e) - (g) are needed to protect consumers when viatical or life settlement providers, provider representatives, or brokers cease doing the business of viatical or life settlements in Texas. The department has changed the sections to clarify that viatical and life settlement providers and brokers are permitted under the rule to retain a provider, broker, or one of their own provider representatives to perform tracking services. A viatical or life settlement provider conducting tracking services is permitted to do so under its existing certificate of registration.
§3.1705
Comment: Several commenters stated that the information required in the annual reports constitutes trade secrets and should be protected from public access. Another commenter stated that the information required by this section serves no useful purpose, and should not be required except in an on-site audit by the department. The commenter stated that requiring this information is onerous, expensive, and results in significantly lower offers to viators, life settlors, or owners. A commenter stated that the requirement to file annual reports in both electronic and paper formats is burdensome and wasteful. The commenter requested that the department reconsider this requirement.
Agency Response: The department recognizes that the commenters are concerned that the information submitted to the department in the annual reports could be accessible by the general public under the Texas Public Information Act. However, the information received in §3.1705 reports is necessary to assist the department in complying with the consumer protection requirements of Article 3.50-6A. The reporting requirements are based upon model statutes and regulations and for nearly identical information to that which is required in those model laws. The information contained in the reports will be helpful to the department in addressing consumer protection issues by providing data to study market trends, ascertain fairness of settlement amounts, and estimate the volume of business in this state. The department believes that there is adequate statutory protection to safeguard information alleged to constitute trade secrets, and directs the commenters to the Texas Public Information Act, Tex. Gov't Code Ann. §§552.110 and 552.305, and other applicable provisions of that act for information on seeking to protect information that is alleged to be a trade secret. The department has changed the language to require only electronic filing, with an option to file in paper format if filing electronically is not feasible for the provider, provider representative, or broker.
§3.1705(c)(1)(C)
Comment: A commenter stated that the A.M. Best rating on the report should clarify that the rating is the rating of the insurer at the time of the settlement transaction.
Agency Response: The department agrees and has changed the language.
§3.1705(c)(1)(E)
Comment: A commenter stated the answer to "viator´s or life settlor´s state of residence" at the time of application can only be Texas.
Agency Response: The department understands the commenter´s suggestion, but has made no change in case there are situations where the information may vary.
§3.1705(c)(1)(M) and (c)(2)(H)
Comment: Several commenters objected to the use of International Classification of Disease (ICD) codes in the annual reports, and suggested the use of a disease category. Reasons given for not including ICD codes included: too costly; difficult to report due to lack of trained medical staff; and difficulty in obtaining from providers. The commenters also believed it serves no useful purpose, and appears to be outside the scope of the legislation. A commenter stated that the prevailing ICD code at the time of death is not usually the prevailing ICD code at the time of settlement.
Agency Response: The department disagrees with the recommended change, as ICD codes have been included in the reports since the department first adopted the viatical settlement rules. This information is one of the data elements needed by the department to monitor pricing trends in the sale of settlements. The method of determining ICD codes is a business choice, whether by hiring or contracting with staff with expertise in this area, or by obtaining such information from the health care provider when requesting a copy of the medical records for underwriting review. The department is not concerned with the ICD code at the time of death, but only at the time of purchase of the viator´s, life settlor´s, or owner´s policy, and has clarified this in the rule.
§3.1705(c)(9)
Comment: A commenter requested that paragraph (9) be clarified to reflect that "any person" does not apply to a company which performs its own in-house tracking and monitoring.
Agency Response: The department agrees that providers that perform in-house tracking should not be required to list their own employees, and has added the code "IH" to indicate in-house tracking,. The department has also made a change to clarify that providers should list brokers, providers, or provider representatives that perform these functions for them.
§3.1705(d)
Comment: A commenter believed this section, which allows the department to request any additional information, is too broad and needs to be stricken.
Agency Response: The department clarifies that any additional information required under this section would generally be related to the information submitted in the report. Even without the rule, TDI has the authority pursuant to Article 3.50-6A, §3, to request additional information.
§3.1706
Comment: A commenter stated that pre-approval of forms and advertising materials does not serve a legitimate purpose. Two commenters stated that the filing requirements are costly. One of the commenters stated that the requirements are contrary to the current trend of file and use.
Agency Response: The department disagrees. Article 3.50-6A, §2(c) requires the commissioner to adopt reasonable rules for approval of contract forms. Approval of contract forms fulfills other statutory requirements, including but not limited to consumer protection and maintenance of confidentiality of personal and medical information. Advertising materials are not listed as a type of form that must be approved, but are required to be filed for informational purposes only and may be used prior to review by the department pursuant to §3.1707. Filing of forms and advertising materials is not a new requirement. There are no filing fees associated with the filing of forms, and the rule does not change the types of forms that must be filed with the department. The requirements are not contrary to file and use because the rules provide a provision which will enable providers, provider representatives, or brokers to use forms upon receipt of the filing by the department (i.e., file and use).
Comment: A commenter proposed an annual submission of forms at the time of license renewal. It was also suggested that the form filing and approval requirements be limited to forms which must be signed by the viator, life settlor, and/or owner. The commenter further stated that Florida uses "signature by seller" criteria in its recent law as did the NAIC in its most recent version.
Agency Response: The department disagrees, as this suggestion would not allow the department to fulfill the requirements of Article 3.50-6A, including but not limited to providing consumer protection through disclosure, approval of contract forms, and confidentiality of personal and medical information. Additionally, an annual submission requirement would be problematic because the rules provide for biennial renewal of registration in lieu of annual renewal. The department has reviewed the most recent versions of the NAIC model act and regulations and was unable to locate a "signature by seller" provision. The department has also reviewed the Florida "signature by seller criteria," and notes that the Florida forms include those listed in §3.1706(b), except for subsection (b)(7). Therefore, it appears that the Texas filing requirements are nearly identical to those used in Florida. Subsection (b)(7) is necessary to address future modifications or changes to forms required by law or for purposes of consumer protection.
§3.1706(d), (m), and (q)
Comment: A commenter stated that the rule no longer allows modification of forms on a case-specific basis, which it said is problematic, time-consuming, and costly. Several commenters expressed concern where modification of a form is required after the form has been issued. A commenter noted that viatical and life settlement changes are different from changes in a life insurance policy because once the policy is purchased, the money is paid to the viator or life settlor up front, and the transaction is ended. Another commenter expressed concern that if the department decides, after the contract or other form is approved and issued, that something in the contract or form needs to be changed or amended, the viator or life settlor may refuse to accept the change to the contract or may refuse to agree to the modification, which could cause problems such as renegotiation of the contract or litigation. One commenter stated that this issue may be partially resolved by the department adding the terminology "may request"; however, the form approval process may still be problematic.
Agency Response: The rule replaces the case-specific filing with a file and use system. File and use allows providers, provider representatives, and brokers flexibility to modify their forms so they can be quickly used in the marketplace so long as the forms comply with rule requirements. Under the current rule, even if a form is a case-specific filing, the form still must be filed with the department and must comply with the minimum requirements of the regulations. This requirement has not changed in the adopted rules. The department understands the commenters' concerns regarding amending or reissuing existing contracts, and notes that requests for corrections or for replacing a form previously issued will be based upon the severity of the deficiency identified and will be handled on a case-by-case basis.
§3.1706(d)(2)
Comment: A commenter suggested that the department approve or disapprove forms within a reasonable time frame, such as 10 business days. The commenter further suggested that failure to meet this time frame should result in automatic approval of the form.
Agency Response: The department understands the commenter´s concerns but has made no change. As part of the department´s overall regulatory requirements, it is required by statute to perform many functions such as form review, data collection and analysis, consumer protection, licensing and registration. The department continually strives to expedite the review of forms and to search for more efficient ways of improving the filing process. Since the rules have separated the registration and form filing processes, this should improve the time frame for registration, as well as for form review. The department also directs the commenters to §3.1706, addressing file and use, if the commenter has remaining concerns about review and approval time frames.
§3.1706(e)(6)
Comment: A commenter stated that the turnaround time for corrections is too long, will be costly to the company, and may even result in business failure.
Agency Response: The commenter´s concern is based upon a misunderstanding of the filing process. The department clarifies that the 30-day time frame for corrections is not a time frame for the department to review corrections, but instead is the time frame set for providers, provider representatives, and brokers to submit their corrections to the department. The department welcomes and encourages providers, provider representatives, and brokers to expedite submission of corrections.
§§3.1706(g) and 3.1709(c)(11)(A)
Comment: A commenter requested that companies and brokers be allowed to delineate which type of settlement is being entered into at the time of contract, because it is not always known until it is underwritten which kind of settlement will be entered into. A few commenters requested addition of the phrase "to the best of their knowledge" in this provision since, at the time the form is used, it may not be evident whether the person has a catastrophic or life-threatening illness if a medical evaluation has not yet been performed.
Agency Response: The department agrees, and has added the words "to the best of their knowledge" to these sections.
§3.1707
Comment: A commenter stated that filing of advertising and/or marketing materials is appropriate.
Agency Response: The department agrees.
§§3.1708(b)(2)(E) and 3.1714(a)
Comment: Several commenters stated that all confidential information obtained for the sale of the policy must be available to possible future owners of the policy, or the policy will become illiquid. Another commenter requested insertion of "or potential financing entity" after "financing entity" in §3.1714(a).
Agency Response: The department agrees that confidential information may be needed for future sales of the policy and has revised the sections accordingly. The department´s intent is not to require identification of the specific person to whom confidential information will be released, but rather to require general identification of those persons or entities to whom the viatical or life settlement provider, provider representative, or broker will release the confidential information, so that the viator, life settlor, or owner will know, upon signing the release, who might have access to their confidential information. Therefore, the department has deleted the words "specifically" and "the person," and changed the word "will" to "may." The department has also removed the words "financing entity" from §3.1714(a)(2). The department has changed the rule in all sections, where appropriate, to remove the limitation that the information may only be given in the form of statistical data.
§§3.1708(b)(2)(I) and 3.1711(a)
Comment: A commenter stated that the requirements to disclose commission information may be impossible to comply with if brokers are sharing commissions or paying referral fees, and that disclosure of this information may be outside the scope of the statute. Another commenter stated that such provisions produce no ascertainable benefit to the client. Another commenter requested that the language be changed to reflect policy owner rather than the insured, because the commenter believed the insured should have no right to be informed of the amount or terms of commission unless the viator or life settlor is also the policy owner.
Agency Response: Viators and life settlors, even if they are not owners of the policy, have consumer protection interests in the transaction as provided by statute, and have the right to information, upon request, regarding commissions. The viator or life settlor is an integral part of the transaction since he or she provides medical consent information, and commission(s) information could affect a viator´s or life settlor´s decision to release such information.
§§3.1708(b)(2)(M), 3.1702(a)(21), 3.1709(e), and 3.1710(d)
Comment: Several commenters expressed concerns about provisions that would prohibit the sale of future increases in the death benefit, as well as accidental death and dismemberment benefits. Some commenters noted that future increases in benefits, such as cost of living increases, double indemnity, etc., may be negotiated as part of the payment amount and should be transferred with ownership of the policy. A few commenters expressed concern that prohibiting the transfer of future benefits would create problems with the law of absolute assignment and could cloud the title to the insurance policy. These commenters believed that disclosure to the viator, life settlor, or owner of these benefits would be adequate.
Agency Response: The department agrees in part and disagrees in part. The department has changed the language throughout the rule to be consistent with the NAIC model act and regulations on viatical and life settlements, such that purchasing of accidental death benefits (ADB) will still be disallowed, but the purchase of other increases and benefits will be permitted, with adequate disclosure as added in §3.1708(b)(2)(L). The department clarifies that spousal and dependent coverage could not be purchased without a settlement on the spouse or dependent, and multiple assignments are possible under any life insurance policy. The department does not agree with the commenters' assertions that limiting the purchase of the ADB rider affects the ownership of the policy, or creates problems with clouding of title.
§3.1709(a)
Comment: A commenter stated that the inclusion of insurance agents as a class of persons to consult regarding the impact of a viatical or life settlement upon a viator´s or life settlor´s eligibility for public assistance, is not appropriate. This commenter believed that persons on public assistance would not have the range of advisers available to them that are listed in this provision. The commenter suggested keeping the current language, as it is simpler, more direct, and more useful to the consumer.
Agency Response: The department disagrees. A person´s socio-economic status does not preclude access to various types of advisors. The required disclosure language does not specify that the viator, life settlor, or owner must contact all the advisors named. The viator, life settlor, or owner has freedom of choice. The fact that the viator, life settlor, or owner has a life insurance policy to sell to a viatical or life settlement provider indicates access to either an insurer or an insurance agent, and these persons often discuss such issues in marketing a life insurance policy.
Comment: A commenter stated that standard Spanish language for this industry has not been developed but believes the proper phrase is "en Vida" rather than "Pago en Vida."
Agency Response: The department contacted a court-certified Spanish interpreter who stated "Pago en Vida" is more precise.
§3.1709(c)(1)
Comment: Two commenters stated that the company´s executive officer should be allowed to appoint someone to act with his or her authority to approve changes to the viatical or life settlement contract.
Agency Response: The department agrees in part and disagrees in part. The department has changed the language to recognize that a person other than the executive officer may make a change, but only if that person is properly identified in the form. The department also clarifies that this section does not affect the provider´s duty to comply with the filing requirements of §3.1706.
§3.1709(c)(4)
Comment: A commenter stated that in some instances, the owner desires to hold transfer documents until he or she can verify that funds are in escrow, and then send them to the insurance company. The commenter believed that the forms are meaningless until they are presented to the insurance company, and suggested the following language: "a provision that, within three business days, upon receipt by the insurance carrier of documents to effect the transfer of the policy." The commenter believed that this common time frame would be more accommodating and still provide adequate assurance of availability of funds.
Agency Response: The department disagrees. In situations where an owner is reticent to sign transfer documents until funds are in the escrow account, the provider can direct the owner to the contract language required by this section. Also, there is nothing in §3.1709(c)(4) which prohibits the provider from appeasing this type of owner by placing funds in the escrow account, or providing some other arrangement that will satisfy the owner´s need to be assured of the security of the transaction prior to the transfer documents being sent to the owner for completion.
§3.1709(c)(5)
Comment: A commenter believed the rule should include a provision for tracking if the designated person or the viator or life settlor cannot be located.
Agency Response: The department recognizes the commenter's concerns, but disagrees, as such a provision could result in the provider, provider representative, or broker being able to contact individuals other than the viator or life settlor or their designated contact persons (i.e. family members), which is prohibited by the rule.
§3.1709(c)(7)
Comment: Several commenters expressed concern with the requirement that the viatical or life settlement company notify the viator, life settlor, or owner of any subsequent assignment, sale, or transfer of the policy. One commenter stated that this provision will present logistical difficulties in subsequent transfers by one or more financing entities. The commenter agreed with disclosing to the viator, life settlor, or owner that the ownership of the policy after it is originally purchased is subject to change; however, the commenter believed that there should be an exemption from disclosing a change in ownership if the original company continues to track the entity. Another commenter stated that such notification to an owner is not appropriate; but agreed it would be appropriate to notify the insured that a policy insuring his or her life has been transferred by the original company.
Agency Response: The department agrees and has deleted the requirement to notify the viator, life settlor, or owner of subsequent assignments, sales, or transfers.
§3.1709(c)(10)
Comment: A commenter requested that this paragraph be reworded to reflect that only the owner of a policy has the right to conversion. Another commenter expressed concern that disclosure of pass-throughs of additional policies or coverages does not eliminate the possibility that a policyholder may be surrendering coverage without reimbursement.
Agency Response: The department has added the word "owner" to this provision. The department acknowledges the second commenter´s concern, but clarifies that policy owners are able to negotiate the sale of their policies, and believes that disclosure to the viator, life settlor, or owner that they may be surrendering coverage without reimbursement is sufficient.
§3.1709(f)
Comment: A commenter suggested that the department develop a clearly worded glossary of key terms for use as an appendix to eliminate any confusion as to the identity of key terms.
Agency Response: The department believes a prescribed glossary from the department is not necessary. Providers should be allowed the opportunity to develop their own glossaries for use in the context of a settlement, ensuring that consumers know the meanings of the words contained in their contracts.
§3.1709(f)(5)
Comment: Several commenters requested addition of the phrase "at the time of the contract" when identifying the insurance company underwriting the policy due to frequent transfers of blocks of business. One of the commenters requested modification of subsection (f)(5) to clarify that such a name does not include any entity reinsuring a portion of the policy.
Agency Response: The department agrees with the first comment and has made the suggested change, with modification. The department disagrees with the second comment because subsection (f)(5) does not require inclusion of any reinsurance entity, only the insurance company underwriting the policy which serves as the basis for the contract. The underwriter and reinsurer are not synonymous.
§3.1709(g)
Comment: A few commenters expressed concerns about limiting the company to use of one escrow or trust account for reasons including, but not limited to, instances where a company receives funding from more than one investor, and each investor requires a separate escrow or trust account for accounting reasons.
Agency Response: The department agrees and has deleted the limitation.
§3.1709(h)
Comment: A commenter stated that the time for providing these materials is uncertain, and requests clarification.
Agency Response: The department clarifies that the timing of the delivery of each of these materials will vary with each document, since they are presented to the viator, life settlor, or owner at different times during the viatical or life settlement transaction.
§3.1710(c)(2)
Comment: A commenter stated that information relating to a viator´s or life settlor´s family is often necessary in connection with the filing of a death claim.
Agency Response: The department recognizes the commenter´s concerns and has changed subsection (c)(2) to allow family member information to be obtained since the name of the viator´s, life settlor´s or owner´s mother and father is often needed to obtain a certificate of death for submission to the life insurance company for payment of the death benefit. However, to protect consumer confidentiality as required by Article 3.50-6A, the department has made other changes to subsection (c)(2) to prohibit a viatical or life settlement provider, provider representative, or broker from contacting by any method, the viator´s, life settlor´s, or owner´s family members, including a spouse and significant other, unless such person(s) have been designated as a contact person under §3.1712. In making this change, the department specifically notes that some viators, life settlors, or owners may have financial or medical issues of a sensitive nature that they wish to keep private from their family members.
§3.1710(c)(5)
Comment: A commenter stated that these provisions deprive the owner of certain rights to pledge or assign a policy as the owner sees fit, and the commenter is uncertain of the legislative authority for these provisions.
Agency Response: The department disagrees that the provisions deprive the owner of certain rights. Before any viatical or life settlement contract is completed, the viatical or life settlement provider requires medical information about the viator or life settlor to evaluate the viator´s or life settlor´s health status for settlement purposes. To review this information, the provider, provider representative, broker, or policy owner, by law, must obtain the viator´s or life settlor´s written consent in situations where the owner and viator or life settlor are different persons under the policy. This provision ensures that the owner has not unlawfully obtained or released the viator´s or life settlor´s confidential information without his or her knowledge. Statutory authority for this provision exists in Article 3.50-6A, §2(c)(7) which requires rules adopted by the commissioner to include rules governing the maintenance of appropriate confidentiality of personal and medical information.
§3.1710(c)(6)
Comment: Two commenters suggested including other factors to better define the criteria the department will utilize, such as current interest rates, term of policy, premium costs, risks associated with policy (e.g. caps on conversion), cost of money, existence of risk for the class of policy, the type of policy, and outstanding loans, among others. One commenter stated that the factors used to determine unjust payments are open-ended, and that it may be difficult, or even impossible, for a company to determine if its payments would be considered "just" by the department.
Agency Response: The department disagrees with some of the items the commenters suggested and notes that much of the criteria suggested is included in the data submitted in the report(s) required by §3.1705. The department has deleted items from §3.1710(c)(6) that are also listed in §3.1705, and has added a reference to §3.1705. The department will use the data in §§3.1705 and 3.1710(c)(6) as the norm to monitor payments in Texas, but also believes that, in some instances, other information might be considered when determining if a payment is just. The department has kept the phrase "among other factors."
Comment: A commenter stated concerns that this provision may lead to elaborate administrative procedures, and requested an explanation of how the department intends to implement this section.
Agency Response: This provision will not lead to elaborate administrative procedures because viatical and life settlement providers currently assess life insurance policies to determine the fair market value they are willing to pay to purchase a viator´s, life settlor´s, or owner´s policy. Such a provision is allowed in the rule pursuant to Article 3.50-6A(e). The department plans to evaluate these criteria annually, and as needed in response to any consumer complaints. If any review reflects a substantial difference in payment amounts between risks of the same class, the department will contact the provider to obtain information, including other factors that may have affected the purchase price.
§3.1710(c)(12)
Comment: Several commenters expressed concerns with a prohibition on use of power-of-attorney forms. These commenters stated that the language requiring the viator, life settlor, or owner to execute a power-of-attorney in favor of a viatical or life settlement company or broker is at times essential to the transaction. Some commenters urged removal of this as a prohibited practice. Other commenters suggested the department allow use of limited or special power-of-attorney forms.
Agency Response: The department agrees in part and disagrees in part. For consumer protection purposes, the power-of-attorney should not be so general or broad as to potentially allow a provider, provider representative, or broker to use the power-of-attorney for purposes unrelated to the viatical or life settlement transaction. However, the department recognizes that the form serves a valuable purpose in the course of the viatical or life settlement transaction. Therefore, the department has changed the language to allow a limited or special power-of-attorney only when it explicitly states the occasions in which the power-of-attorney may be invoked, and is limited to purposes related to the viatical or life settlement transaction.
§3.1712
Comment: A commenter stated that the provision relating to contacting the viator, life settlor, or owner for health status inquiries may resolve other difficulties, but is poorly placed, and suggested that all provisions regarding tracking should be in one single place or refer to other relevant sections.
Agency Response: Various provisions throughout the rule apply to tracking, including registration, renewal, and prohibited practices, among others. The department believes the provisions are appropriately placed.
Comment: A few commenters stated that because life expectancy may change at certain stages of the viatical or life settlement contract, limiting a company´s ability to inquire about a viator´s or life settlor´s life expectancy based on information obtained at the time of the contract is unworkable and potentially confusing for the company. Another commenter stated that the frequency of contacts in the proposed rule is based upon life expectancy at the time of contract, and requested that monthly contacts should be allowed in the final expected year. Another commenter stated that it is unreasonable to limit the number of contacts based on life expectancy because the company has a large investment in the policy, and a contact of once per month is not unreasonable if it is disclosed at the time of purchase of the policy. A commenter supported the concept of a contact person, but suggested the provision be amended to require three contact persons at the time of contract, one of whom must be an attending physician.
Agency Response: The department disagrees with contacting a viator, life settlor, or owner more than once per month, but agrees that life expectancy may change at certain stages of the viatical or life settlement process, and has removed the phrase "as determined at the time of contract." Nothing in this section prohibits the viator or life settlor from designating more than one contact person, but the department believes the number should be kept within a reasonable limit.
§3.1713(b)
Comment: A commenter stated that the provision prohibiting a viatical or life settlement company from continuing to track a policy that the company sells is completely unreasonable. The commenter believed the issue could be resolved by replacing the word "must" with "may" in the fourth line, and by concluding with language that indicates that if the company does not wish to track the policy, it must designate another licensed company for the tracking. The commenter stated that this entire section is further confused by earlier language requiring persons who perform tracking to be licensed brokers. The commenter encourages the department to further review this concept.
Agency Response: The department agrees that clarification is needed, and has changed the subsection to allow a viatical or life settlement provider to continue to track or appoint one of their provider representatives, another Texas provider, or a broker to track the viator´s or life settlor´s health status. Any person appointed for this purpose must hold a Texas certificate of registration.
§3.1714(a)(4) and (b)
Comment: Several commenters expressed concern with the 12-month expiration of the medical consent form and recommended that the consent form be allowed to remain in effect for the duration of the insured´s life, as it is used to track the health status of the viator and life settlor. A commenter stated that this requirement could place the broker or company in conflict with §3.1712. A few commenters stated that limitation of the consent form affects the funder´s ability to obtain updated medical data necessary for secondary sales, and believed the insured should have the option to waive "expiration of consent forms" with appropriate disclosures. A commenter stated that this will result in higher offers and less intrusive post-settlement monitoring. Two commenters stated that stop loss insurers require a valid authorization to release medical information so that a re-review may take place to provide a current valuation. One of the commenters stated that institutional investors also require accurate and timely health information.
Agency Response: The department agrees with removal of the 12-month expiration period, and has changed subsection (b) to remove the language that limited the duration of medical release forms and prohibited the use of confidential information to track the on-going health status of any viator or life settlor after the owner and the viatical or life settlement provider have entered into the viatical or life settlement contract, and require disclosure of this fact and of the person´s right to withdraw consent pursuant to applicable law.
§3.1715
Comment: A commenter stated that this subsection unfairly places liability on properly licensed entities for the failure of others to adhere to applicable regulations, and that the department can adequately police violations through annual broker reports.
Agency Response: The department disagrees. Article 3.50-6A requires the department to develop rules to adequately address consumer protection. The article also requires providers, provider representatives, and brokers that conduct viatical or life settlement business in Texas to be properly registered. Registration is necessary to ensure that consumers are dealing with persons who are aware of the requirements of Article 3.50-6A and this subchapter. Allowing properly registered entities to pay or share commissions with unregistered entities may harm consumers, and thus contravenes these consumer protection provisions. The department believes that reporting information would not adequately address this goal because a broker could do business with many different providers, each of whom will be submitting a separate report under §3.1705 long after the non-registered entity has engaged in the unlawful practice.
Comment: Several commenters stated that requiring an escrow agent or trustee who pays premium to be a licensed insurance agent is a burdensome restriction. These commenters stated that other states only require escrow agents to be financial institutions protected by the FDIC and suggested that Texas propose similar regulations. One commenter suggested deletion of the requirement. One commenter stated that the nature of the escrow agent is to serve as an independent party to the transaction and to preserve the interest of the parties and as such, believed that the definition of "escrow agent or trustee" is sufficient to maintain the integrity and conformity with the intent and purpose of the act. A commenter stated that requiring an escrow agent or trustee to obtain a life insurance license is not related to their involvement in the settlement industry and suggested that the requirement that any individual that performs services relating to the gathering, organization, analysis of confidential information, etc., be expanded to include the handling of funds. A commenter stated that the responsibility of paying premiums has nothing to do with the business of insurance and that escrow agents, who are licensed by the Texas Department of Banking (TDB), are routinely audited and must meet substantial requirements. This commenter urged the department to prohibit any person or entity not subject to the regulatory authority of TDI or TDB from acting as an escrow agent.
Agency Response: The department recognizes the commenters' concerns and has accordingly deleted the language.
§3.1716(a)
Comment: A commenter stated that this subsection appears to require viatical and life settlement companies and brokers to be responsible for entities completely out of their control, such as escrow agents, and urged modification or deletion of this section to only include those entities under the direct control of the company or broker.
Agency Response: The department disagrees. The provision addresses acts or omissions that are committed through various entities. Therefore, this provision does not hold the provider, provider representative, or broker responsible for acts committed by a person acting independently of the provider, provider representative, or broker.
§3.1717(b)
Comment: A commenter stated that viatical or life settlement brokers may not know of the death of the viator or life settlor, and that it was important to note this fact. The commenter believed that the appropriate file retention period should be three years after the closing of the sale of the policy, and that this concept is contained in the NAIC model of which the commenter approves.
Agency Response: The department agrees and has replaced the phrase, "death of the viator or life settlor" with "date the viatical or life settlement has matured."
For, with changes: Accelerated Benefits Corporation; Affirmative Lifestyle Corporation; American Viatical Services; Coventry Capital, LLC; Coventry Financial LLC; Life Partners, Inc.; Montgomery Capital, LLC; Mutual Benefits Corporation; National Viatical Association; National Viatical and Life Settlement Association of America; Office of Public Insurance Counsel; Texas Association of Insurance and Financial Advisors; Viatical Benefactors, LLC; ViatiCare Financial Services, LLC; ViatiCare Financial Services, LLC; Viaticus.
Against: None.
The sections are proposed under the Insurance Code Article 3.50-6A and Section 36.001. Article 3.50-6A provides that the commissioner shall adopt reasonable rules to implement this article as it relates to viatical and life settlements. Section 36.001 provides that the Commissioner of Insurance may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.
§3.1701. Purpose and Severability.
(a) Purpose. This subchapter implements the provisions of Insurance Code Article 3.50-6A. The commissioner implements this subchapter for the following purposes:
(1) to provide consumer protection in a viatical or life settlement transaction for a viator or life settlor and owner who assigns, sells, or otherwise transfers a policy or its net death benefit, or who attempts to do so;
(2) to establish requirements for registration, disclosure, and form approval for persons engaged in the business of viatical or life settlements;
(3) to define prohibited practices for persons engaged in or involved in transactions relating to the business of viatical or life settlements;
(4) to ensure that a viator´s or life settlor´s and owner´s rights under the Insurance Code and this subchapter remain protected if a viatical or life settlement provider assigns, sells, or otherwise transfers a policy or net death benefit under the policy which served as the basis for a viatical or life settlement transaction;
(5) to protect the confidential information of viators or life settlors and owners who assign, sell, or otherwise transfer their policies or net death benefits under such policies, or who seek to do so; and
(6) to provide enforcement mechanisms to ensure that persons engaged in, or involved in transactions relating to the business of viatical or life settlements comply with the Insurance Code, this subchapter, or any other applicable law of this state or the United States.
(b) Severability. If a court of competent jurisdiction holds that any provision of this subchapter is inconsistent with any statutes of this state, is unconstitutional or for any other reason is invalid, the remaining provisions shall remain in full effect. If a court of competent jurisdiction holds that the application of any provision of this subchapter to particular persons, or in particular circumstances, is inconsistent with any statutes of this state, is unconstitutional or for any other reason is invalid, the provision shall remain in full effect as to other persons or circumstances.
§3.1702. Definitions.
(a) The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise.
(1) Advertisement -- Includes, but is not limited to:
(A) printed and published material, audio-visual material, and descriptive literature of a viatical or life settlement provider, provider representative, or broker, including materials used in direct mail, newspapers, magazines, the internet, radio, telephone and television scripts, billboards, and similar displays;
(B) descriptive literature and sales aids of all kinds used by a viatical or life settlement provider, provider representative, or broker and distributed to members of the public, including circulars, leaflets, booklets, depictions, illustrations, and form letters;
(C) prepared sales talks, presentations, and materials for use by a viatical or life settlement provider, provider representative, or broker, and those representations made to members of the public;
(D) materials used to solicit viatical or life settlements;
(E) material included with a viatical or life settlement or an application for a viatical or life settlement, when the settlement is solicited or when the contract is delivered, including materials used in connection therewith;
(F) lead card solicitations, which are communications that, regardless of form, content, or stated purpose, are used to compile a list containing names or other personal information regarding individuals who have expressed a specific interest in a product and are used to solicit persons in this state for a viatical or life settlement; and
(G) any other communication directly or indirectly related to a viatical or life settlement or application for a viatical or life settlement, and used in the eventual sale or solicitation of a viatical or life settlement or application for a viatical or life settlement.
(H) The term "advertisement" does not include:
(i) communications or materials used within a viatical or life settlement provider´s, provider representative´s, or broker´s own organization, not used as sales aids and not disseminated to members of the public;
(ii) communications with individuals, other than materials urging individuals to purchase or inquire into the potential purchase of a viatical or life settlement;
(iii) materials used solely for the recruitment, training, and education of a viatical or life settlement provider´s, provider representative´s, or broker´s personnel, provided it is not also used to induce individuals to inquire into the potential purchase of a viatical or life settlement or application for a viatical or life settlement.
(2) Business of viatical or life settlements -- The making of, or proposing to make, as a viatical or life settlement provider, provider representative, or broker, a viatical or life settlement contract, or taking or receiving any application for a viatical or life settlement, or doing the acts of a viatical or life settlement provider, provider representative, or broker.
(3) Catastrophic or life-threatening illness -- An illness or physical condition which, as certified by a physician, can reasonably be expected to result in death in 24 months or less after the date of the certification.
(4) Certificate holder -- A member or employee eligible for coverage under a certificate issued pursuant to a group policy.
(5) Confidential information -- A viator´s, life settlor´s, or owner´s name, address, telephone number, facsimile number, electronic mail address, photograph or likeness, employer, employment status, social security number, genetic information, medical information, financial information, or any other information that is likely to lead to the identification of a viator, life settlor, or owner, including the identity of any family member, spouse, or significant other.
(6) Control -- As defined in Insurance Code Article 21.49-1, §2.
(7) Escrow account -- An account established by a viatical or life settlement provider for the sole purpose of entering into viatical or life settlements wherein the funds payable to the owner are placed with an independent third party to be paid to the owner on the fulfillment of the conditions of the viatical or life settlement contract.
(8) Escrow agent or trustee -- An attorney, certified public accountant, financial institution, or other person licensed in a capacity under the authority of a regulatory body to provide escrow or trust services.
(9) Escrow or trust agreement -- An agreement establishing an escrow account or a trust.
(10) Financing entity -- An underwriter, placement agent, lender, purchaser of securities, purchaser of a policy from a viatical or life settlement provider, credit enhancer, reinsurer, or any person whose sole activity related to the viatical or life settlement is providing funds to effect the viatical or life settlement, and who has an agreement in writing with a registered viatical or life settlement provider to act as a participant in financing the viatical or life settlement.
(11) Genetic information -- Information derived from the results of a genetic test.
(12) Genetic test -- A laboratory test of an individual´s DNA, RNA, proteins, or chromosomes to identify by analysis of the DNA, RNA, proteins, or chromosomes, the genetic mutations or alterations in the DNA, RNA, proteins, or chromosomes that are associated with a predisposition for a clinically-recognized disease or disorder. The term does not include:
(A) a routine physical examination or a routine test performed as part of a physical examination;
(B) a chemical, blood, or urine analysis;
(C) a test to determine drug use; or
(D) a test for the presence of the human immunodeficiency virus.
(13) Insured -- An individual covered by a policy.
(14) Life expectancy -- The mean number of months a viator or life settlor can be expected to live as determined by the viatical or life settlement provider considering medical records and appropriate experiential data.
(15) Life settlement -- A transaction whereby a written agreement is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state, under which a life settlement provider acquires, through assignment, sale, or transfer, a policy insuring the life of an individual who does not have a catastrophic or life-threatening illness or condition by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.
(16) Life settlor -- An individual who:
(A) is the insured under an individual policy or a certificate holder under a group policy, and who does not have a catastrophic or life-threatening illness or condition; and
(B) enters into a life settlement contract with a life settlement provider or attempts to do so through inquiry to, negotiation with, or by providing or consenting to the provision of confidential information to, a life settlement provider, provider representative, or broker. The term does not include a life settlement provider that assigns, sells, or otherwise transfers a policy that it has purchased from a life settlor and owner.
(17) Mature --
(A) as it relates to viatical or life settlement brokers, occurs when the owner has received full payment of the settlement for the assignment, sale, or transfer of the policy that served as the basis for the viatical or life settlement; or
(B) as it relates to viatical or life settlement providers, occurs when the viator or life settlor has died; or
(C) as it relates to viatical or life settlement provider representatives or brokers who have been appointed to continue to track a viator´s or life settlor´s health status pursuant to §3.1704(e) of this subchapter (relating to Renewal; Fees), occurs when the viator or life settlor has died.
(18) Net death benefit -- The amount of the death benefit under a policy to be purchased, less any outstanding debts or liens.
(19) Owner -- The person who has the right to assign, sell, or otherwise transfer a policy, or a certificate issued pursuant to a group policy. This definition recognizes that, in some instances, the owner and viator or life settlor may not be the same person under the policy.
(20) Person -- An individual, corporation, trust, partnership, association, or any other legal entity.
(21) Policy -- An individual life insurance policy, a rider to an individual life insurance policy, or a certificate or a rider to a certificate evidencing coverage under a group life insurance policy.
(22) Referral agent -- A person who refers or introduces a viator, life settlor, or owner to a viatical or life settlement provider, provider representative, or broker, but does not advertise his or her services as a referral agent, nor advertises the availability of viatical or life settlements on behalf of any viatical or life settlement provider, provider representative, or broker; nor performs services or takes part in any negotiations effecting a viatical or life settlement. This definition shall not be construed to allow a person making a referral to perform the acts of a viatical or life settlement provider, provider representative, or broker in this state without first obtaining a certificate of registration as required by §3.1703 of this title (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
(23) Settlement application -- A written form provided by a viatical or life settlement provider, provider representative, or broker to be completed by a viator or life settlor and owner for the purpose of applying to a viatical or life settlement provider, provider representative, or broker to be considered by the provider, provider representative, or broker for the sale of the policy insuring the life of a viator or life settlor.
(24) Settlement contract -- The written document evidencing the agreement entered into between a viatical or life settlement provider and a viator or life settlor and owner that establishes the terms under which the viatical or life settlement provider will pay compensation or anything of value in return for the viator´s or life settlor´s and owner´s assignment, sale, or transfer of the net death benefit or ownership of all or a portion of the policy or benefit which served as the basis for the viatical or life settlement.
(25) Trust -- An account or trust established by a viatical or life settlement provider for the sole purpose of entering into viatical or life settlements wherein the funds payable to the owner are placed with a trustee to be paid to the owner on the fulfillment of the conditions of the viatical or life settlement contract.
(26) Viatical or life settlement broker -- A person who is not a viatical or life settlement provider representative, and who for a commission or other form of compensation, or with the intent of obtaining such compensation:
(A) offers or attempts to negotiate a viatical or life settlement between a viator or life settlor and owner and one or more viatical or life settlement providers by representing the viator, life settlor, or owner in such negotiation(s) to obtain the best offer or sale price for the viator´s, life settlor´s, or owner´s policy; or
(B) performs services related to the gathering, organization, or analysis of confidential information about a viator, life settlor, or owner for purposes of entering into a settlement contract, or contacts a viator, life settlor, or owner, or a viator´s or life settlor´s designee as provided in §3.1712 of this subchapter (relating to Contacting the Viator, Life Settlor, or Owner for Health Status Inquiries: Limits and Prohibited Practices) for the purpose of tracking the viator´s or life settlor´s health status after a viatical or life settlement has been signed by all necessary parties and payments have been made to the owner.
(C) The term does not include: an owner of a policy insuring the life of a viator or life settlor; a family member of a viator or life settlor who does not receive, or expect to receive, any form of compensation from a viatical or life settlement provider, provider representative, or broker for referring a family member; an attorney, accountant, estate planner, financial planner, or individual acting under power of attorney from the viator, life settlor, or owner, who is retained to represent the viator, life settlor, or owner and whose compensation is paid entirely by the viator, life settlor, or owner or at the direction and on behalf of the viator, life settlor, or owner without regard to whether a viatical or life settlement is effected; an attorney or accountant representing the viator, life settlor, or owner in relation to the viatical or life settlement, who receives a contingent fee from the viator, life settlor, or owner; a person who solicits only potential investors in viatical or life settlements, and who does not in any way advertise, solicit, or promote viatical or life settlements in a manner that reasonably could attract viators, life settlors, or owners; or any physician acting within the scope of the physician´s medical license who provides medical analysis for the physician´s own patient or who, on a contract or employment basis, performs medical analysis for a person who performs services for a viatical or life settlement provider, provider representative, or broker related to the gathering, organization, or analysis of confidential information about a viator or life settlor for the purpose of effecting a viatical or life settlement.
(27) Viatical or life settlement provider -- A person, other than a viator, life settlor, or owner of an individual policy or certificate holder under a group policy insuring the life of a viator or life settlor, who enters into a viatical or life settlement with a viator or life settlor and owner or certificate holder, or who attempts to do so through negotiation, solicitation, or acquisition of confidential information from or about a viator, life settlor, or owner, or who performs services as described in paragraphs (26) or (28) of this subsection. The term does not include:
(A) a bank, savings bank, savings and loan association, credit union, or other licensed lending institution that takes an assignment of a policy as collateral for a loan;
(B) the issuer of a policy that makes a loan or pays benefits, including accelerated benefits, under the policy or in exchange for surrender of the policy;
(C) a financing entity;
(D) a trustee or escrow agent; or
(E) an insurer that provides stop loss coverage to a viatical or life settlement provider.
(28) Viatical or life settlement provider representative -- A person who is not a viatical or life settlement broker, and who is employed by, or contracts exclusively with, a viatical or life settlement provider, and who by nature of the person´s employment or contract does one or more of the following on behalf of the viatical or life settlement provider with whom the person is employed or contracted:
(A) offers or attempts to negotiate a viatical or life settlement with a viator, life settlor, or owner by representing the viatical or life settlement provider with whom the person is employed or contracted; or
(B) performs any of the services described in paragraph (26)(B) of this subsection.
(C) The term does not include those persons listed in paragraph (26)(C) of this subsection.
(29) Viatical settlement -- A transaction whereby a written agreement is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state, under which a viatical settlement provider acquires through assignment, sale, or transfer, a policy insuring the life of an individual who has a catastrophic or life-threatening illness or condition by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.
(30) Viator -- An individual who:
(A) is the insured under an individual policy or a certificate holder under a group policy, and who has a catastrophic or life-threatening illness or condition; and
(B) enters into a viatical settlement contract with a viatical settlement provider or attempts to do so through inquiry to, negotiation with, or by providing or consenting to the provision of confidential information to a viatical settlement provider, provider representative, or broker. The term does not include a viatical settlement provider that assigns, sells, or otherwise transfers a policy that it has purchased from a viator and owner.
(b) Insurance Code §§31.001, 31.002, 31.003, and 31.007 which include definitions of "department" and "commissioner" and describe the structure and duties of the Texas Department of Insurance, apply to this subchapter and to Insurance Code Article 3.50-6A.
§3.1703. Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees.
(a) Any person engaging in the business of viatical or life settlements in this state must hold a certificate of registration issued by the department as required by this subchapter unless:
(1) the person´s involvement in a viatical or life settlement transaction is limited solely to that of a referral agent; and
(2) any fee received by such person for making the referral consists of a nominal, fixed, one-time fee, that is not contingent upon the purchase or sale of the product for which the referral is made.
(b) A viatical or life settlement provider, provider representative, or broker may hold no more than one certificate of registration of the same type in the same legal name at the same time.
(c) A viatical or life settlement provider, provider representative, or broker doing viatical or life settlement business subject to the provisions of this subchapter shall have the viatical or life settlement provider´s, provider representative´s, or broker´s certificate of registration issued in the provider´s, provider representative´s, or broker´s legal name, and may only act within the scope of authority granted by the certificate of registration. If a person holds a certificate of registration authorizing the person to act as:
(1) a viatical or life settlement broker or provider representative, that person need not obtain an additional certificate of registration to participate in a registered partnership or corporate entity of the same type in this state, but the partnership or corporate entity with which the person participates must hold, in its own legal name, a separate certificate of registration to conduct business as a viatical or life settlement broker or provider representative in this state.
(2) a viatical or life settlement provider, that person need not obtain an additional certificate of registration to participate in a registered partnership or corporate entity of the same type in this state, but the partnership or corporate entity with which the person participates must hold, in its own legal name, a separate certificate of registration to conduct business as a viatical or life settlement provider in this state.
(d) Any registered viatical or life settlement provider, provider representative, or broker may have additional offices or do business under assumed names as that term is defined in §19.901 of this title (relating to Definitions Concerning Conduct of Licensed Agents) without obtaining an additional certificate of registration; provided, each viatical or life settlement provider, provider representative, or broker shall furnish the department with a list identifying any and all offices from which the viatical or life settlement provider, provider representative, or broker will conduct viatical or life settlement business, and show any and all assumed names which the viatical or life settlement provider, provider representative, or broker will utilize in conducting viatical or life settlement business at each of those offices.
(1) Where such a filing is required under the Assumed Business or Professional Name Act, Texas Business and Commerce Code §36.01, et seq., or any similar statute, the viatical or life settlement provider, provider representative, or broker shall provide the department with a copy of the valid assumed name certificate reflecting proper registration of each assumed name utilized by the viatical or life settlement provider, provider representative, or broker.
(2) The assumed name shall comply with subsection (e) of this section.
(e) The legal name, including an assumed name, used by a viatical or life settlement provider, provider representative, or broker in the conduct of viatical or life settlement business under a certificate of registration shall be subject to the requirements of §19.902 of this title (relating to One Agent, One License) except that a separate application shall not be required for a viatical or life settlement provider, provider representative, or broker who conducts business under a single assumed name and registers that name with the department on the viatical or life settlement provider´s, provider representative´s, or broker´s initial application for certificate of registration.
(f) Each person engaging in, or desiring to engage in, business as a viatical or life settlement provider, provider representative, or broker in this state shall file with the department a completed application for certificate of registration in such form as the department may require. The application shall be signed and sworn to by the person. Persons may obtain forms for application for a certificate of registration by making a request to the Texas Department of Insurance, P.O. Box 149104, Austin, Texas, 78714-9107 or 333 Guadalupe, Austin, Texas, 78701, or by accessing the department´s website at www.tdi.state.tx.us.
(g) Each completed application for certificate of registration, when filed with the department, shall be accompanied by a two-year registration fee in the amount of $500 if the applicant is a viatical or life settlement provider, and $250 if the applicant is a viatical or life settlement provider representative or broker. All registration fees are non-refundable and non-transferable, except as otherwise provided in §3.1704(f) of this subchapter (relating to Renewal; Fees).
(h) In addition to submitting the application and two-year registration fee required by subsection (g) of this section, a person engaging in, or desiring to engage in, business as a provider representative in this state shall submit to the department with his or her application for certificate of registration, a notice of exclusive representation from the viatical or life settlement provider on whose behalf the applicant, as a provider representative, will solicit business. The notice shall include a certification from the viatical or life settlement provider stating that the viatical or life settlement provider desires to designate the applicant as its provider representative.
(i) A designation made under subsection (h) of this section continues in effect until it is terminated or withdrawn by the viatical or life settlement provider. Such termination and withdrawal shall be in writing, a copy of which shall be sent to the department, no later than 10 calendar days after the date the designation is terminated and withdrawn.
(j) If the applicant is domiciled in another state, and if:
(1) the domiciliary state licenses or registers persons engaged in the business of viatical or life settlements, the applicant shall attach to the application for certificate of registration either:
(A) a current copy of a letter of good standing obtained from the regulatory body which issued the license or certificate of registration; or
(B) a copy of the applicant´s current license or certificate of registration issued by the domiciliary state.
(2) the domiciliary state does not license or register persons engaged in the business of viatical or life settlements, the applicant shall attach to the application for certificate of registration, a current copy of a letter of good standing obtained from the domiciliary secretary of state or other regulatory body, as applicable, which maintains records relating to incorporation.
(k) If the applicant is domiciled in another state, the applicant shall complete and execute forms as required by the department for appointment of agent for service of process and for irrevocable consent to jurisdiction of the commissioner of insurance and Texas courts. Both forms shall be attached to the application for certificate of registration. The agent for service of process must be a person with a Texas address who has an established place of business and who can be easily located and served with notices, legal process, and papers.
(l) A partnership may file an application for certificate of registration to engage in business as a viatical or life settlement provider, provider representative, or broker provided that all persons having control in the affairs of any such partnership are named in the application for certificate of registration, and the partnership submits with its application for certificate of registration, a current copy of its certificate of existence as a registered partnership from the Texas Secretary of State.
(m) A corporation may file an application for certificate of registration to engage in business as a viatical or life settlement provider, provider representative, or broker provided that the corporation submits with its application for certificate of registration, a current copy of its certificate of existence as a registered corporation from the Texas Secretary of State.
(n) If an applicant for a certificate of registration to operate as a viatical or life settlement provider, provider representative, or broker has complied with all application procedures in this section, and the department is satisfied that the applicant meets all legal requirements, the department shall issue the applicant a certificate of registration to engage in business as a viatical or life settlement provider, provider representative, or broker unless the department determines that the application should be denied based on any one or more of the factors set forth in Insurance Code Article 3.50-6A, or other applicable law. If the department denies the application, or if, at any time, the applicant no longer meets the requirements for registration, the procedure for the grant, denial, renewal, revocation, suspension, annulment, or withdrawal of a certificate of registration shall be governed by §1.32 of this title (relating to Licenses).
(o) If there is a change to any information provided in an application for certificate of registration by an applicant, the viatical or life settlement provider, provider representative, or broker shall submit written notification of the change to the department within 30 days of the change. This requirement includes changes in information that occur after the certificate of registration has been issued and during which time the certificate of registration remains valid and unexpired. Such notifications of change in information shall be separate from any other submission of information to the department and:
(1) each applicant shall at all times keep the department informed of both the applicant´s current mailing and physical addresses;
(2) the mailing and physical addresses on the most recent application or notification shall be considered the viatical or life settlement provider´s, provider representative´s, or broker´s last known addresses for purposes of notice to the viatical or life settlement provider, provider representative, or broker by the department.
(3) Nothing in paragraphs (1) and (2) of this subsection releases a registered viatical or life settlement provider, provider representative, or broker relocating outside of Texas from complying with subsections (j) - (m) of this section.
(p) A viatical or life settlement provider, provider representative, or broker shall notify the department, and shall deliver a copy of any applicable order or judgment to the department not later than the 30th day after the date of the:
(1) suspension or revocation of the viatical or life settlement provider´s, provider representative´s, or broker´s right to transact business in another state;
(2) receipt of an order to show why the viatical or life settlement provider´s, provider representative´s, or broker´s license or certificate of registration in another state should not be suspended or revoked; or
(3) imposition of a penalty, forfeiture, or sanction on the viatical or life settlement provider, provider representative, or broker for the violation of the laws of this state, any other state, or the United States.
(q) An applicant shall comply with the requirements of Chapter 19, Subchapter S of this title (relating to Fingerprint Card Requirements for Applicants for License).
(r) In addition to the information required in this section, the department may ask for other information necessary to determine whether the applicant complies with the requirements of Insurance Code Article 3.50-6A and this subchapter for purposes of issuing a certificate of registration to the applicant.
§3.1704. Renewal; Fees.
(a) Unexpired certificates of registration may be renewed every two years by filing with the department a completed application for renewal in such form as the department may require. Each renewal application, when filed, shall be accompanied by a two-year renewal fee of $500 if the renewal applicant is a viatical or life settlement provider, and $250 if the renewal applicant is a viatical or life settlement provider representative or broker. All renewal fees are nonrefundable and non-transferable, except as otherwise provided in subsection (f) of this section.
(b) If an applicant subsequently adds additional certificates of registration, the department may designate one expiration date per applicant to apply to all certificates of registration held by the applicant. The designated date shall be the date on which the initial certificate of registration would normally expire. For certificates of registration which would normally expire after the designated expiration date, renewal fees shall be adjusted pro rata on a monthly basis. The fee adjustment shall be for the renewal immediately following the institution of the designated expiration date. On each subsequent renewal, the applicant shall pay the full registration fee for each certificate of registration.
(c) If the renewal applicant is domiciled in another state, the renewal applicant shall comply with the requirements of §3.1703(j) - (m) of this subchapter (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
(d) Upon filing the completed renewal application and payment of the proper fee, the viatical or life settlement provider´s, provider representative´s, or broker´s current certificate of registration shall continue in force until the renewal certificate is issued by the department or until the department has refused, for cause, to issue such renewal certificate as provided in Insurance Code Article 3.50-6A, or §3.1716 of this subchapter (relating to Denial, Suspension, or Revocation of Certificate of Registration; Enforcement), or other applicable law, and has given notice of such refusal in writing to the renewal applicant.
(e) If a viatical or life settlement provider, provider representative, or broker does not intend to renew or elects to surrender its certificate of registration, the viatical or life settlement provider, provider representative, or broker shall notify the department in writing. The provider´s, provider representative´s, or broker´s written notification of nonrenewal or surrender shall be mailed not later than the 60th day before the date its current certificate of registration expires or is to be surrendered. The viatical or life settlement provider, provider representative, or broker that is nonrenewing or surrendering its certificate of registration shall comply with paragraph (1) or (2) of this subsection.
(1) A viatical or life settlement provider that has viatical or life settlements that will not mature by the date the current certificate of registration expires or is to be surrendered shall take one of the following actions:
(A) renew its current certificate of registration, subject to subsection (f) of this section, or not surrender the certificate of registration until the date the last viatical or life settlement has matured and file the report required by §3.1705 of this subchapter (relating to Reporting Requirements);
(B) sell the viatical or life settlements that have not matured and file the report required by §3.1705 of this subchapter; or
(C) appoint in writing one of its provider representatives, another provider, or a broker to continue to track the viator´s or life settlor´s health status for purposes of continuing the administration of the viatical or life settlement. Appointments shall comply with the following:
(i) The appointed viatical or life settlement provider, provider representative, or broker must agree in writing to make all inquiries to the viator or life settlor or the viator´s or life settlor´s designee in accordance with §3.1712 of this subchapter (relating to Contacting the Viator, Life Settlor, or Owner for Health Status Inquiries: Limits and Prohibited Practices), and include the transferred viatical or life settlement information in the annual report required by §3.1705(c) of this subchapter.
(ii) The viatical or life settlement provider making the appointment shall transfer all records pertaining to its viatical or life settlements to the appointed viatical or life settlement provider, provider representative, or broker; obtain written confirmation from the appointed viatical or life settlement provider, provider representative, or broker that the records for all transferred viatical or life settlements have been received; file the report required by §3.1705 of this subchapter; and provide the viator or life settlor and owner with the appointed provider´s, provider representative´s, or broker´s name, address, telephone number, and contact person.
(iii) Copies of the written agreements, confirmations, and reports required by clauses (i) and (ii) of this subparagraph shall be filed with the department no later than the date of expiration or surrender.
(2) A viatical or life settlement broker or provider representative who elects to surrender, or not renew, their current certificate of registration, shall file the reports required by §3.1705 of this subchapter. A broker appointed by a viatical or life settlement provider or broker, or a provider representative appointed by its viatical or life settlement provider, to provide tracking services who is nonrenewing or surrendering his/her certificate of registration shall:
(A) renew its current certificate of registration, subject to subsection (f) of this section;
(B) appoint in writing a Texas registered viatical or life settlement provider or broker to continue to track the viator´s or life settlor´s health status for purposes of continuing the administration of the viatical or life settlement. Appointments shall comply with the following:
(i) The appointed viatical or life settlement provider or broker must agree in writing to make all inquiries to the viator or life settlor or the viator´s or life settlor´s designee in accordance with §3.1712 of this subchapter, and include the transferred viatical or life settlement information in the annual report required by §3.1705 of this subchapter.
(ii) The viatical or life settlement broker or provider representative making the appointment shall transfer all records pertaining to its viatical or life settlements to the appointed viatical or life settlement provider or broker; obtain written confirmation from the appointed viatical or life settlement provider or broker that the records for all transferred viatical or life settlements have been received; file the report required by §3.1705 of this subchapter; and provide the viator or life settlor and owner with the appointed provider´s or broker´s name, address, telephone number, and contact person.
(iii) Copies of the written agreements, confirmations, and reports required by clauses (i) and (ii) of this subparagraph shall be filed with the department no later than the date of expiration or surrender.
(f) In the event that a viatical or life settlement provider, provider representative, or broker taking one of the actions required by subsection (e)(1) or (e)(2) of this section is not able to fully complete one of the actions before its certificate of registration expires, the viatical or life settlement provider, provider representative, or broker shall pay its full two-year renewal fee, and comply fully with subsection (e)(1) or (e)(2), as applicable, and thereafter surrender its certificate of registration to the department. Upon return of the certificate of registration, the viatical or life settlement provider, provider representative, or broker shall be eligible for a pro rata, monthly-based refund of its renewal fee.
(g) The surrender of any viatical or life settlement provider´s, provider representative´s, or broker´s certificate of registration to the department shall not operate to negate any offense committed prior to the effective date of the surrender. In addition, transmitting to the department any or all viatical or life settlement certificates of registration shall in no way affect any disciplinary proceedings by the department or by the commissioner of insurance in respect to any viatical or life settlement provider, provider representative, or broker.
(h) Nothing in this section shall require the department to issue a renewal of a certificate of registration to any person.
§3.1705. Reporting Requirements.
(a) On or before March 1 of each year, each viatical or life settlement broker shall submit to the department, for the previous calendar year, a complete and accurate annual report containing the name and address of each viatical or life settlement provider and any other brokers with whom the broker transacted the business of viatical or life settlements in Texas, and the number of transactions for each viatical or life settlement provider or other broker. A viatical or life settlement broker who is non-renewing or surrendering the certificate of registration, shall file, upon nonrenewal or surrender, a complete and accurate report containing the information required by this subsection for the period from the latter of the last reporting period or the date of initial registration through the date of nonrenewal or surrender. The report shall be submitted in electronic format as a text file in a comma-delimited format, unless prior to filing the report, the viatical or life settlement broker submits a written request and receives approval from the department to file the report in hard copy. The report and/or written request to file the report in hard copy shall be submitted to the department´s Filings Intake Division at the address specified in §3.1703(f) of this subchapter (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
(b) On or before March 1 of each year, each viatical or life settlement provider registered to conduct business in this state shall submit to the department for the previous calendar year, a complete and accurate annual report of all viatical or life settlement transactions in Texas, and a separate complete and accurate annual report of all viatical or life settlement transactions for all states in the aggregate. A viatical or life settlement provider that is nonrenewing or surrendering its certificate of registration, upon nonrenewal or surrender shall file a complete and accurate report containing the information required by subsection (c) of this section for the period from the latter of the last reporting period or the date of initial registration through the date of nonrenewal or surrender.
(c) The viatical or life settlement provider´s reports required by this section shall be submitted in electronic format as a text file in a comma-delimited format, unless prior to filing the report, the viatical or life settlement provider submits a written request and receives approval from the department to file only a hard copy. The reports and/or written request to file the report in hard copy shall be submitted to the department´s Filings Intake Division at the address specified in §3.1703(f) of this subchapter. The reports shall contain the information set forth in paragraphs (1) - (9) of this subsection as follows:
(1) For each viatical or life settlement contracted during the reporting period:
(A) a unique identifying number or other consistent identifier that corresponds to each viator, life settlor, or owner in the report, as a means of identifying the viator, life settlor, or owner, in a manner that does not reveal any confidential information;
(B) date (month and year) the settlement contract was signed by all necessary parties;
(C) insurance carrier´s name and, if available, A.M. Best or other rating at the time of settlement contract;
(D) age and mean life expectancy (in months) of the viator or life settlor at the time of contract;
(E) viator´s or life settlor´s and owner´s state of residence at the time of contract;
(F) face amount of policy purchased;
(G) net death benefit purchased;
(H) estimated total premiums to keep policy in force for mean life expectancy, and/or WP-Waiver of Premium in effect, or NA-not applicable because policy is paid up or no premiums are due;
(I) net amount paid to the owner (less any outstanding debts or liens);
(J) source of policy (B-Broker; D-Direct Purchase; SM-Secondary Market, i.e., previously purchased by another person);
(K) type of policy (I-Individual or G-Group);
(L) age of the policy at the time the viatical or life settlement contract was effected;
(M) primary ICD Diagnosis Code at the time of settlement contract, in numeric format, as defined by the International Classification of Diseases, as published by the U.S. Department of Health and Human Services (for life settlors with no diagnosis code, use N/A);
(N) type of funding (I-Institutional - e.g. a bank, corporation, company, non-individual entity; P-Private - e.g. an individual); and
(O) status as of ending date (The allowable status codes are: Death, if applicable; N/A, if the date of death has not been determined or verified; Sold, if the settlement contract has been sold; or Appoint, if the settlement contract has been appointed to another registered settlement provider, provider representative, or broker.
(2) For each viatical or life settlement where death has occurred during the reporting period:
(A) a unique identifying number or other consistent identifier that corresponds to each viator, life settlor, or owner in the report, as a means of identifying the viator, life settlor, or owner, in a manner that does not reveal any confidential information;
(B) date (month and year) the settlement contract was signed by all necessary parties;
(C) age and mean life expectancy (in months) of the viator or life settlor at time of contract;
(D) viator´s or life settlor´s and owner´s state of residence at the time of contract;
(E) net death benefit collected under the policy;
(F) amount of total premiums paid, and/or WP-Waiver of Premium in effect, or NA-not applicable because policy is paid up or no premiums are due;
(G) net amount paid to the owner (less any outstanding debts or liens);
(H) primary ICD Diagnosis Code at the time of settlement contract, in numeric format, as defined by the International Classification of Diseases, as published by the U.S. Department of Health and Human Services (for life settlors with no diagnosis code, use N/A);
(I) date of death;
(J) amount of time (in months) between the date the viatical or life settlement contract was signed by all necessary parties, and the date of death;
(K) difference between the actual number of months the viator or life settlor lived after the date the contract was signed by all necessary parties, and the mean life expectancy used by the reporting viatical or life settlement provider.
(3) the name and address of each viatical or life settlement provider, provider representative, or broker from which the reporting provider was referred a policy;
(4) the name and address of any other person from which the reporting provider was referred a policy for which a fee was given for the referral;
(5) the name and address of each viatical or life settlement provider, provider representative, or broker to whom the reporting provider referred a policy;
(6) the number of policies reviewed and rejected;
(7) the number of policies purchased in the secondary market as a percentage of total policies purchased;
(8) the name and address of any person whom the provider utilizes to perform medical evaluations of any kind relating to viators or life settlors; and
(9) the name and address of any provider, provider representative, or broker that the viatical or life settlement provider utilizes to track a viator´s or life settlor´s health status after a settlement contract has been signed by all necessary parties, and payment has been made to the owner, or the code "IH" to indicate tracking performed by in-house employees.
(d) In addition to the information required in this section, the department may request any other information the department deems necessary to conduct a complete review of the viatical or life settlement provider´s, provider representative´s, or broker´s conduct of business related to the assignment, negotiation, purchase, sale, or other business related to viatical and life settlements.
(e) In complying with the reporting requirements of this section, a viatical or life settlement provider, provider representative, or broker shall not include any confidential information, or in any other way compromise the anonymity of any viator, life settlor, or owner, or the viator's, life settlor´s, or owner´s family members, spouse, or significant other.
(f) Any viatical or life settlement provider, provider representative, or broker that fails or refuses to submit any information required by this section is subject to disciplinary action under §3.1716 of this subchapter (relating to Denial, Suspension, or Revocation of Certificate of Registration; Enforcement).
§3.1706. Form Filing Requirements and Approval, Disapproval, or Withdrawal of Forms.
(a) Upon issuance of a viatical or life settlement certificate of registration by the department, a viatical or life settlement provider, provider representative, or broker shall file, for review or approval, any form it uses, or intends to use, to effect a viatical or life settlement contract in this state, prior to any use, issuance, or delivery of the form. A provider, provider representative, or broker conducting both viatical and life settlement business in this state may file a form for use in both the viatical and life settlement markets in accordance with subsection (g) of this section.
(b) Forms which must be filed include, but are not limited to, the following:
(1) settlement applications;
(2) settlement contracts, and any amendments thereto;
(3) disclosures, except as provided in subsection (f)(8) and (9) of this section;
(4) escrow or trust agreements;
(5) documents used to obtain or release confidential information, including documents used by the viatical or life settlement provider, provider representative, or broker which in any way refer to, affect, request, or relate to a viatical or life settlement provider´s, provider representative´s, or broker´s obtaining or releasing confidential information;
(6) acknowledgment forms, except as provided in subsection (f)(8) of this section; and
(7) any other form used by a viatical or life settlement provider, provider representative, or broker to effect a viatical or life settlement contract in this state.
(c) All forms filed pursuant to this section shall be accompanied by a transmittal checklist, a copy of which is available from the department at the address specified in §3.1703(f) of this subchapter (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees). The transmittal checklist shall be completed and signed by a duly authorized representative or attorney of the viatical or life settlement provider, provider representative, or broker, and shall include the following information:
(1) the name of the submitting viatical or life settlement provider, provider representative, or broker and its registration number;
(2) a designated contact person for the filing, including the individual´s name, address, phone number, and if available, fax number and e-mail address. If the form filing is submitted by anyone other than the viatical or life settlement provider, provider representative, or broker, the filing shall be accompanied by an attachment executed by an officer of the viatical or life settlement provider, provider representative, or broker, designating the person submitting the filing as the contact for that filing;
(3) a statement indicating the type(s) of settlement for which the form is used (i.e. viatical, life, or both);
(4) a list of all submitted forms, and an explanation of the purpose and use of each form including, if applicable, a designation of any prototype form(s) used;
(5) if applicable, a list of the form numbers and approval dates of all previously approved forms with which the submitted form will be used, and a statement explaining when the submitted form will be used;
(6) a designation indicating whether the form is file and use or review and approval prior to use as those categories are described in subsection (d) of this section;
(7) a designation indicating whether the form is new, informational, substantially similar to a previously approved form, exact copy, substitution of a previously approved form, correction to a pending form, or a resubmission of a previously disapproved form, as those types are described in subsection (e) of this section; and
(8) any applicable information, attachments, and certifications specified in this section.
(d) Categories for viatical or life settlement form filings are file and use or review and approval prior to use, as follows:
(1) File and Use. A form filed under this category may be immediately used and delivered in this state until a request for corrections has been made, or the form has been disapproved by the department. A filing under this category shall include the information and certifications specified in subsection (f)(1) and (2) of this section. Any form that has been previously disapproved by the department pursuant to subsection (k) of this section is not eligible for filing under this category.
(2) Review and approval prior to use. A form filed under this category must be filed with the department not less than 60 days prior to the viatical or life settlement provider´s, provider representative´s, or broker's intended use or delivery of such form. A filing under this category prohibits the viatical or life settlement provider, provider representative, or broker from using or delivering such form prior to the end of 60 days from the date the form is received by the department, unless the department approves the form during the 60-day period. If the form has not been approved by the 60th day after the date the form is received by the department, the viatical or life settlement provider, provider representative, or broker may use the form:
(A) when the form is approved by the department; or
(B) if the form has not been previously disapproved, or corrections have not been requested by the department at any time, and the viatical or life settlement provider, provider representative, or broker submits to the department the certifications specified in subsection (f)(3) of this section.
(e) The types of viatical or life settlement form filings are new, informational, substantially similar to a previously approved form, exact copy, substitution of a previously approved form, corrections to a pending form, and resubmission of a previously disapproved form, as follows:
(1) New. A form which has not been previously reviewed or approved by the department under Insurance Code Article 3.50-6A and this subchapter, except for a form withdrawn by a viatical or life settlement provider, provider representative, or broker pursuant to paragraph (6) of this subsection.
(2) Informational. A form which is submitted for informational purposes only.
(3) Substantially similar to a previously approved form. A form which is substantially similar to a form that was approved by the department on or after May 1, 2001. This type of form filing requires the information and certification specified in subsection (f)(1) and (4) of this section.
(4) Exact copy. A form which, except for the viatical or life settlement provider´s, provider representative´s, or broker´s name, address, phone number, or other similar viatical or life settlement provider´s, provider representative´s, or broker´s identification information, is an exact copy of a form approved by the department on or after May 1, 2001. This type of form filing requires the information and certifications specified in subsection (f)(1) and (4)(A) and (C) of this section, and will be approved as of the date of receipt by the department.
(5) Substitution of a previously approved form. A form which substitutes a form previously approved by the department on or after May 1, 2001, for the same viatical or life settlement provider, provider representative, or broker wherein the previously approved form has not been issued, or otherwise used in Texas, and will not be used in Texas at any time. This type of form filing requires the information and certifications specified in subsection (f)(1) and (4) of this section.
(6) Correction to a pending form. A form containing corrections to a pending form submitted subsequent to the viatical or life settlement provider, provider representative, or broker receiving notification of the form´s deficiencies from the department. This type of form filing requires the information and certifications specified in subsection (f)(1) and (5) of this section, and shall be received by the department no later than 30 days following the date the viatical or life settlement provider, provider representative, or broker receives oral or written notification from the department of the form´s deficiencies. If a corrected form is not received by the department within the 30 days following the date the viatical or life settlement provider, provider representative, or broker receives notification of the form´s deficiencies, the form shall be considered withdrawn by the viatical or life settlement provider, provider representative, or broker, and will receive no further consideration until it is refiled as a new form filing.
(7) Resubmission of a previously disapproved form. A form containing corrections to a form subsequent to the viatical or life settlement provider, provider representative, or broker receiving a disapproval letter from the department. This type of form filing requires the information and certifications specified in subsection (f)(1) and (7) of this section.
(f) A viatical or life settlement provider, provider representative, or broker shall include the certification(s), attachments(s), and other information referred to in this section as follows:
(1) A viatical or life settlement provider, provider representative, or broker, or its duly authorized representative or attorney filing any form with the department shall certify on the transmittal checklist that it has reviewed, and is familiar with, all applicable statutes and regulations of this state and of the United States, has reviewed the form filing, and to the best of their knowledge and belief, states that the filed form complies in all respects with the applicable statutes and regulations of this state and of the United States.
(2) A viatical or life settlement provider, provider representative, or broker filing a form under subsection (d)(1) of this section shall, in addition to providing the certification specified in paragraph (1) of this subsection, certify to the following:
(A) that no corrections to the form have been requested by the department; and
(B) that the form has not been previously disapproved by the department.
(3) A viatical or life settlement provider, provider representative, or broker filing a form under subsection (d)(2) of this section shall, in addition to providing the certification specified in paragraph (1) of this subsection, certify that the form will not be used until the form is approved by the department. If, following the 60th day from the date the form is received by the department, the viatical or life settlement provider, provider representative, or broker elects to use, issue, or deliver such form prior to receiving approval from the department, the viatical or life settlement provider, provider representative, or broker shall provide the certifications specified in paragraphs (1) and (2) of this subsection.
(4) A viatical or life settlement provider, provider representative, or broker submitting a form under subsection (e)(3), (4) or (5) of this section, shall provide the certification specified in paragraph (1) of this subsection, and shall provide the following information and certification(s):
(A) the form number and approval date of the previously approved form, including the provider´s, provider representative´s, or broker´s name if different from the submitting provider, provider representative, or broker;
(B) a summary of the difference(s) between the previously approved form and the submitted form, including a description of any deleted text. The submitted form shall clearly identify all changes. New or modified text shall be underlined; and
(C) a certification that no changes have been made to the form other than those identified.
(5) A viatical or life settlement provider, provider representative, or broker submitting a form pursuant to subsection (e)(6) of this section shall provide the certification specified in paragraph (1) of this subsection, and shall provide the following information and certification(s):
(A) the form number of the pending form;
(B) the name of the department´s form review specialist who reviewed the form;
(C) the date of notification of any form deficiencies;
(D) the tracking number of the pending form as assigned by the department;
(E) a summary of the difference(s) between the previously reviewed form and the corrected form, including a description of any deleted text. The corrected form shall clearly identify all changes. New or modified text shall be underlined; and
(F) a certification that no changes have been made to the form other than those identified.
(6) A viatical or life settlement provider, provider representative, or broker submitting a form pursuant to subsection (e)(5) of this section shall provide the certification specified in paragraph (1) of this subsection, and a certification that the original version of the form has not been issued in Texas, or otherwise used in Texas, and will not be used in Texas at any time.
(7) A viatical or life settlement provider, provider representative, or broker submitting a form pursuant to subsection (e)(7) of this section shall provide the certification specified in paragraph (1) of this subsection, and shall provide the following information and certification(s):
(A) the form number of the disapproved form;
(B) the date of disapproval by the department; and
(C) the information and certification(s) specified in paragraph (5)(B), (D), (E), and (F) of this subsection.
(8) A viatical or life settlement provider, provider representative, or broker utilizing either the prototype viatical or life settlement disclosure described in §3.1708(c) of this subchapter (relating to Required Disclosure), or the prototype viatical or life settlement acknowledgment form described in §3.1709(d) of this subchapter (relating to Application and Contract Forms: Required Provisions and Escrow/Trust Agreements), is not required to file the form under this section if the viatical or life settlement provider, provider representative, or broker certifies on the transmittal checklist that no changes have been, or will be made, to the department´s language.
(9) A viatical or life settlement provider, provider representative, or broker shall certify on the transmittal checklist either that the English/Spanish application disclosure:
(A) appearing on the submitted application is an exact copy of the language specified in §3.1709(a) of this subchapter and that no changes have been or will be made to the application disclosure; or
(B) will be attached as a supplement to the front of the submitted application and that no changes have been or will be made to the English/Spanish application disclosure. A viatical or life settlement provider, provider representative, or broker making this certification is not required to file the supplement with the department.
(g) A provider, provider representative, or broker conducting both viatical and life settlement business in this state, and who submits a form for use in both the viatical and life settlement business shall certify that the provider, provider representative, or broker will, to the best of their knowledge, when issuing the form to viators, life settlors, or owners, clearly delineate on the form itself, whether the form is being used to effectuate a viatical settlement or whether the form is being used to effectuate a life settlement.
(h) Any form filed pursuant to this section shall be:
(1) filled in with specimen language and specimen fill-in material, and shall not contain the confidential information of any viator, life settlor, or owner;
(2) submitted on 8 1/2 by 11-inch paper. Bound forms will not be accepted;
(3) submitted in typewritten, computer generated, or printer's proof format and be clearly legible. Handwritten forms or handwritten corrections will not be accepted;
(4) designated by a unique form number sufficient to distinguish it from all other forms used by the viatical or life settlement provider, provider representative, or broker. The form number shall be located in the lower left-hand corner of the cover page or on the first page of the form, if visible with the cover closed.
(i) A form filed under this section may contain variable language, provided that the variable language is:
(1) bracketed; and
(2) accompanied by a clear explanation of how the material will vary and how it will be used.
(j) Form filings that are not accompanied by a completed transmittal checklist, or which do not contain all required information and/or certifications, will not be accepted for review by the department, and will be returned to the viatical or life settlement provider, provider representative, or broker as incomplete.
(k) The department may disapprove any form filed pursuant to this section, or withdraw previous approval of any form, if:
(1) the form fails to comply with any applicable statutes or regulations of this state or the United States; or
(2) the content of the form is unjust, encourages misrepresentation, or is in any way deceptive.
(l) The department may request that corrections be made to a form to bring the form into compliance with the provisions of this subchapter, Article 3.50-6A, or any law of this state or the United States.
(m) When the department makes a request for corrections, disapproves a form, or withdraws approval of a form pursuant to subsection (k), (l), or (q) of this section, the department may request that the viatical or life settlement provider, provider representative, or broker replace the form previously used, issued, or delivered, with a corrected form, or correct the form by amendment. The department may also request that the viatical or life settlement provider, provider representative, or broker discontinue using the form, if, prior to receiving approval from the department, any form has been used, issued, or delivered.
(n) The department shall send written notification of any approval or disapproval of any form filed under this section.
(o) The department may request any additional information necessary for a comprehensive review of any form.
(p) The viatical or life settlement provider, provider representative, or broker may make a written request for hearing to the department's Chief Clerk at the address specified in §3.1703(f) of this subchapter upon receiving notification under subsection (k) of this section of any disapproval of a form by the department.
(q) The commissioner may, after notice and opportunity for hearing, withdraw any previous approval of a form, if any form violates or does not comply with Insurance Code Article 3.50-6A, this subchapter, or any law of this state or the United States. The commissioner may require the viatical or life settlement provider, provider representative, or broker to either replace the form previously used or delivered with a corrected form, or correct the form by amendment.
§3.1707. Advertising, Sales and Solicitation Materials; Filing Prior to Use.
(a) Upon issuance of a certificate of registration, each viatical or life settlement provider, provider representative, or broker shall file with the department all advertising or other solicitation materials used to market viatical or life settlements or the viatical or life settlement provider´s, provider representative´s, or broker's services in this state, on or before the date such materials are disseminated. Advertising filings should be filed with the department´s Advertising Unit at the address specified in §3.1703(f) of this subchapter (relating to Application for Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
(b) The filings required by this section are for informational purposes only. Viatical and life settlement providers, provider representatives, or brokers may use or disseminate the materials referenced in this section without the prior review of the department.
§3.1708. Required Disclosure.
(a) With each application for a viatical or life settlement, the viatical or life settlement provider, provider representative, or broker shall deliver to the viator or life settlor and owner written disclosures required by this section.
(b) The written disclosures shall:
(1) prominently display the viatical or life settlement provider´s, provider representative´s, or broker´s full name, home office address, and telephone number; and
(2) disclose the following information:
(A) that individuals wishing to sell their policies may have alternatives to viatical or life settlements. These alternatives may include accelerated benefits offered by the issuer of the policy, loans secured by the policy, and surrender of the policy for cash value.
(B) that an individual may incur tax consequences by entering into a viatical or life settlement.
(C) that a viatical or life settlement may affect an individual´s ability to receive supplemental social security income, public assistance and public medical services, including Medicaid.
(D) that the proceeds of a viatical or life settlement may not be exempt from creditors, personal representatives, trustees in bankruptcy, and receivers in state or federal court.
(E) that all confidential information solicited or obtained by a viatical or life settlement provider, provider representative, or broker about a viator, life settlor, or owner, including the viator´s, life settlor´s, or owner´s identity or the identity of family members, a spouse or significant other, if obtained in accordance with §3.1710(c)(2) of this subchapter (relating to Prohibited Practices Relating to Advertising and Solicitation; Applications and Contracts), is confidential, and shall not be disclosed in any form to any person, unless disclosure has been given by prior written consent from the viator, life settlor, or owner on a form which identifies to whom the confidential information may be released, and the purpose for releasing the confidential information.
(F) that the medical release form may be used to track ongoing health status and that the viator, life settlor, or owner may withdraw their consent pursuant to applicable law.
(G) how viatical or life settlements operate.
(H) the owner´s right to rescind a viatical or life settlement contract at any time, but not later than the 15th day after the date the owner receives the viatical or life settlement proceeds. If the viator or life settlor dies at any time prior to the end of the rescission period, the viatical or life settlement contract shall be deemed to have been rescinded. The viatical or life settlement provider shall refund the death benefit to the owner or beneficiaries designated by the owner in the viatical or life settlement contract for this purpose, and the death benefit returned to such beneficiary or beneficiaries shall be subject to the deduction of all viatical or life settlement proceeds previously paid, and if applicable, any premiums paid by the viatical or life settlement provider.
(I) the viator's, life settlor´s, or owner´s right to know, upon request, the identity of any person who will receive or has received a commission or other form of compensation from the viatical or life settlement provider, provider representative, or broker with respect to their viatical or life settlement and the amount and terms of such compensation.
(J) the limits and options regarding contacts for determination of health status set forth in §3.1709(c)(5) and (6) of this subchapter (relating to Application and Contract Forms: Required Provisions and Escrow/Trust Agreements).
(K) that if the policy which is the subject of a viatical or life settlement is a joint policy, or contains riders or other provisions insuring the lives of a spouse , dependents, or anyone else other than the viator or life settlor, there may be a possible loss of coverage.
(L) that the individual may wish to inquire if the policy which is the subject of a viatical or life settlement contains a provision or rider for future increases in the death benefit, and the amount paid by the viatical/life settlement provider for the purchase of the future increase.
(M) that if the policy which is the subject of the viatical or life settlement contains a rider to, or a provision of, the policy providing an additional death benefit for accidental death, such death benefit remains payable by the insurance company to the beneficiary last named by the viator, life settlor, or owner, not including the viatical or life settlement company, or in the absence of a beneficiary, to the estate of the viator, life settlor, or owner.
(N) that entering into a viatical or life settlement contract will have an effect on payment of premiums and dispositions of proceeds, cash values, and dividends, and may cause other rights or benefits, including conversion rights and waiver of premium benefits that may exist under the policy, to be forfeited by the individual.
(O) that the individual may wish to contact an attorney, accountant, estate planner, financial planning advisor, their insurer, insurance agent, tax advisor, or social services agency regarding potential consequences resulting from entering into a viatical or life settlement.
(P) that the individual may wish to inquire if the person marketing, offering, or negotiating the viatical or life settlement is a viatical or life settlement broker, or is a provider representative, and explain that a provider representative does not actively market the viator´s, life settlor´s, or owner´s policy to various viatical or life settlement providers to find the best competitive offer, but instead only offers and negotiates a viatical or life settlement between a viator, life settlor, or owner and the viatical or life settlement provider with whom the provider representative is employed or contracted.
(Q) that the viator, life settlor, or owner may file a complaint by contacting the Texas Department of Insurance, Consumer Protection Division, Mail Code 111-1A, P. O. Box 149104, Austin, Texas 78714-9104 or 333 Guadalupe, Austin, Texas 78701, or by calling the department´s Consumer Help Line between 8 a.m. and 5 p.m., Central Time, Monday-Friday at 800-252-3439; by faxing a complaint to the department at 1-512-475-1771; by completing a complaint on-line at www.tdi.state.tx.us; or by e-mailing a complaint to consumer.protection@tdi.state.tx.us; and
(3) comply with the plain language requirements prescribed in §3.602(b)(1)(A)-(C) of this title (relating to Plain Language Requirements), and shall contain the appropriate text required by this section, but shall not contain any material of an advertising nature, except for the viatical or life settlement provider´s, provider representative´s, or broker´s logo-type.
(c) A viatical or life settlement provider, provider representative, or broker may either develop and file for approval its own disclosure or utilize the applicable disclosure available from the department which may be obtained by making a request to the Life/Health Division at the address specified in §3.1703(f) of this subchapter (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
§3.1709. Application and Contract Forms: Required Provisions and Escrow/Trust Agreements.
(a) With each application for a viatical or life settlement, the viatical or life settlement provider, provider representative, or broker shall deliver to the viator or life settlor and owner, the following information in English and in Spanish, which either must be displayed prominently and in bold print on the front page of the application, or on a supplement attached to the front of the application:
(1) In English: "Receipt of a (INSERT: viatical* or life,** as applicable) settlement may affect your eligibility for public assistance programs such as medical assistance (Medicaid), Aid to Families with Dependent Children (AFDC), supplementary social security income (SSI), and drug assistance programs. The money you receive for your life insurance policy also may be taxable. Before completing a (INSERT: viatical or life, as applicable) settlement contract, you are urged to consult with an attorney, accountant, estate planner, financial planning advisor, your insurer or insurance agent, tax advisor, or a social service agency concerning how receipt of a payment will affect you, your family, and your spouse´s eligibility for public assistance. For more information about (INSERT: viatical or life, as applicable) settlements generally, contact the Texas Department of Insurance at 800-252-3439."
(Insert either or both, as applicable:
*Viatical settlement -- A transaction whereby a written agreement is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state, under which a viatical settlement provider acquires, through assignment, sale, or transfer of a policy insuring the life of an individual who has a catastrophic or life-threatening illness or condition, by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.
**Life settlement -- A transaction whereby a written agreement is solicited, negotiated, offered, entered into, delivered, or issued for delivery in this state, under which a life settlement provider acquires, through assignment, sale, or transfer of a policy insuring the life of an individual who does not have a catastrophic or life-threatening illness or condition, by paying the owner or certificate holder compensation or anything of value that is less than the net death benefit of the policy.)
(2) In Spanish: "El aceptar una liquidación tipo (INSERT: viáticos* or pago en vida**) podría afectar que usted pueda inscribirse en los programas de asistencia pública, tales como los de Asistencia Médica de Medicaid, Ayuda para Familias con Hijos Menores (AFDC), Ingreso Suplementario del Seguro Social (SSI) y otros programas de ayuda para la compra de medicamentos. Es posible que también tenga que pagar impuestos por el dinero que usted reciba por su seguro de vida. Antes de firmar cualquier acuerdo tipo (INSERT: viáticos or pago en vida) lo exhortamos que consulte con un abogado, contador, planeador de patrimonios, consejero económico, su aseguradora o agente de seguros, consejero (perito) en materia de impuestos o con (y con) una agencia (las agencias) de servicios sociales para que se informe cómo el recibo de dichos pagos podría afectar su capacidad, la de su familia y la de su cónyuge para recibir asistencia pública. Para más información en general respecto a los acuerdos tipo (INSERT: viáticos or pago en vida) llame al Departamento de Seguros de Texas al 800-252-3439."
*Pago Tipo Viáticos - Una transacción en la cual por medio de un contrato por escrito a cumplir en este estado se solicita, negocia, ofrece, compromete, establece o expide, que bajo dicho contrato un proveedor de liquidación tipo viáticos adquiera, por medio de asignación, venta o transferencia, la póliza de seguro de vida de un individuo que padece de una enfermedad o padecimiento catastrófico o que amenaza la vida, al pagar al propietario o tenedor de la póliza una compensación o cualquier cosa de valor de menos cuantía que la suma neta del beneficio de muerte que estipula la póliza.
or
**Pago en Vida - Una transacción en la cual por medio de un contrato por escrito a cumplir en este estado se solicita, negocia, ofrece, compromete, establece o expide, que bajo dicho contrato un proveedor de liquidación tipo pago en vida adquiera, por medio de asignación, venta o transferencia, la póliza de seguro de vida de un individuo que no padece de una enfermedad o padecimiento catastrófico o que amenaza la vida, al pagar al propietario o tenedor de la póliza una compensación o cualquier cosa de valor de menos cuantía que la suma neta del beneficio de muerte que estipula la póliza.
(b) All application and medical release forms signed by the viator, life settlor, or owner at the time of application shall contain the name, address, and phone number of the viatical or life settlement provider, provider representative, or broker to whom the application is being made, and copies of the forms, including the Spanish/English disclosure, shall be given to the viator, life settlor, or owner at the time of application.
(c) All contracts used to effect viatical or life settlements shall contain the following:
(1) a provision that the viatical or life settlement contract together with the application, including any amendments and attached papers, if any, constitutes the entire viatical or life settlement contract between the parties to the contract, and no change to the viatical or life settlement contract shall be valid until approved by an executive officer of the viatical or life settlement provider designated in the contract with authority to bind the provider, and unless such approval be endorsed thereon or attached to the viatical or life settlement contract. The provision shall also state that no person, other than an executive officer of the provider, has the authority to change the viatical or life settlement contract, or to waive any of its provisions, and that in the absence of fraud, all statements made by the viator or life settlor and owner shall be deemed representations and not warranties.
(2) a provision that the owner may rescind the viatical or life settlement contract at any time, but not later than the 15th day after the date that the owner receives the proceeds of the viatical or life settlement. If the viator or life settlor dies at any time prior to the end of the rescission period, the viatical or life settlement contract shall be deemed to have been rescinded, and the viatical or life settlement provider shall refund the death benefit to the owner or beneficiaries designated in the viatical or life settlement contract for this purpose. A refund of the death benefit to a beneficiary or beneficiaries under this paragraph is subject to repayment of all viatical or life settlement proceeds, and if applicable, any premium paid by the viatical or life settlement provider.
(3) a provision that, at the option of the viatical or life settlement provider, the proceeds may be placed into an escrow or trust account to effect payment to the owner.
(4) a provision that, within three business days, upon receipt from the owner of documents to effect the transfer of the policy, the viatical or life settlement provider may at its option either:
(A) make unconditional payment to the owner, either in a lump sum or in installment payments in a manner not prohibited by §3.1710(c)(7) of this subchapter (relating to Prohibited Practices Relating to Advertising and Solicitation; Applications, and Contracts); or
(B) place the proceeds of the settlement with a trustee or escrow agent, to be placed into an escrow or trust account in a financial institution that is a member of the Federal Deposit Insurance Corporation (FDIC), where such proceeds shall remain until:
(i) the proceeds are disbursed to the owner within three business days, upon acknowledgment of the transfer of the policy by the issuer of the policy;
(ii) the proceeds are transferred to purchase an instrument used to effect installment payments in a manner not prohibited by §3.1710(c)(7) of this subchapter; or
(iii) the proceeds and premium paid by the viatical or life settlement provider are returned to the viatical or life settlement provider by the escrow agent or trustee upon notice of the owner´s rescission, including rescission due to the death of the viator, life settlor, or owner within the rescission period.
(5) a provision that the viator or life settlor may designate any individual of legal age, in regular contact with the viator or life settlor, as a contact for inquiries about the viator's or life settlor´s health status upon written notice providing the name, address and telephone number of the individual. The provision shall include:
(A) the limitations on inquiry set forth in §3.1712 of this subchapter (relating to Contacting the Viator, Life Settlor, or Owner for Health Status Inquiries: Limits and Prohibited Practices); and
(B) a statement that the viator or life settlor may change a designation at any time upon written notice to the viatical or life settlement provider.
(6) a provision that the viatical or life settlement provider shall provide to the viator or life settlor and owner, the name, address, and telephone number of the viatical or life settlement provider, provider representative, or broker that will contact the viator or life settlor or his or her designee as provided in §3.1712 of this subchapter, and shall notify the viator or life settlor and owner of any change in such information.
(7) a provision disclosing that the viatical or life settlement provider has the right to assign, sell, or otherwise transfer the policy that is the subject of the viatical or life settlement to a person unknown to the viator, life settlor, or owner, without the viator's, life settlor´s, or owner´s consent.
(8) a provision defining how any notice required or permitted under the contract shall be given and delivered.
(9) a provision disclosing what effect the viatical or life settlement will have on payment of premiums and disposition of proceeds, cash values and dividends.
(10) a provision disclosing that if the policy that is the subject of the viatical or life settlement is a joint policy, or contains riders or other provisions insuring the lives of a spouse, dependents, or anyone else other than the viator or life settlor, there may be a possible loss of coverage, and the viator, life settlor, or owner should contact their insurance company or their agent to determine if the coverage may be converted in order to avoid losing the coverage.
(11) an acknowledgment form, which a viator or life settlor and owner shall sign before a notary, stating that:
(A) to the best of their knowledge, either the viator has a catastrophic or life-threatening illness, or the life settlor does not have a catastrophic or life-threatening illness;
(B) the written disclosures required by §3.1708 of this subchapter (relating to Required Disclosure) have been received and read;
(C) all of the documents used to effect the viatical or life settlement have been received and read; and
(D) the viatical or life settlement contract is being entered into knowingly and voluntarily.
(d) A viatical or life settlement provider, provider representative, or broker may develop and file its own acknowledgement form required by subsection (c)(11) of this section, or may utilize the acknowledgment form available from the department, which may be obtained by making a request to the Life/Health Division at the address specified in §3.1703(f) of this subchapter (relating to Application for Certificate of Registration for Viatical or Life Settlement Providers, Provider Representatives, or Brokers; Fees).
(e) If a viatical or life settlement provider enters into a viatical or life settlement which allows the owner to retain an interest in the policy or the policy contains a provision, whether in the policy or attached by rider, providing an additional death benefit for accidental death, the viatical or life settlement contract or amendment shall contain a provision:
(1) that the viatical or life settlement provider will effect the transfer of the amount of the net death benefit only to the extent or portion of the amount sold. Benefits in excess of the amount that is sold will be paid by the insurance company directly to the beneficiaries in accordance with the terms of the policy;
(2) that the additional death benefit for accidental death shall remain payable to the beneficiary last named by the viator, life settlor, or owner, not including the viatical or life settlement provider or in the absence of a beneficiary, to the estate of the viator, life settlor, or owner;
(3) that the viatical or life settlement provider will, upon acknowledgment of the perfection of the transfer, either:
(A) advise the owner, in writing, that the insurance company has confirmed the owner´s remaining interest in the policy; or
(B) send the owner a copy of the document sent from the insurance company that acknowledges the owner´s remaining interest in the policy;
(4) that defines the apportionment of premiums to be paid by the viatical or life settlement provider and the owner. It is permissible for the viatical or life settlement contract, or amendment, to specify that all premiums will be paid by the viatical or life settlement provider. The contract, or amendment, may also require the owner to reimburse the viatical or life settlement provider for the premiums attributable to the remaining interest, including any premiums for the accidental death benefit subsequent to the viatical or life settlement contract.
(f) All viatical or life settlement contracts, in addition to meeting the other requirements of this section, shall contain:
(1) consistent terminology;
(2) a section defining key terms used in the viatical or life settlement contract;
(3) the name of the owner and insured;
(4) the number of the policy which serves as the basis for the viatical or life settlement contract;
(5) the name of the insurance company underwriting the policy at the time of contract;
(6) the amount of the net death benefit of the policy; and
(7) a signature line for the viatical or life settlement provider and the owner and insured, as applicable.
(g) A viatical or life settlement provider that places the proceeds of the viatical or life settlement into an escrow or trust account pursuant to subsection (c)(3) or (c)(4)(B) of this section, shall comply with the following:
(1) the name of the registered viatical or life settlement provider shall be included within the name of the escrow or trust account;
(2) the escrow agent shall not be any person under common control with a viatical or life settlement provider, provider representative, or broker;
(3) the escrow or trust agreement shall contain:
(A) the name of the owner and insured:
(B) the number of the policy which serves as the basis for the viatical or life settlement contract;
(C) the name of the insurance company underwriting the policy at time of contract;
(D) the name of the viatical or life settlement provider purchasing the policy;
(E) the name, address, and telephone number of the escrow agent or trustee;
(F) the amount of proceeds placed into the escrow or trust account;
(G) all terms and conditions of the escrow or trust agreement;
(H) the name and address of the financial institution where the funds to be paid to the owner will be deposited;
(I) a description of the purpose of the escrow or trust account;
(J) the circumstances that will trigger disbursement of the funds from the escrow or trust account;
(K) the name of the person to whom the funds will be disbursed;
(L) the time restrictions or limitations for accepting assignment of the policy regarding the insurance company´s acceptance of the assignment or failure of the insurance company to acknowledge the assignment;
(M) if applicable, the process for required notices for communication if the viator or life settlor rescinds the viatical or life settlement contract pursuant to subsection (c)(2) of this section, or if the insurance company does not accept the policy assignment;
(N) the duties of the escrow agent or trustee;
(O) the designation of the escrow agent or trustee;
(P) the limits of liability for the escrow agent or trustee;
(Q) the process by which any dispute arising between the owner and the viatical or life settlement provider and the escrow agent or trustee concerning the interpretation of the escrow or trust agreement is to be resolved; and
(R) a signature line for the viatical or life settlement provider, the owner and insured, and the escrow agent or trustee.
(h) The viatical or life settlement provider, provider representative, or broker shall provide, to the viator or life settlor and owner, a copy of the viatical or life settlement contract and all materials used to effect the viatical or life settlement, including, but not limited to, the application, a copy of the escrow or trust agreement, and any consent forms or any other document that the viatical or life settlement provider, provider representative, or broker, as applicable, required the viator or life settlor and owner, or his or her representative, to sign in order to effect the viatical or life settlement. The viatical or life settlement contract and all other materials used to effect the viatical or life settlement shall be provided at no charge to the viator or life settlor and owner.
§3.1710. Prohibited Practices Relating to Advertising and Solicitation; Applications and Contracts.
(a) No viatical or life settlement provider, provider representative, or broker shall advertise or in any other way solicit business in a manner that is untruthful or misleading by fact or implication. In considering whether or not the advertising or other solicitation is untruthful or misleading, the department shall use the standards set forth in this subchapter, Insurance Code Article 21.21, and Chapter 21, Subchapter B of this title (relating to Insurance Advertising, Certain Trade Practices, and Solicitation), or any other applicable law.
(b) No viatical or life settlement provider, provider representative, or broker shall state or imply any advantage, right, or preference which, if granted or performed, would be a violation of any law of this state or the United States.
(c) No viatical or life settlement provider, provider representative, or broker shall:
(1) condition the consideration of an application for a viatical or life settlement on the exclusive dealing between the viator or life settlor and owner and the viatical or life settlement provider, provider representative, or broker;
(2) directly or indirectly contact any owner´s, viator´s, or life settlor´s parents or family members, including a spouse or significant other, for any purpose, unless the owner, viator, or life settlor has designated a member of his or her family, a spouse, or a significant other as a contact person for health status information as provided in §3.1712 of this title (relating to Contacting the Viator, Life Settlor, or Owner for Health Status Inquiries; Limits and Prohibited Practices);
(3) discriminate in the availability or terms of viatical or life settlements on the basis of race, color, national origin, creed, religion, occupation, geographic location, marital or family status, sexual orientation, age, gender, disability or partial disability, unless it can be demonstrated that any such factor affects the life expectancy of the viator or life settlor;
(4) discriminate between viators or life settlors with dependents and those without dependents;
(5) enter into any viatical or life settlement contract without:
(A) obtaining the written consent of both the viator or life settlor and owner, if the two are separate individuals under the policy which is the subject of the viatical or life settlement; and
(B) making the disclosures required by §3.1708 of this subchapter (relating to Required Disclosure) to both the viator or life settlor and the owner;
(6) enter into any viatical or life settlement contract that provides a payment to the owner that is unjust. In determining whether a payment is unjust, the department may consider, among other factors, the data submitted in the reports required by §3.1705 of this title (relating to Reporting Requirements), and the prevailing discount rates in the viatical or life settlement market in Texas, or if insufficient data is available for Texas, the prevailing rates nationally or in other states that maintain such data;
(7) enter into a viatical or life settlement contract in which payments of proceeds are made in installments, unless the settlement is effected through an annuity purchased from an insurance company licensed by this state or licensed by the state in which the annuity is purchased or through an escrow or trust account which provides for installment payments and which is established by a financial institution licensed by this state or any other state in the United States, and is also a member of the FDIC;
(8) enter into any viatical or life settlement in this state in which any form used to effect the settlement, including the escrow or trust agreement, contains a provision that either requires or limits a viator, life settlor, or owner to resolve a legal dispute with the viatical or life settlement provider, provider representative, or broker in any state other than Texas, specifies a particular city, county, or locality in Texas or elsewhere as the legal forum for resolving a dispute, or makes any other state´s laws as the law applicable to the form;
(9) enter into any viatical or life settlement in which any form used to effect the settlement, including the escrow or trust agreement, contains a provision that requires the owner, viator, or life settlor to pay for policy premiums that cover any period of time after the date in which the ownership of the policy is transferred, except as provided in §3.1709(e)(4) of this subchapter (relating to Application and Contract Forms: Required Provisions and Escrow/Trust Agreements);
(10) retain any portion of the proceeds from the viatical or life settlement contract;
(11) intentionally misstate the life expectancy of any viator or life settlor for the purpose of evading the tax laws of the United States, or for any other purpose; or
(12) require any viator, life settlor, or owner to give the viatical or life settlement broker, provider, provider representative, or any person, a general power-of-attorney, or designate the broker, provider, provider representative, or any person as his or her attorney-in-fact; provided that the viatical or life settlement broker, provider, provider representative, or other person may obtain a special or limited power-of-attorney if such power-of-attorney is restricted only to purposes related to the viatical or life settlement transaction, and those purposes are explicitly described in the special or limited power-of-attorney form.
(d) No viatical or life settlement provider, provider representative, or broker shall purchase benefits of a policy or rider which provides for additional death benefits for accidental death. Such additional death benefits shall remain payable to the beneficiary last named by the viator, life settlor, or owner, not including the viatical or life settlement provider, or in the absence of a beneficiary, to the estate of the viator, life settlor, or owner.
§3.1711. Payment of Commissions or Other Forms of Compensation: Disclosure and Prohibited Practices.
(a) Upon request of the viator, life settlor, or owner, the viatical or life settlement provider, provider representative, or broker shall disclose in writing to the viator, life settlor, or owner:
(1) the identity of any person who will receive a commission or other form of compensation from the viatical or life settlement provider, provider representative, or broker with respect to the viatical or life settlement; and
(2) the amount and terms of the compensation.
(b) A viatical or life settlement provider, provider representative, or broker shall not pay or offer to pay any referral or finder's fee, commission, or other compensation to a viator's or life settlor´s physician, attorney, accountant, social worker, case manager, individual acting under power-of-attorney, or other person providing medical, social, financial planning or other counseling services to the viator, life settlor, or owner.
(c) Notwithstanding the manner in which the viatical or life settlement broker is compensated, a viatical or life settlement broker, is deemed to represent only the viator or life settlor and owner and owes a fiduciary duty to the viator or life settlor and owner to act according to the viator´s or life settlor´s and owner´s instructions and in the best interest of the viator or life settlor and owner.
§3.1712. Contacting the Viator, Life Settlor, or Owner for Health Status Inquiries: Limits and Prohibited Practices.
(a) If a viator or life settlor makes a designation of an individual as provided in §3.1709(c)(5) of this subchapter (relating to Application and Contract Forms: Required Provisions and Escrow/Trust Agreements), a viatical or life settlement provider, provider representative, or broker shall not contact the viator, life settlor, or owner for health status information about the viator or life settlor, unless the viatical or life settlement provider, provider representative, or broker is unable, after diligent effort, to contact a designee for more than 30 calendar days, subject to the restrictions set forth in subsection (b) of this section.
(b) Once a viator, life settlor, or owner has entered into a settlement with a viatical or life settlement provider, no viatical or life settlement provider, provider representative, or broker shall contact the viator, life settlor, or owner, or a viator's or life settlor´s designee, to determine the viator's or life settlor´s health status more frequently than once every 30 days for viators or life settlors with a life expectancy of one year or less, and no more than once every three months for viators or life settlors with a life expectancy of more than one year. No person shall contact the viator, life settlor, owner, or designee for determining the health status of a viator or life settlor as provided in §3.1709(c)(5) and (6) of this subchapter, unless that person is registered as a viatical or life settlement provider, provider representative, or broker in this state.
§3.1713. Assignment, Sale, or Transfer of Policies: Disclosure.
(a) Any viatical or life settlement provider that assigns, sells, or otherwise transfers its interest in any policy that is the subject of a viatical or life settlement without providing the disclosures to the viator, life settlor, or owner as required by §3.1709(c)(7) of this subchapter (relating to Application and Contract Forms: Required Provisions and Escrow/Trust Agreements) is subject to discipline by the commissioner under §3.1716 of this subchapter (relating to Denial, Suspension, or Revocation of Certificate of Registration; Enforcement).
(b) At the time a viatical or life settlement provider assigns, sells, or otherwise transfers its interest in any policy that is the subject of a viatical or life settlement contract to any person not registered pursuant to this subchapter, the viatical or life settlement provider, must continue to track the viator´s or life settlor´s health status, or appoint, in writing, one of their Texas-registered provider representatives, another Texas-registered viatical or life settlement provider, or a Texas-registered broker, to make all inquiries to the viator, life settlor, or owner, or the viator's or life settlor´s designee, regarding the health status of the viator or life settlor or any other matters. A viatical or life settlement provider that assigns, sells, or otherwise transfers such a policy to a non-registered person and fails to continue to track the viator´s or life settlor´s health status, or to make such an appointment, commits a violation of this section, and is subject to discipline by the commissioner under §3.1716 of this subchapter.
§3.1714. Confidentiality.
(a) All confidential information solicited or obtained by a viatical or life settlement provider, provider representative, or broker about a viator, life settlor or owner, including the viator's, life settlor´s, or owner´s identity or the identity of family members, a spouse or a significant other, is confidential and shall not be disclosed in any form to any person, unless disclosure:
(1) is provided by prior written consent from the viator, life settlor, or owner on a form which identifies to whom the confidential information may be released, and the purpose for releasing the confidential information;
(2) is provided to the department in the form of statistical data from which the identity of the viator or life settlor and owner cannot be ascertained;
(3) is provided to the department in response to a subpoena from the commissioner, pursuant to the enforcement powers made applicable by Insurance Code Article 3.50-6A, and §3.1716 of this subchapter (relating to Denial, Suspension, or Revocation of Certificate of Registration; Enforcement), or in response to a written request for information made pursuant to Insurance Code §38.001; or
(4) is provided to the department during the course of an examination by the department of the business and affairs of the viatical or life settlement provider, provider representative, or broker, as provided in §3.1717 of this subchapter (relating to Examinations).
(b) All medical and financial information solicited or obtained by a viatical or life settlement provider, provider representative, or broker about a viator, life settlor, or owner must be obtained by written consent which must disclose that the viator, life settlor or owner has the right to withdraw consent pursuant to applicable law, and that the release form(s) may be used to track on-going health status.
(c) A viatical or life settlement provider, provider representative, or broker shall not release any viator´s, life settlor´s, or owner´s confidential information to any person without first making a factual determination that:
(1) the releasing of any confidential information to that person is not in violation of any applicable provisions of the laws of this state, or of the United States, relating to the confidentiality of information;
(2) all persons to whom any confidential information is disclosed will maintain the confidentiality of such information and not disclose it to any other person in any form without prior and knowing written consent of the viator or life settlor and owner;
(3) all persons to whom any confidential information is released, have sufficient procedures implemented to prevent the accidental or unauthorized release of any viator´s or life settlor´s and owner´s confidential information; and
(4) the viatical or life settlement provider, provider representative, or broker is not violating any law of this state or the United States by engaging in business with persons to whom it is releasing the confidential information of any viator, life settlor, and owner.
(d) In any enforcement action taken by the department for a violation of this section, in accordance with §3.1716 of this subchapter, it shall be the viatical or life settlement provider´s, provider representative´s, or broker´s duty to establish sufficient evidentiary proof that the factual determinations referenced in subsection (c) of this section were made by the provider, provider representative, or broker.
(e) Confidential information obtained by the commissioner pursuant to the subpoena powers set forth in §3.1716 of this subchapter, is protected by the confidentiality provisions of either Insurance Code Article 1.10D or §§36.151 - 36.159 depending on which provision is used to subpoena the information.
(f) All confidential information solicited or obtained by a viatical or life settlement provider, provider representative, or broker about a viator, life settlor, or owner shall be further subject to applicable provisions of the laws of this state and of the United States.
§3.1715. Prohibition Against Doing Business with an Unregistered or Unlicensed Viatical or Life Settlement Provider, Provider Representative, or Broker, Escrow Agent or Trustee. No viatical or life settlement provider, provider representative, or broker registered pursuant to this subchapter shall participate in a viatical or life settlement, or pay or share commissions, with a person engaging in the business of viatical or life settlements who is required to be registered pursuant to this subchapter, but who has not obtained such registration.
§3.1716. Denial, Suspension, or Revocation of Certificate of Registration; Enforcement.
(a) Pursuant to Insurance Code Article 3.50-6A, if the commissioner determines, after notice and opportunity for hearing, that a viatical or life settlement provider, provider representative, or broker, individually or through any officer, partner, member or key management personnel, employee, director, affiliate, subcontractor, shareholder of the registrant or applicant, escrow agent, or trustee has violated or fails to meet any provision of Insurance Code Article 3.50-6A, this subchapter, or any other insurance law of this state or another law made applicable to viatical or life settlement providers, provider representatives, or brokers, the department may take any of the actions authorized by the insurance laws referenced in Insurance Code Article 3.50-6A, §3.
(b) A viatical or life settlement provider, provider representative, or broker whose certificate of registration has been denied, suspended, or revoked under this section or pursuant to Insurance Code Article 3.50-6A shall not file another application for certificate of registration before the first anniversary of the effective date of the denial, suspension, or revocation or, if judicial review of the denial, suspension, or revocation is sought, the first anniversary of the date of the final court order or decree affirming the action. An application filed after that period shall be denied by the department unless the applicant shows good cause why the denial, suspension, or revocation of the previous certificate of registration should not bar the issuance of a new certificate of registration.
(c) Pursuant to Insurance Code Article 3.50-6A, §3, the department shall have all authority and powers in Insurance Code Article 1.10D against a person who violates any penal law while engaging in the business of viatical or life settlements or while attempting to defraud a viatical or life settlement provider, provider representative, or broker.
(d) Pursuant to Insurance Code Article 3.50-6A, §3, in order to facilitate enforcement of Article 3.50-6A, other applicable laws and this subchapter, the department may utilize the provisions of Insurance Code Chapters 36 and 38 which apply to investigations of viatical or life settlement providers, provider representatives, or brokers (whether registered by the department, applying for a certificate of registration or unlawfully doing business without a certificate of registration), or anyone else engaged in, or conducting transactions relating to the business of viatical or life settlements.
(e) The department may seek information made confidential by §3.1714 of this subchapter (relating to Confidentiality) through use of subpoenas issued pursuant to Insurance Code Article 3.50-6A, §3, Article 1.10D, Chapter 36, or through use of a written request for information made pursuant to Insurance Code §38.001. Confidential information obtained by the department shall remain confidential pursuant to the terms of either Insurance Code Chapter 38 or Article 1.10D, §5.
(f) Pursuant to Insurance Code Article 3.50-6A, §3, Insurance Code §§36.101, 36.205, and Chapter 40 apply to enforcement actions brought pursuant to this subchapter.
§3.1717. Examinations.
(a) The department may examine the business and affairs of any viatical or life settlement provider, provider representative, or broker in this state. The department may request any viatical or life settlement provider, provider representative, or broker to produce any records, books, files, or other information reasonably necessary to ascertain whether or not the viatical or life settlement provider, provider representative, or broker is acting or has acted in violation of the law or otherwise contrary to the interests of the public. The expenses incurred in conducting any examination shall be paid by the viatical or life settlement provider, provider representative, or broker.
(b) For purposes of such examination, records of all transactions of viatical and life settlements shall be maintained by the viatical or life settlement provider, provider representative, or broker and shall be available to the department for inspection during reasonable business hours. All viatical or life settlement providers, provider representatives, and brokers doing business in this state shall maintain records of each viatical or life settlement in which it participates, until three years after the date the viatical or life settlement has matured.