SENATE BILL No. 151
An Act concerning insurance companies; relating to viatical
settlements; repealing K.S.A.
40-2,140, 40-2,141, 40-2,142, 40-2,143, 40-2,144, 40-2,145,
40-2,146, 40-2,147, 40-
2,148, 40-2,149, 40-2,150, 40-2,151 and 40-2,152.
Be it enacted by the Legislature of the State of Kansas:
Section 1. This shall be known as
the viatical settlements act.
Sec. 2. As used in this act the
following terms shall apply:
(a) ``Commissioner'' means the
commissioner of insurance.
(b) ``Financing entity'' means an
underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy or
a viatical settlement provider, credit enhancer or any person that
a party to a viatical settlement contract and that has a direct
in a policy or certificate that is the subject of a viatical
but whose sole activity related to the transaction is providing
effect the viatical settlement and who has an agreement in writing
a licensed viatical settlement provider to act as a participant in
(c) ``Financing transaction'' means a
transaction in which a licensed
viatical settlement provider or a financing entity obtains
viatical settlement contracts, viaticated policies or interests
cluding, without limitation, any secured or unsecured financing,
curitization transaction or any securities offering either
registered or ex-
empt from registration under federal and state securities law, or
purchase of interests in a policy or certificate, if the financing
complies with federal and state securities law.
(d) ``Person'' means an individual,
partnership, limited liability com-
pany, association, trust, corporation or other legal entity.
(e) (1) ``Viatical settlement
representative'' means a person who is an
authorized agent of a licensed viatical settlement provider or
tlement broker, as applicable, who acts or aids in any manner in
solicitation of a viatical settlement. Viatical settlement
(A) An attorney, an accountant, a
financial planner or any person
exercising a power of attorney granted by a viator; or
(B) any person who is retained to
represent a viator and whose com-
pensation is paid by or at the direction of the viator regardless
the viatical settlement is consummated.
(2) A viatical settlement representative
is deemed to represent only
the viatical settlement provider or viatical settlement broker.
(f) ``Viatical settlement broker'' means
a person that on behalf of a
viator and for a fee, commission or other valuable consideration,
or attempts to negotiate viatical settlements between a viator and
more viatical settlements providers. Irrespective of the manner in
the viatical settlement broker is compensated, a viatical
is deemed to represent only the viator and owes a fiduciary duty to
viator to act according to the viator's instructions and in the
of the viator. The term viatical settlement broker does not include
attorney, accountant or financial planner retained to represent the
and whose compensation is paid directly by or at the direction of
(g) ``Viatical settlement contract''
means a written agreement entered
into between a viatical settlement provider and a viator. The
shall establish the terms under which the viatical settlement
pay compensation or anything of value, which compensation or value
less than the expected death benefit of the insurance policy or
in return, for the viator's assignment, transfer, sale, devise or
the death benefit or ownership of all or a portion of the insurance
or certificate of insurance to the viatical settlement provider.
viatical settlement contract also includes any contract for a loan
financial transaction secured primarily by an individual or group
surance policy, other than a loan by a life insurance company
the terms of the life insurance contract, or a loan secured by the
value of a policy.
(h) ``Viatical settlement provider''
means a person, other than a viator,
that: (1) Enters into a viatical settlement contract; or (2)
from a financing entity for the purchase, acquisition, transfer or
assignment of one or more viatical settlement contracts, viaticated
or interests therein, or otherwise sells, assigns, transfers,
pothecates or otherwise disposes of one or more viatical settlement
tracts, viaticated policies or interests therein.
The term viatical settlement provider shall
(1) A bank, savings bank, savings and
loan association, credit union
or other licensed lending institution that takes an assignment of a
insurance policy as collateral for a loan;
(2) the issuer of a life insurance policy
providing accelerated benefits
under K.S.A. 40-401, and amendments thereto, and pursuant to the
(3) a natural person who enters into no
more than one agreement in
a calendar year for the transfer of life insurance policies for any
than the expected death benefits.
(i) ``Viator'' means the owner of a life
insurance policy or a certificate
holder under a group policy insuring the life of an individual with
astrophic, life threatening or chronic illness or condition who
seeks to enter into a viatical settlement contract.
(j) ``Viaticated policy'' means a life
insurance policy or certificate that
has been acquired by a viatical settlement provider pursuant to a
Sec. 3. (a) A person shall not
operate as a viatical settlement provider,
viatical settlement representative or a viatical settlement broker
first having obtained a license from the commissioner.
(b) Application for a viatical settlement
provider, viatical settlement
representative or viatical settlement broker license shall be made
commissioner by the applicant on a form prescribed by the
Each application shall be accompanied by a nonrefundable fee of
(c) Any license issued pursuant to this
section shall expire on the
anniversary of its date of issuance unless the licensee pays the
fee. Any license issued pursuant to this section may be renewed
year to year on the anniversary of the date of issuance upon
the annual renewal fee of $500. Failure to pay the fee by the
date results in expiration of the license.
(d) The applicant shall provide
information on forms required by the
commissioner. The commissioner shall have the authority, at any
require the applicant to fully disclose the identity of all
partners, officers, members and employees, and the commissioner, in
exercise of the commissioner's discretion, may refuse to issue a
the name of a legal entity if not satisfied that any officer,
holder, partner or member thereof who may materially influence
applicant's conduct meets the standards of this act.
(e) A license issued to a legal entity
authorizes all members, officers
and designated employees to act as viatical settlement providers,
settlement brokers or viatical settlement representatives, as
under the license, and all those persons shall be named in the
and any supplements to the application.
(f) Upon the filing of an application and
the payment of the license
fee, the commissioner shall make an investigation of each applicant
issue a license if the commissioner finds that the applicant:
(1) Has provided a detailed plan of
(2) is competent and trustworthy and
intends to act in good faith in
the capacity involved by the license applied for;
(3) has a good business reputation and
has had a experience, training
or education so as to be qualified in the business for which the
applied for; and
(4) has provided a certificate of good
standing from the state of its
domicile except that no such certificate shall be required.
(g) The commissioner shall not issue a
license to a nonresident ap-
plicant, unless: (1) A written designation of an agent for service
is filed and maintained with the commissioner; or (2) the applicant
filed with the commissioner, the applicant's written irrevocable
that any action against the applicant may be commenced against the
plicant by service of process on the commissioner.
Sec. 4. The commissioner after
notice and opportunity for a hearing
conducted in accordance with provisions of the Kansas
procedures act, may deny, suspend, revoke or refuse to renew the
of a viatical settlement provider, viatical settlement
representative or vi-
atical settlement broker if the commissioner finds that:
(a) There was any material
misrepresentation in the applicant for the
(b) The licensee or any officer, partner,
member or key management
personnel: (1) Has been convicted of any fraudulent or dishonest
(2) is subject toa final administrative action; or (3) is otherwise
be untrustworthy or incompetent.
(c) The viatical settlement provider
demonstrates a pattern of unrea-
sonable payments to viators.
(d) The licensee has been found guilty
of, or has pleaded guilty or
nolo contendre to, any felony, or to a misdemeanor involving fraud
moral turpitude, regardless of whether a judgment of conviction has
entered by a court.
(e) The viatical settlement provider has
entered into any viatical set-
tlement contract that has not been approved pursuant to this
(f) The viatical settlement provider has
failed to honor contractual
obligations set out in a viatical settlement contract.
(g) The licensee no longer meets the
requirements for issuance of
the original license.
(h) The viatical settlement provider has
assigned, transferred or
pledged a viaticated policy to a person other than a viatical
provider licensed in this state or a financing entity.
(i) The licensee has violated any
provision of this act.
Sec. 5. A person shall not use a
viatical settlement contract or provide
to a viator a disclosure statement form in this state unless filed
proved by the commissioner. The commissioner may disapprove a
settlement contract or disclosure statement form, if in the
discretion, the contract or provisions contained therein are
contrary to the interests of the public, or otherwise misleading or
to the viator.
Sec. 6. On or before March 1 of
each year each licensee shall file
with the commissioner an annual statement containing such
as the commissioner may prescribe by rule and regulation.
Sec. 7. Except as otherwise
required by law, a viatical settlement
provider, viatical settlement representative, viatical settlement
surance company, insurance agent, insurance broker, information
rating agency or company or any other person with actual knowledge
a viator's identity, shall not disclose that identity as a viator
to any other
person unless the disclosure is:
(a) Necessary to effect a viatical
settlement between the viator and a
viatical settlement provider and the viator has provided prior
sent to the disclosure;
(b) provided in response to an
investigation by the commissioner or
any other governmental officer or agency; or
(c) a term or condition to the transfer
of a viatical policy by one
viatical settlement provider to another viatical settlement
Sec. 8. (a) The commissioner may,
when the commissioner deems it
reasonably necessary to protect the interests of the public,
business and affairs of any license or applicant for a license. The
missioner shall have the authority to order any licensee or
produce any records, books, files or other information reasonably
essary to ascertain whether or not the licensee or applicant is
has acted in violation of the law or otherwise contrary to the
the public. The expenses incurred in conducting any examination
be paid by the licensee or applicant.
(b) Names and individual identification
data for all viators shall be
considered private and confidential information and shall not be
by the commissioner, unless required by law.
(c) Records of all transactions of
viatical settlement contracts shall be
maintained by the viatical settlement provider and shall be
the commissioner for inspection during reasonable business hours. A
atical settlement provider shall maintain records of each viatical
ment until five years after the death of the insured.
Sec. 9. (a) A viatical settlement
provider, viatical settlement repre-
sentative or viatical settlement broker shall disclose the
mation to the viator no later than the time of application
(1) Possible alternatives to viatical
settlement contracts for individuals
with catastrophic, life threatening or chronic illnesses,
including, any ac-
celerated death benefits offered under the viator's life insurance
exist and what those alternatives are;
(2) some or all of the proceeds of the
viatical settlement may be free
from federal income tax and from state franchise and income taxes,
that assistance should be sought from a professional tax
(3) proceeds of the viatical settlement
could be subject to the claims
(4) receipt of the proceeds of a viatical
settlement may adversely ef-
fect the viator's eligibility for medicaid or other government
entitlements and that advice should be obtained from the
(5) the viator's right to rescind a
viatical settlement contract 15 cal-
endar days after the receipt of the viatical settlement proceeds by
(6) funds will be sent to the viator
within two business days after the
viatical settlement provider has received the insurer or group
tor's acknowledgment that ownership of the policy or interest in
tificate has been transferred and the beneficiary has been
pursuant to the viatical settlement contract; and
(7) entering into a viatical settlement
contract may cause other rights
or benefits, including conversion rights and waivers of premium
that may exist under the policy or certificate, to be forfeited by
and that assistance should be sought from a financial advisor.
(b) A viatical settlement provider shall
disclose the following infor-
mation to the viator prior to the date the viatical settlement
signed by all parties:
(1) The affiliation, if any, between the
viatical settlement provider
and the issuer of an insurance policy to be viaticated;
(2) if an insurance policy to be
viaticated has been issued as a joint
policy or involves family riders or any coverage of a life other
insured under the policy to be viaticated, the viator shall be
the possible loss of coverage on the other lives and be advised to
with the viator's insurance producer or the company issuing the
for advice on the proposed viatication; and
(3) the dollar amount of the current
death benefit payable to the
viatical settlement provider under the policy or certificate. The
settlement provider shall also disclose the availability of any
guaranteed insurance benefits, the dollar amount of any accidental
and dismemberment benefits under the policy or certificate and the
atical settlement provider's interest in those benefits.
Sec. 10. (a) A viatical settlement
provider entering into a viatical set-
tlement contract shall first obtain:
(1) A written statement from a licensed
attending physician that the
viator is of sound mind and under no constraint or undue influence
enter into a viatical settlement contract whenever the viator is
(2) A witnessed document in which the
(A) Consents to the viatical settlement
(B) acknowledges that the insured has a
catastrophic, life threatening
or chronic illness or condition;
(C) represents that the viator has a full
and complete understanding
of the viatical settlement contract;
(D) has a full and complete understanding
of the benefits of the life
insurance policy; and
(E) acknowledges that the viator has
entered into the viatical settle-
ment contract freely and voluntarily.
(3) A document in which the insured
consents to the release of the
insured's medical records to a viatical settlement provider or
(b) All medical information solicited or
obtained by any licensee shall
be subject to the applicable provision of state law relating to
ality of medical information.
(c) All viatical settlement contracts
entered into in this state shall
provide the viator with an unconditional right to rescind the
at least 15 calendar days from the receipt for the viatical
ceeds. If the insured dies during the recision period, the viatical
ment contract shall be deemed to have been rescinded, subject to
ment to the viatical settlement provider of all viatical settlement
(d) Immediately upon the viatical
settlement provider's receipt of
documents to effect the transfer of the insurance policy, the
tlement provider shall pay the proceeds of the viatical settlement
escrow or trust account in a state or federally chartered financial
tution whose deposits are insured by the federal deposit insurance
poration (FDIC). The account shall be managed by a trustee or
agent independent of the parties to the contract. The trustee or
agent shall transfer the proceeds to the viator immediately upon
atical settlement provider's receipt of acknowledgment of the
the insurance policy.
(e) Failure to tender consideration to
the viator for the viatical set-
tlement contract within the required time period renders the
tlement contract voidable by the viator for lack of consideration
time consideration is tendered to and accepted by the viator.
(f) Contacts with the insured for the
purpose of determining the
health status of the insured by the viatical settlement provider,
settlement broker or viatical settlement representative after the
settlement has occurred shall only be made by the viatical
provider or broker licensed in this state and shall be limited to
viatical settlement has occurred and shall be limited to once every
months for insureds with a life expectancy of more than one year,
no more than one per month for insureds with a life expectancy of
year or less. The provider or broker shall explain the procedure
contacts at the time the viatical settlement contract is entered
limitations set forth in this subsection shall not apply to any
an insured under a viaticated policy for reasons other than
the insured's health status.
Sec. 11. The commissioner shall
have the authority to promulgate
rules and regulations to:
(a) Establish requirements for evaluating
reasonableness of payments
under viatical settlement contracts. This authority includes, but
limited to, regulation of discount rates used to determine the
paid in exchange for assignment, transfer, sale, devise or bequest
benefit under a life insurance policy.
(b) Establish appropriate licensing
requirements, fees not to exceed
$200 and requirements for continued licensure for viatical
providers, representatives and brokers.
(c) Establish requirements for a bond or
any other mechanism for
financial accountability for viatical settlement providers.
(d) Establish requirements governing the
relationship and responsi-
bilities of both insurers and viatical settlement providers,
representatives during the viatication of a life insurance policy
(e) Establish requirements for any other
matters necessary for the
proper enforcement of the act.
Sec. 12. A violation of this act
shall also be considered an unfair or
deceptive act or practice under K.S.A. 40-2404, and amendments
and subject to the penalties contained in K.S.A. 40-2401 et
Sec. 13. A viatical settlement
provider, viatical settlement represen-
tative or viatical settlement broker transacting business in this
continue to do so pending approval or disapproval of the viatical
ment provider's, viatical settlement representative's or viatical
broker's application for a license provided that the required
is filed with the commissioner by July 1, 1999.
Sec. 14. K.S.A. 40-2,140, 40-2,141,
40-2,142, 40-2,143, 40-2,144, 40-
2,145, 40-2,146, 40-2,147, 40-2,148, 40-2,149, 40-2,150, 40-2,151
2,152 are hereby repealed.
Sec. 15. This act shall take effect
and be in force from and after its
publication in the Kansas register.
Approved April 14, 1999.
Published in the Kansas Register April 22, 1999.