HB 348 (BR 1034) - R. Damron, R. Crimm, E. Ballard, J. Fischer, D. Horlander, D. Keene, D. Pasley, S. Riggs, T. Thompson, D. Watkins, S. Westrom
AN ACT relating to life settlements.
Amend KRS 304.15-020 to define "advertisement," "financing transaction," "life expectancy," "premium finance loan," "purchaser," "settled policy," and "stranger-originated life insurance"; amend KRS 304.15-700 to prohibit an insurer that is the subject of a life settlement contract from being responsible for any act or omission of a broker, purchaser, or provider unless the insurer receives compensation for the placement of the life settlement contract from the broker, purchaser, or provider; prohibit an insurer from requiring the owner, insured, provider, or broker to sign any form, disclosure, consent, waiver, or acknowledgment that has not been expressly approved by the executive director of the Office of Insurance; create a new section of KRS 304.15-700 to 304.15-725 to regulate advertisements pertaining to life settlements; amend KRS 304.15-710 to add disclosures a provider must provide to an owner; require the broker to make certain disclosures to the provider and owner; create a new section of KRS 304.15-700 to 304.15-725 to permit an insurer to inquire in the insurance application whether the proposed owner intends to pay premiums with the assistance of financing from a lender that will use the policy as collateral to support the financing; permit the insurer to make disclosures to the applicant and insured if premiums are paid with the assistance of financing and permit the insurer to require certification from the applicant or insured about future sale of the policy, the sufficiency of the loan to pay premiums and costs, and that the borrower has an insurable interest in the insured; amend KRS 304.15-715 to prohibit an insurer from unreasonably delaying the change of ownership or beneficiary with any lawful life settlement contract; require the provider to notify the insurer within 20 days after an owner executes a life settlement contract; require a fee paid to a broker for services provided to an owner to be computed as a percentage of the offer obtained and not the face value of the policy; require the broker to disclose to the owner anything of value paid or given to a broker which relates to a life settlement contract; amend KRS 304.15-716 to provide exceptions to the prohibition of a person entering into a life settlement contract within a two year period commencing with the date of issuance of the policy; amend KRS 304.15-717 to establish unlawful acts including to engage in any transaction, practice, or course of business the person knows or reasonably should have known that the intent was to avoid the notice requirements in the life settlement statutes; declare it is unlawful to issue, solicit, market, or otherwise promote the purchase of a life insurance policy for the purpose of or with an emphasis on settling the policy; declare it is unlawful to enter into a premium finance agreement where the person receives any proceeds, fees, or other consideration from the policy or policy owner or any other person that are in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums pursuant to the premium finance agreement or subsequent sale of the agreement; declare it is unlawful for a insurer, broker, or provider to make any statement or representation in connection with the sale or financing of a life insurance policy to the effect that the insurance is free or without cost to the policyholder for any period of time unless provided in the policy; declare certain acts of a broker and provider as unlawful when anything of value is paid to a broker or provider under common control or controlled by the provider, broker, or financing entity or related provider trust; create a new section of Subtitle 14 of KRS Chapter 304 to provide that except as provided in KRS 304.14-050, it is a violation of insurable interest for any person or entity without insurable interest to provide or arrange for the funding ultimately used to pay premiums, or the majority of premiums, on a life insurance policy and at policy inception have an arrangement for such person or entity to have an ownership interest in the majority of the death benefit of that life insurance policy; create a new section of KRS 304.15-700 to 304.15-725 to require each provider and each broker to file an annual statement with the Office of Insurance providing information required by administrative regulations; require the annual statement of providers to include the names of insurance companies whose policies have been settled and the brokers that have settled the policies; amend KRS 304.2-160, 304.4-040, 304.9-133, 304.9-150, 304.9-170, 304.0-200, 304.9-260. 304.9-425, 304.9-440, 304.9-467, 304.15-705, 304.15-718, 304.15-720, 304.42-190, 304.99-020, 304.99-100, and 304.99-126 to conform.
HB 348 - AMENDMENTS
HCS - Retain original provisions; in Section 1(1) delete "directly or indirectly" after "public" and insert "directly" after "placed"; in Section 1(7) delete "but is not limited to"; in Section 4(1) to permit written disclosures to be conspicuously displayed in a separate document; in Section 7(1) to add "at any time prior to, or at the time of application for, issuance of a policy, or"; in Section 8(1)(l) insert "any insurer"; in Section 8(1)(m) add "or provider" and "any insurer"; in Section 8(1)(o) add "insurance producer" and "or any other person"; add (p) in Section 8(1) to prohibit an insurer from prohibiting, restricting, limiting or impairing a life insurance producer from certain listed actions; prohibit an insurer from engaging in or permitting any discrimination in rates charged based upon an individual's having entered into a life settlement contract or being insured under a settled policy; prohibit an insurer from making any false or misleading statements as to the business of life settlements or financing premiums due for a policy or to any owner or insured to induce or tend to induce the owner or insured not to enter into a life settlement contract; prohibit an insurer from engaging in any transaction, act, or practice that restricts, limits, or impairs the lawful transfer of ownership, change of beneficiary, or assignment of a policy; and in Section 9 delete "and the brokers that have settled these policies".
SCS - Retain the original provisions; delete subparagraph 3. in Section 1(7) which made failure to disclose to the insurer a request for disclosure of a life expectancy evaluation by any person or entity other than the insurer with respect to issuance of the policy a fraudulent act; delete reference to a life expectancy company in the definition of "life expectancy."; include an arrangement or agreement to own or control in the definition of "STOLI"; require the executive director to promulgate an administrative regulation to list any contract, transaction, or arrangement that the executive director determines as not included in the definition of "life settlement contract" in Section 1(17)(b)9; delete the exclusion of an accredited investor from the definition of "owner" in Section 1(19)(b); insert "a primary" before "emphasis" in Section 3(3)(a); delete paragraph (f) in Section 4(2) pertaining to disclosure of the amount and method of compensation paid to a broker or other person acting for the owner; add "sole" before "purpose" and "a primary" before "emphasis" in Section 8(1)(j); add "unless disclosed to the owner" in paragraphs (l) and (m) in Section 8(1); delete subparagraph 1. in Section 8(1)(p) which prohibited, restricted, limited, or impaired specific acts by a life insurance provider; delete application of Section 9 to brokers.
Jan 23-introduced in House
Jan 24-to Banking & Insurance (H)
Jan 25-posted in committee
Jan 30-reported favorably, 1st reading, to Calendar with Committee Substitute
Jan 31-2nd reading, to Rules; posted for passage in the Regular Orders of the Day for Friday, February 1, 2008
Feb 5-3rd reading, passed 93-0 with Committee Substitute
Feb 6-received in Senate
Feb 8-to Banking & Insurance (S)
Mar 18-reported favorably, 1st reading, to Consent Calendar with Committee Substitute
Mar 19-2nd reading, to Rules
Mar 26-posted for passage in the Consent Orders of the Day for Wednesday, March 26, 2008; 3rd reading, passed 36-0 with Committee Substitute
Mar 27-received in House; to Rules (H); posted for passage for concurrence in Senate Committee Substitute ; House concurred in Senate Committee Substitute ; passed 98-0
Mar 28-enrolled, signed by Speaker of the House
Apr 1-enrolled, signed by President of the Senate; delivered to Governor
Apr 9-signed by Governor (Acts Ch. 32)