REPORT TITLE:
Insurance Death Benefits


DESCRIPTION:
Provides for state regulation of accelerated death benefits
agreements in life insurance policies or certificates, as well as
viatical settlement agreements.  (HB2477 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2477
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The purpose of this Act is to protect consumers
 
 2 who are faced with catastrophic or terminal illness and seek to
 
 3 finance medical or hospice care by leveraging their assets in
 
 4 life insurance policies or group life insurance certificates.
 
 5 This Act establishes a framework for state regulation of
 
 6 accelerated death benefits agreements and viatical settlement
 
 7 agreements.
 
 8      This Act is not intended to affect or interfere in any way
 
 9 with the implementation of chapter 485, Hawaii Revised Statutes,
 
10 or any rules adopted pursuant to chapter 485 by the commissioner
 
11 of securities.
 
12      SECTION 2.   Chapter 431, Hawaii Revised Statutes, is
 
13 amended by adding to article 10D two new parts to be
 
14 appropriately designated and to read as follows:
 
15                  "PART   .  ACCELERATED BENEFITS
 
16      §431:10D-A  Purpose.  The purpose of this part is to
 
17 regulate accelerated benefit provisions of individual and group
 
18 life insurance policies.  This part shall apply to all
 
19 accelerated benefits provisions of individual and group life
 
20 insurance policies other than those subject to part V of article
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 10A, that are issued or delivered in this state on or after the
 
 2 effective date of this part.
 
 3      §431:10D-B  Definitions.  As used in this part:
 
 4      "Accelerated benefits" means benefits payable under a life
 
 5 insurance contract:
 
 6      (1)  To a policyowner or certificate holder, during the
 
 7           lifetime of the insured, in anticipation of death or
 
 8           upon the occurrence of catastrophic or life-threatening
 
 9           conditions specified in the policy or rider;
 
10      (2)  That reduce the death benefit otherwise payable under
 
11           the life insurance contract; and
 
12      (3)  That are payable upon the occurrence of a single
 
13           qualifying event that results in the payment of a
 
14           benefit amount fixed at the time of acceleration.
 
15      "Qualifying event" means one or more of the following:
 
16      (1)  A medical condition that would result in a drastically
 
17           limited life span as specified in the contract;
 
18      (2)  A medical condition that has required or requires
 
19           extraordinary medical intervention, such as, but not
 
20           limited to a major organ transplant or continuous
 
21           artificial life support, without which the insured
 
22           would die;
 

 
 
 
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 1      (3)  A condition that usually requires continuous
 
 2           confinement in an eligible institution, as defined in
 
 3           the contract, if the insured is expected to remain
 
 4           there for the rest of the insured's life;
 
 5      (4)  A medical condition that would, in the absence of
 
 6           extensive or extraordinary medical treatment, result in
 
 7           a drastically limited life span.  These conditions may
 
 8           include but not be limited to one or more of the
 
 9           following:
 
10           (A)  Coronary artery disease resulting in an acute
 
11                infraction or requiring surgery;
 
12           (B)  Permanent neurological deficit resulting from
 
13                cerebral vascular accident;
 
14           (C)  End stage renal failure;
 
15           (D)  Acquired immune deficiency syndrome; or
 
16           (E)  Other medical conditions approved by the
 
17                commissioner for a particular filing;
 
18           or
 
19      (5)  Other qualifying events that the commissioner shall
 
20           approve for a particular filing.
 
21      §431:10D-C  Applicability.  Accelerated benefit riders and
 
22 life insurance policies with accelerated benefit provisions shall
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 be deemed mortality risks and shall be subject to regulation
 
 2 under this part.
 
 3      §431:10D-D  Product identification.  The term "accelerated
 
 4 benefit" shall be included in the descriptive title of products
 
 5 regulated under this part.  Products regulated under this part
 
 6 shall not be described or marketed as long-term care insurance or
 
 7 as providing long-term care benefits.
 
 8      §431:10D-E  Contract terms.(a)  The accelerated benefit
 
 9 provision shall be effective for accidents on the effective date
 
10 of the policy or rider.  The accelerated benefit provision shall
 
11 be effective for illness no more than thirty days following the
 
12 effective date of the policy or rider.
 
13      (b)  Contract payment options shall include the option to
 
14 take the accelerated benefit as a lump sum.  The accelerated
 
15 benefit shall not be made available as an annuity contingent upon
 
16 the life of the insured.
 
17      (c)  No restrictions shall be imposed upon the use of the
 
18 proceeds of an accelerated benefits settlement.
 
19      (d)  If any death benefits remain after payment of an
 
20 accelerated benefit, the accidental death benefit provision, if
 
21 any, in the policy or rider, shall not be affected by the payment
 
22 of the accelerated benefit.
 

 
 
 
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 1      §431:10D-F  Disclosure to policyowners or certificate
 
 2 holders.  (a)  An insurer offering financing options other than
 
 3 as described in section 431:10D-L(a)(2) and (3) shall disclose to
 
 4 the policyowner or certificate holder any premium or cost of
 
 5 insurance charge for the accelerated benefit.  If the policyowner
 
 6 or certificate holder is required to pay an additional premium or
 
 7 cost of insurance charge, the insurer shall make a reasonable
 
 8 effort to assure that the policyowner or certificate holder is
 
 9 aware of the charge.
 
10      (b)  An insurer shall disclose to the policyowner or
 
11 certificate holder that receipt of accelerated benefits may be
 
12 taxable and that assistance should be sought from a personal tax
 
13 advisor.  A statement disclosing this information shall be
 
14 presented to the policyowner or certificate holder both at the
 
15 time of application for the policy or rider, and at the time the
 
16 accelerated benefit payment request is submitted.  The disclosure
 
17 statement shall also be prominently displayed on the first page
 
18 of the policy or rider and any other related documents.
 
19      (c)  The insurer shall disclose to the policyowner or
 
20 certificate holder any administrative expense charge.  If the
 
21 policyowner or certificate holder is required to pay an
 
22 administrative expense charge, the insurer shall make a
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 reasonable effort to assure that the policyowner or certificate
 
 2 holder is aware of charge.
 
 3      431:10D-G  Disclosure at the time of solicitation.(a)  A
 
 4 written disclosure including but not necessarily limited to a
 
 5 brief description of the accelerated benefit and definitions of
 
 6 the conditions or occurrences triggering payment of the benefits
 
 7 shall be given to the applicant prior to application for a policy
 
 8 that includes a provision for accelerated death benefits.  The
 
 9 description shall include an explanation of the effect of the
 
10 payment of the benefit on the policy's cash value, accumulation
 
11 account, death benefit, premium, policy loans, and policy liens;
 
12 provided that:
 
13      (1)  In the case of agent-solicited insurance, the agent
 
14           shall provide the written disclosure to the applicant
 
15           prior to or concurrently with the application for
 
16           accelerated benefits.  The applicant and writing agent
 
17           shall sign an acknowledgment of receipt of the written
 
18           disclosure;
 
19      (2)  In the case of a solicitation by direct response
 
20           methods, the insurer shall provide the written
 
21           disclosure to the applicant at the time the policy is
 
22           delivered.  The disclosure shall include a notice that
 

 
 
 
Page 7                                                     2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           a full premium refund shall be made if the policy is
 
 2           returned to the company within the thirty-day free look
 
 3           period; and
 
 4      (3)  In the case of group insurance policies, the written
 
 5           disclosure shall be contained as part of the
 
 6           certificate of coverage or any related document
 
 7           furnished by the insurer to the certificate holder.
 
 8      (b)  If there is a premium or cost of insurance charge for
 
 9 the accelerated benefit, the insurer shall provide the applicant
 
10 with a generic illustration numerically demonstrating the effect
 
11 of the payment of an accelerated benefit on the policy's cash
 
12 value, accumulation account, death benefit, premium, policy
 
13 loans, and policy liens; provided that:
 
14      (1)  In the case of agent-solicited insurance, the agent
 
15           shall provide the illustration to the applicant prior
 
16           to or concurrently with the application;
 
17      (2)  In the case of a solicitation by direct response
 
18           methods, the insurer shall provide the illustration to
 
19           the applicant at the time the policy is delivered; and
 
20      (3)  In the case of group insurance policies, the
 
21           illustration shall be included in the certificate of
 
22           coverage or any related document furnished by the
 
23           insurer to the certificate holder.
 

 
Page 8                                                     2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      §431:10D-H  Disclosure at the time of request.(a)  When a
 
 2 policyowner or certificate holder requests an acceleration of
 
 3 benefits, the insurer shall send written disclosure to the
 
 4 policyowner or certificate holder, and the irrevocable
 
 5 beneficiary, disclosing any effect that the payment of the
 
 6 accelerated benefit will have on the policy's cash value,
 
 7 accumulation account, death benefit, premium, policy loans, and
 
 8 policy liens.
 
 9      (b)  The written disclosure shall disclose that receipt of
 
10 accelerated benefits may adversely affect the recipient's
 
11 eligibility for medicaid or other government benefits or
 
12 entitlements, and that accelerated benefits may be taxable and
 
13 that assistance should be sought from a personal tax advisor.
 
14      (c)  When a previous disclosure statement becomes invalid as
 
15 the result of an acceleration of death benefits, the insurer
 
16 shall send a revised disclosure statement to the policyowner or
 
17 certificate holder and irrevocable beneficiary.
 
18      (d)  When an agreement has been reached to accelerate death
 
19 benefits, the insurer shall issue an amended schedule page to
 
20 inform the policyholder or certificate holder of any new,
 
21 reduced, in-force face amount of the contract.
 
22      §431:10D-I  Assignee or beneficiary concurrence required.
 
23 Prior to the payment of the accelerated benefit, the insurer
 

 
Page 9                                                     2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 shall obtain from an assignee or irrevocable beneficiary, a
 
 2 signed acknowledgement of concurrence for payout, except where
 
 3 the insurer making the accelerated benefit is itself the assignee
 
 4 under the policy.
 
 5      §431:10D-J  Waiver of premiums.  The insurer may offer a
 
 6 waiver of premium for the accelerated benefit provision in the
 
 7 absence of a regular waiver of premium provision in the contract.
 
 8 At the time the benefit is claimed, the insurer shall explain any
 
 9 continuing premium required to keep the policy in force.
 
10      §431:10D-K  Unfair discrimination prohibited.  An insurer
 
11 shall not unfairly discriminate between insureds according to the
 
12 difference between qualifying events that are covered under
 
13 policies, or unfairly discriminate between insureds who have
 
14 similar qualifying events covered under their policies.  An
 
15 insurer shall not apply conditions to the payment of accelerated
 
16 benefits other than those specified in the policy or rider.
 
17      §431:10D-L  Actuarial standards.  (a)  To finance
 
18 accelerated death benefits, an insurer may:
 
19      (1)  Require a premium charge or cost of insurance charge
 
20           for the accelerated benefit that shall be based on
 
21           sound actuarial principles.  In the case of group
 
22           insurance, the additional cost may also be reflected in
 
23           the experience rating;
 

 
Page 10                                                    2477
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 1      (2)  Pay the present value of the face amount, the
 
 2           calculation of which shall be based on any applicable
 
 3           actuarial discount appropriate to the policy design.
 
 4           The interest rate or interest rate methodology used in
 
 5           the calculation shall be based on sound actuarial
 
 6           principles and disclosed in the contract or actuarial
 
 7           memorandum.  The maximum interest rate used shall be no
 
 8           greater than the greater of:
 
 9           (A)  The current yield on ninety-day treasury bills; or
 
10           (B)  The current maximum statutory adjustable policy
 
11                loan interest rate;
 
12           or
 
13      (3)  Accrue an interest charge on the amount of the
 
14           accelerated benefits.  The interest rate or interest
 
15           rate methodology used in the calculation shall be based
 
16           on sound actuarial principles and disclosed in the
 
17           contract or actuarial memorandum.  The maximum interest
 
18           rate used shall be no greater than the greater of:
 
19           (A)  The current yield on ninety-day treasury bills; or
 
20           (B)  The current maximum statutory adjustable policy
 
21                loan interest rate.
 
22           The interest rate accrued on the portion of the lien
 
23           that is equal in amount to the cash value of the
 

 
Page 11                                                    2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           contract at the time of the benefit acceleration shall
 
 2           be no more than the policy loan interest rate stated in
 
 3           the contract.
 
 4      (b)  When an accelerated benefit is payable, the insurer
 
 5 shall:
 
 6      (1)  Reduce the cash value of the policy by no more than a
 
 7           pro rata reduction based on the percentage of death
 
 8           benefits accelerated to produce the accelerated benefit
 
 9           payment; or
 
10      (2)  Charge the payment of accelerated benefits, any
 
11           administrative expense charges, any future premiums,
 
12           and any accrued interest as a lien against the death
 
13           benefit of the policy or rider and the access to the
 
14           cash value may be restricted to any excess of the cash
 
15           value over the sum of any other outstanding loans and
 
16           the lien.  Future access to additional policy loans
 
17           could also be limited to any excess of the cash value
 
18           over the sum of the lien and any other outstanding
 
19           policy loans.
 
20      (c)  When payment of an accelerated benefit results in a pro
 
21 rata reduction in the cash value, the payment may not be applied
 
22 toward repaying an amount greater than a pro rata portion of any
 
23 outstanding policy loans.
 

 
Page 12                                                    2477
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 1      §431:10D-M  Actuarial disclosures to commissioner.  (a)  An
 
 2 insurer shall furnish an actuarial demonstration to the
 
 3 commissioner when filing the product, that discloses the
 
 4 insurer's method of arriving at the insurer's cost for
 
 5 accelerated benefits.
 
 6      (b)  A qualified actuary shall describe the accelerated
 
 7 benefits, the risks, the expected costs, and the calculation of
 
 8 statutory reserves in an actuarial memorandum accompanying each
 
 9 state filing.
 
10      (c)  The insurer shall maintain in its files descriptions of
 
11 the bases and procedures used to calculate accelerated benefits
 
12 payable under its policies and riders, which shall be made
 
13 available for examination by the commissioner upon request.
 
14      §431:10D-N  Reserves.  (a)  When benefits are provided
 
15 through the acceleration of benefits under group or individual
 
16 life policies or riders to such policies, policy reserves shall
 
17 be determined in accordance with section 431:5-307.
 
18      (b)  All valuation assumptions used in constructing the
 
19 reserves shall be determined as appropriate for statutory
 
20 valuation purposes by a member in good standing of the American
 
21 Academy of Actuaries.
 
22      (c)  Mortality tables and interest currently recognized for
 
23 life insurance reserves by the National Association of Insurance
 

 
Page 13                                                    2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1 Commissioners may be used, as well as appropriate assumptions for
 
 2 the other provisions incorporated in the policy form.  The
 
 3 actuary shall follow both actuarial standards and certification
 
 4 for good and sufficient reserves. Reserves in the aggregate shall
 
 5 be sufficient to cover:
 
 6      (1)  Policies upon which no claim has yet arisen; and
 
 7      (2)  Policies upon which an accelerated claim has arisen.
 
 8      (d)  For policies and certificates that provide actuarially
 
 9 equivalent benefits, no additional reserves need to be
 
10 established.
 
11      (e)  Policy liens and policy loans, including accrued
 
12 interest, represent assets of the company for statutory reporting
 
13 purposes.  For a policy on which the policy lien exceeds the
 
14 policy's statutory reserve liability, the excess shall be held as
 
15 a non-admitted asset.
 
16      §431:10D-O  Rules.  (a)  The commissioner may adopt rules
 
17 implementing this part.
 
18                  PART   . VIATICAL SETTLEMENTS
 
19      §431:10D-AA  Definitions.  As used in this part:
 
20      "Viatical settlement broker" means an individual,
 
21 partnership, corporation, or other entity who or which for
 
22 another and for a fee, commission, or other valuable
 
23 consideration:
 

 
Page 14                                                    2477
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 1      (1)  Offers or advertises the availability of viatical
 
 2           settlements;
 
 3      (2)  Introduces viators to viatical settlement providers; or
 
 4      (3)  Offers or attempts to negotiate viatical settlements
 
 5           between a viator and one or more viatical settlement
 
 6           providers.
 
 7 "Viatical settlement broker" shall not include an attorney,
 
 8 accountant, or financial planner retained to represent the viator
 
 9 whose compensation is not paid by the viatical settlement
 
10 provider.
 
11      "Viatical settlement contract" means a written agreement
 
12 entered into between a viatical settlement provider and a person
 
13 owning a life insurance policy or who owns or is covered under a
 
14 group policy insuring the life of a person who has a catastrophic
 
15 or life-threatening illness or condition.  The agreement shall
 
16 establish the terms under which the viatical settlement provider
 
17 will pay compensation or anything of value, which compensation or
 
18 value is less than the expected death benefit of the insurance
 
19 policy or certificate, in return for the policyowner's
 
20 assignment, transfer, sale, devise, or bequest of the death
 
21 benefit or ownership of the insurance policy or certificate to
 
22 the viatical settlement provider.
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      "Viatical settlement provider" means an individual,
 
 2 partnership, corporation, or other entity that enters into an
 
 3 agreement with a person owning a life insurance policy or who
 
 4 owns or is covered under a group policy insuring the life of a
 
 5 person who has a catastrophic or life-threatening illness or
 
 6 condition, under the terms of which the viatical settlement
 
 7 provider pays compensation or anything of value, which
 
 8 compensation or value is less than the expected death benefit of
 
 9 the insurance policy or certificate, in return for the policy
 
10 owner's assignment, transfer, sale, devise, or bequest of the
 
11 death benefit or ownership of the insurance policy or certificate
 
12 to the viatical settlement provider.  "Viatical settlement
 
13 provider" shall not include:
 
14      (1)  Any bank, savings bank, savings and loan association,
 
15           credit union, or other licensed lending institution
 
16           that takes an assignment of a life insurance policy as
 
17           collateral for a loan;
 
18      (2)  The issuer of a life insurance policy that makes a
 
19           policy loan, permits surrender of the policy, or pays
 
20           other policy benefits, including accelerated benefits,
 
21           in accordance with the terms of the policy; or
 
22      (3)  Any natural person who enters into no more than one
 
23           agreement in a calendar year for the transfer of life
 

 
Page 16                                                    2477
                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1           insurance policies for any value less than the expected
 
 2           death benefit.
 
 3      "Viator" means a person who is the holder of a certificate,
 
 4 or owner of a life insurance policy insuring the life of the
 
 5 holder or owner, who has a catastrophic or life-threatening
 
 6 illness or condition, and who enters into an agreement under
 
 7 which the viatical settlement provider will pay compensation or
 
 8 anything of value, which compensation or value is less than the
 
 9 expected death benefit of the insurance policy or certificate, in
 
10 return for the viator's assignment, transfer, sale, devise, or
 
11 bequest of the death benefit or ownership of the insurance policy
 
12 or certificate to the viatical settlement provider.
 
13      §431:10D-BB  Licensing requirements.(a)  No individual,
 
14 partnership, corporation or other entity shall act as a viatical
 
15 settlement provider or enter into or solicit a viatical
 
16 settlement contract without first having obtained a license from
 
17 the commissioner.
 
18      (b)  Application for a viatical settlement provider license
 
19 shall be made to the commissioner by the applicant on a form
 
20 prescribed by the commissioner, and the application shall be
 
21 accompanied as provided in section 431:7-101.
 
22      (c)  Licenses may be renewed from year to year on the
 
23 anniversary date upon payment of the annual renewal required
 

 
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 1 under section 431:7-101.  Failure to pay the fee within the terms
 
 2 prescribed shall result in the automatic revocation of the
 
 3 license.
 
 4      (d)  The applicant shall provide information as the
 
 5 commissioner may require on forms prepared by the commissioner.
 
 6 The commissioner may, at any time, require the applicant to fully
 
 7 disclose the identity of all stockholders, partners, officers,
 
 8 and employees, and the commissioner may, in the exercise of
 
 9 discretion, refuse to issue a license in the name of any firm,
 
10 partnership, or corporation if not satisfied that any officer,
 
11 employee, stockholder, or partner thereof who may materially
 
12 influence the applicant's conduct meets the standards of this
 
13 part.
 
14      (e)  A license issued to a partnership, corporation, or
 
15 other entity authorizes all member, officers, and designated
 
16 employees to act as viatical settlement providers under the
 
17 license, and all those persons shall be named in the application
 
18 and any supplements to the application.
 
19      (f)  Upon the filing of an application and the payment of
 
20 the license fee, the commissioner shall make an investigation of
 
21 each applicant and may issue a license if the commissioner finds
 
22 that the applicant:
 
23      (1)  Has provided a detailed plan of operation;
 

 
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 1      (2)  Is competent and trustworthy and intends to act in good
 
 2           faith in the capacity involved by the license applied
 
 3           for;
 
 4      (3)  Has a good business reputation and has had experience,
 
 5           training, or education so as to be qualified in the
 
 6           business for which the license is applied for; and
 
 7      (4)  If the applicant is a corporation, is incorporated
 
 8           pursuant to the laws of this state or is a foreign
 
 9           corporation authorized to transact business in this
 
10           state.
 
11      (g)  The commissioner shall not issue any license to any
 
12 nonresident applicant, unless a written designation of an agent
 
13 for service of process is filed and maintained with the
 
14 commissioner, or unless the applicant has filed with the
 
15 commissioner the applicant's written irrevocable consent that any
 
16 action against the applicant may be commenced against the
 
17 applicant by service of process on the commissioner.
 
18      (h)  The commissioner may suspend, revoke, or refuse to
 
19 renew the license of any viatical settlement provider if the
 
20 commissioner finds that:
 
21      (1)  There was any misrepresentation in the application for
 
22           the license;
 

 
 
 
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 1      (2)  The holder of the license has been guilty of fraudulent
 
 2           or dishonest practices, is subject to a final
 
 3           administrative action, or is otherwise shown to be
 
 4           untrustworthy or incompetent to act as a viatical
 
 5           settlement provider;
 
 6      (3)  The license demonstrates a pattern of unreasonable
 
 7           payments to policy owners;
 
 8      (4)  The licensee has been convicted of a felony or any
 
 9           misdemeanor of which criminal fraud is an element; or
 
10      (5)  The licensee has violated any of the provisions of this
 
11           part.
 
12      Before the commissioner shall deny a license application or
 
13 suspend, revoke, or refuse to renew the license of a viatical
 
14 settlement provider, the commissioner shall conduct a hearing in
 
15 accordance with chapter 91.
 
16      §431:10D-CC  Viatical settlement contract approval.  No
 
17 viatical settlement provider may use any viatical settlement
 
18 contract in this state unless it has been filed with and approved
 
19 by the commissioner.  Any viatical settlement contract form filed
 
20 with the commissioner shall be deemed approved if it has not been
 
21 disapproved within sixty days of the filing.  The commissioner
 
22 shall disapprove a viatical settlement contract form within sixty
 
23 days of the filing.  The commissioner shall disapprove a viatical
 

 
Page 20                                                    2477
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 1 settlement contract form if, in the commissioner's opinion, the
 
 2 contract or provisions contained therein are unreasonable,
 
 3 contrary to the interests of the public, or otherwise misleading
 
 4 or unfair to the policy owner.
 
 5      §431:10D-DD  Annual statement.  Each licensee shall file
 
 6 with the commissioner on or before the first day of March of each
 
 7 year an annual statement containing such information as the
 
 8 commissioner by rule may prescribe.
 
 9      §431:10D-EE  Examination of licensee or applicant records.
 
10 (a)  The commissioner may, when the commissioner deems it
 
11 reasonably necessary to protect the interests of the public,
 
12 examine the business and affairs of any licensee or applicant for
 
13 a license.  The commissioner may order any licensee or applicant
 
14 to produce any records, books, files, or other information
 
15 reasonably necessary to ascertain whether the licensee or
 
16 applicant is acting or has acted in violation of the law or
 
17 otherwise contrary to the interests of the public.  The expenses
 
18 incurred in conducting any examination shall be paid by the
 
19 licensee or applicant.
 
20      (b)  Names and individual identification data for all
 
21 viators shall be considered private and confidential information
 
22 and shall not be disclosed by the commissioner unless required by
 
23 law.
 

 
Page 21                                                    2477
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 1      (c)  Records of all transactions of viatical settlement
 
 2 contracts shall be maintained by the licensee and shall be
 
 3 available to the commissioner for inspection during reasonable
 
 4 business hours.
 
 5      §431:10D-FF  Provider disclosure to viator.  A viatical
 
 6 settlement provider shall disclose the following information to
 
 7 the viator no later than the date the viatical settlement
 
 8 contract is signed by all parties:
 
 9      (1)  Possible alternatives to viatical settlement contracts
 
10           for persons with catastrophic or life-threatening
 
11           illness, including but not limited to accelerated
 
12           benefits offered by the issuer of the life insurance
 
13           policy;  
 
14      (2)  The fact that some or all of the proceeds of a viatical
 
15           settlement contract may be taxable, and that assistance
 
16           should be sought from a personal tax advisor;  
 
17      (3)  The fact that the proceeds from a viatical settlement
 
18           contract could be subject to the claims of creditors;  
 
19      (4)  The fact that receipt of proceeds from a viatical
 
20           settlement contract may adversely affect the
 
21           recipients' eligibility for public assistance or other
 
22           government benefits or entitlements, and that advice
 
23           should be obtained from the appropriate agencies;  
 

 
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 1      (5)  The policy owner's right to rescind a viatical
 
 2           settlement contract within thirty days of the date it
 
 3           is executed by all parties or fifteen days of the
 
 4           receipt of the viatical settlement proceeds by the
 
 5           viator, whichever is less, as provided in section
 
 6           431:10D-GG(b); and 
 
 7      (6)  The date by which the funds will be available to the
 
 8           viator and the source of the funds.  
 
 9      §431:10D-GG.  Catastrophic or life-threatening condition;
 
10 contract requirements.(a)  A viatical settlement provider
 
11 entering into a viatical settlement contract with any person with
 
12 a catastrophic or life-threatening illness or condition shall
 
13 first obtain:  
 
14      (1)  A written statement from a licensed attending physician
 
15           that the person is of sound mind and under no
 
16           constraint or undue influence; and 
 
17      (2)  A witnessed document in which the person consents to
 
18           the viatical settlement contract, acknowledges the
 
19           catastrophic or life-threatening illness, represents
 
20           that such person has a full and complete understanding
 
21           of the viatical settlement contract, that such person
 
22           has a full and complete understanding of the benefits
 
23           of the life insurance policy, releases medical records,
 

 
Page 23                                                    2477
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 1           and acknowledges that such person has entered into the
 
 2           viatical settlement contract freely and voluntarily.
 
 3 All medical information solicited or obtained by any licensee
 
 4 shall be subject to privacy protections under chapter 323.
 
 5      (b)  All viatical settlement contracts entered into in this
 
 6 state shall contain an unconditional refund provision of at least
 
 7 thirty days from the date of the contract, or fifteen days of the
 
 8 receipt of the viatical settlement proceeds, whichever is less.  
 
 9      (c)  Immediately upon receipt from the viator of documents
 
10 to effect the transfer of the insurance policy, the viatical
 
11 settlement provider shall pay the proceeds of the settlement to
 
12 an escrow or trust account managed by a trustee or escrow agent
 
13 in a bank approved by the commissioner pending acknowledgement of
 
14 the transfer by the issuer of the policy.  The trustee or escrow
 
15 agent shall transfer the proceeds due to the viator immediately
 
16 upon receipt of acknowledgement of the transfer from the insurer.  
 
17      (d)  Failure to tender the viatical settlement contract
 
18 proceeds by the date disclosed to the viator renders the contract
 
19 null and void.  
 
20      §431:10B-HH  Powers of the commissioner.  The commissioner
 
21 may:  
 
22      (1)  Adopt rules under chapter 91 to implement this part;  
 

 
 
 
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 1      (2)  Establish standards for evaluating reasonableness of
 
 2           payments under viatical settlement contracts.  This
 
 3           authority includes but shall not be limited to
 
 4           regulation of discount rates used to determine the
 
 5           amount paid in exchange for assignment, transfer, sale,
 
 6           devise, or bequest of a benefit under a life insurance
 
 7           policy;
 
 8      (3)  Establish appropriate licensing requirements for agents
 
 9           and brokers; and 
 
10      (4)  Require a bond.  
 
11      §431:10D-II  Broker fees.(a)  Any fee paid by a viatical
 
12 settlement provider or by a viator to a viatical settlement
 
13 broker in exchange for services provided to the viator pertaining
 
14 to a viatical settlement contract shall be computed as a
 
15 percentage of the offer obtained, not the face value of the
 
16 policy.  Nothing in this section shall be construed as
 
17 prohibiting a viatical settlement broker from reducing such
 
18 broker's fee below this percentage if the viatical settlement
 
19 broker so chooses.  
 
20      (b)  The viatical settlement broker shall disclose to the
 
21 viator the amount of any and all fees paid to a viatical
 
22 settlement broker that relate to the viatical settlement contract
 
23 in which the viator has engaged.  
 

 
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 1      §431-10D-JJ  Penalties.  Violation of any provision of this
 
 2 chapter is an unfair or deceptive act or practice in the conduct
 
 3 of trade or commerce under section 480-2."
 
 4      SECTION 3.  Section 431:7-101, Hawaii Revised Statutes, is
 
 5 amended by amending subsections (a) and (b) to read as follows:
 
 6      "(a)  The commissioner shall collect in advance the
 
 7 following fees:
 
 8      (1)  Certificate of authority:  Issuance................$900
 
 9      (2)  Organization of domestic insurers and affiliated
 
10           corporations:
 
11           (A)  Application and all other papers required for
 
12                issuance of solicitation permit, filing.....$1,500
 
13           (B)  Issuance of solicitation permit...............$150
 
14      (3)  General agent's license:
 
15           (A)  Issuance, regular license......................$75
 
16           (B)  Issuance, temporary license....................$75
 
17      (4)  Subagent's license:
 
18           (A)  Issuance, regular license......................$75
 
19           (B)  Issuance, temporary license....................$75
 
20      (5)  Nonresident agent's or broker's license:
 
21           Issuance............................................$60
 
22      (6)  Solicitor's license: Issuance.......................$60
 
23      (7)  Independent adjuster's license: Issuance............$60
 

 
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 1      (8)  Public adjuster's license: Issuance.................$60
 
 2      (9)  Workers' compensation claims adjuster's limited
 
 3           license: Issuance...................................$60
 
 4     (10)  Limited license issued pursuant to section
 
 5           431:9-214(c): Issuance..............................$60
 
 6     (11)  Managing general agent's license:
 
 7           Issuance............................................$75
 
 8     (12)  Reinsurance intermediary's license:
 
 9           Issuance............................................$75
 
10     (13)  Surplus line broker's license: Issuance............$150
 
11     (14)  Viatical settlement provider's license:
 
12           Issuance..........................................$   
 
13    [(14)] (15) Examination for license:  For each examination, a
 
14           fee to be established by the commissioner.
 
15      (b)  The fees for services of the department of commerce and
 
16 consumer affairs subsequent to the issuance of a certificate of
 
17 authority or a license are as follows:
 
18      (1)  $600 per year for all services (including extension of
 
19           the certificate of authority) for an authorized
 
20           insurer;
 
21      (2)  $75 per year for all services (including extension of
 
22           the license) for a regularly licensed general agent;
 

 
 
 
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 1      (3)  $75 per year for all services (including extension of
 
 2           the license) for a regularly licensed subagent;
 
 3      (4)  $45 per year for all services (including extension of
 
 4           the license) for a regularly licensed nonresident agent
 
 5           or broker;
 
 6      (5)  $30 per year for all services (including extension of
 
 7           the license) for a regularly licensed solicitor;
 
 8      (6)  $45 per year for all services (including extension of
 
 9           the license) for a regularly licensed independent
 
10           adjuster;
 
11      (7)  $45 per year for all services (including extension of
 
12           the license) for a regularly licensed public adjuster;
 
13      (8)  $45 per year for all services (including extension of
 
14           the license) for a regularly limited licensed workers'
 
15           compensation claims adjuster;
 
16      (9)  $45 per year for all services (including extension of
 
17           the license) for a limited license issued pursuant to
 
18           section 431:9-214(c);
 
19     (10)  $75 per year for all services (including extension of
 
20           the license) for a regularly licensed managing general
 
21           agent;
 

 
 
 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1     (11)  $75 per year for all services (including extension of
 
 2           the license) for a regularly licensed reinsurance
 
 3           intermediary;
 
 4     (12)  $45 per year for all services (including extension of
 
 5           the license) for a licensed surplus line broker; [and]
 
 6     (13)  $   per year for all services (including extension of
 
 7           the license) for a licensed viatical settlement
 
 8           provider; and
 
 9    [(13)] (14) The services referred to in paragraphs (1) to
 
10           [(12)] (13) shall not include services in connection
 
11           with examinations, investigations, hearings, appeals,
 
12           and deposits with a depository other than the
 
13           department of commerce and consumer affairs."
 
14      SECTION 4.  No viatical settlement provider transacting
 
15 business in this state may continue to do so after the effective
 
16 date of this Act, unless the provider is in compliance with this
 
17 Act. 
 
18      SECTION 5.  In codifying the new sections in the new parts
 
19 added to article 10D of chapter 431, Hawaii Revised Statutes, by
 
20 section 3 of this Act, the revisor of statutes shall substitute
 
21 appropriate section numbers for the letters in the designations
 
22 of those new sections in this Act.
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        

 
 1      SECTION 6.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 7.  This Act shall take effect ________________.