Chapter 632

632.69(12)(a) (a) No person may enter into a life settlement contract at any time before the application or issuance of a policy that is the subject of a life settlement contract or within a 5-year period commencing with the date of issuance of the policy unless any of the following conditions have been met:

632.69(12)(a)1. 1. The owner certifies to the provider that, within the 5-year period, the policy was issued upon the owner’s exercise of conversion rights arising out of a group or individual policy, provided the total of the time covered under the conversion policy plus the time covered under the prior policy is at least 60 months. The time covered under the group policy shall be calculated without regard to any change in insurance carriers, if the coverage has been continuous and under the same group sponsorship.

632.69(12)(a)2. 2. The owner submits independent evidence to the provider that any of the following conditions have been met within the 5-year period:

632.69(12)(a)2.a. a. The owner or insured is terminally or chronically ill.

632.69(12)(a)2.b. b. The owner’s spouse or child dies.

632.69(12)(a)2.c. c. The owner divorces his or her spouse.

632.69(12)(a)2.d. d. The owner retires from full-time employment.

632.69(12)(a)2.e. e. The owner becomes physically or mentally disabled and a physician determines that the disability prevents the owner from maintaining full-time employment.

632.69(12)(a)2.f. f. A final order, judgment, or decree is entered by a court of competent jurisdiction, on the application of a creditor of the owner, adjudicating the owner bankrupt or insolvent, approving a petition seeking reorganization of the owner, or appointing a receiver, trustee, or liquidator to all or a substantial part of the owner’s assets.

632.69(12)(a)2.g. g. The sole beneficiary of the policy is a family member of the owner and the beneficiary dies.

632.69(12)(a)2.h. h. The owner is a charitable organization with an insurable interest that has received from the federal Internal Revenue Service a determination letter that is currently in effect stating that the charitable organization is described in section 501 (c) (3) of the Internal Revenue Code and is exempt from federal income taxation under section 501 (a) of the Internal Revenue Code.

632.69(12)(a)2.i. i. The owner or insured disposes of ownership interests in a closely held corporation pursuant to the terms of a buyout or other similar agreement in effect at the time the policy was initially issued.

632.69(12)(a)2.j. j. Other circumstances exist that are established as eligible exemptions by the commissioner by rule, including substantial adverse financial circumstances or other factors substantially affecting the owner.

632.69(12)(a)3. 3. The owner certifies to the provider that the owner is entering into a life settlement contract more than 2 years after the date of issuance of a policy and, with respect to the policy, at all times before the date that is 2 years after policy issuance all of the following conditions are met:

632.69(12)(a)3.a. a. Policy premiums are funded exclusively with unencumbered assets, including an interest in the policy being financed only to the extent of its net cash surrender value, provided by, or full recourse liability incurred by, the owner or a person described in sub. (1) (j) 2. e.

632.69(12)(a)3.b. b. There is no agreement or understanding with any other person to guarantee any liability or to purchase, or stand ready to purchase, the policy, including through an assumption or forgiveness of a loan.

632.69(12)(a)3.c. c. Neither the insured nor the policy has been evaluated for settlement.

632.69(12)(b) (b) Copies of the independent evidence described in par. (a) 2. and documents required by sub. (11) (a) shall be submitted to the insurer when the provider entering into a life settlement contract with an owner submits a request to the insurer for verification of coverage. The provider shall submit, along with the copies, a letter of attestation from the provider that the copies are true and correct copies of the documents received by the provider.

632.69(12)(c) (c) If the provider submits to the insurer a copy of the owner’s certification under par. (a) 1. or 3. or independent evidence under par. (a) 2. when the provider submits a request to the insurer to effect the transfer of the policy to the provider, the copy conclusively establishes that the life settlement contract satisfies the requirements of this subsection and the insurer shall timely respond to the request.

632.69(12)(d) (d) No insurer may, as a condition of responding to a request for verification of coverage or effecting the transfer of a policy pursuant to a life settlement contract, require that the owner, insured, provider, or broker sign any form, disclosure, consent, or waiver that has not been expressly approved by the commissioner for use in connection with life settlement contracts in this state.

632.69(12)(e) (e) Upon receipt of a properly completed request for change of ownership or beneficiary of a policy, the insurer shall respond in writing within 30 calendar days with acknowledgement confirming that the change has been effected or specifying the reasons why the requested change cannot be processed.

632.69(12)(f) (f) A broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner’s instructions and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.

632.69(13) (13) Prohibited practices and conflicts of interest.

632.69(13)(a) (a) No person may enter into a life settlement contract if the person knows or reasonably should have known that the policy that is the subject of the life settlement contract was obtained by means of a false, deceptive, or misleading application for the policy.

632.69(13)(b) (b) No person may engage in any transaction, practice, or course of business if the person knows or reasonably should know that the intent is to avoid the notice requirements of this section.

632.69(13)(c) (c) No person may engage in any fraudulent act or practice in connection with any transaction relating to any life settlement involving an owner.

632.69(13)(d) (d) No person may issue, solicit, market, or otherwise promote the purchase of a policy for the primary purpose of or with a primary emphasis on settling the policy.

632.69(13)(e) (e) No person may enter into a premium finance agreement with any person or agency, or any person affiliated with such person or agency, pursuant to which the person who is providing premium financing receives any proceeds, fees, or other consideration, directly or indirectly, from the policy or owner of the policy or any other person with respect to the premium finance agreement or any life settlement contract or other transaction related to the policy that is 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. Any payments, charges, fees, or other amounts in addition to the amounts required to pay the principal, interest, and service charges related to policy premiums paid under the premium finance agreement shall be remitted to the original owner of the policy or to the owner’s estate if the owner is not living at the time of the determination of the overpayment.

632.69(13)(f) (f) With respect to any life settlement contract or policy, no broker may knowingly solicit an offer from, effectuate a life settlement with, or make a sale to any provider, purchaser, financing entity, or related provider trust that is controlling, controlled by, or under common control with the broker unless the relationship is disclosed to the owner.

632.69(13)(g) (g) With respect to any life settlement contract or policy, no provider may knowingly enter into a life settlement contract with an owner, if, in connection with the life settlement contract, anything of value will be paid to a broker that is controlling, controlled by, or under common control with the provider or the purchaser, financing entity, or related provider trust that is involved in the life settlement contract unless the relationship is disclosed to the owner.

632.69(13)(h) (h) No life settlement promotional, advertising, or marketing materials may represent that the insurance is “free” for any period of time, or include any reference that would cause an owner to reasonably believe that the insurance is free for any period of time.

632.69(13)(i) (i) No producer, insurer, broker, or provider may make any statement or representation to an applicant or policyholder in connection with the sale or financing of a 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.

632.69(14) (14) Advertisements of life settlement contracts and purchase agreements.

632.69(14)(a) (a) This subsection applies to any advertising of life settlement contracts, purchase agreements, or related products or services intended for dissemination in this state, including Internet advertising viewed by persons located in this state.

632.69(14)(b) (b) If disclosure requirements are established by federal regulation, this subsection shall be interpreted so as to minimize or eliminate conflict with federal regulation.

632.69(14)(c) (c) The commissioner may require a broker or provider to submit advertising material at any time.

632.69(14)(d) (d) Every licensee shall establish and maintain a system of control over the content, form, and method of dissemination of all advertisements of its life settlement contracts, products, and services. All advertisements, regardless who wrote, created, designed, or presented the advertisement, shall be the responsibility of the licensee and the person who created or presented the advertisement. The system of control shall include regular routine notification of the requirements and procedures for approval prior to use of any advertisements not furnished by the licensee, at least once a year, to producers, brokers, and others authorized by the licensee who disseminate advertisements.

632.69(14)(e) (e) Advertisements shall be truthful and not misleading in fact or by implication. The form and content of an advertisement of a life settlement contract or purchase agreement, product, or service shall be sufficiently complete and clear so as to avoid deception. The advertisement may not have the capacity or tendency to mislead or deceive. The commissioner shall determine whether an advertisement has the capacity or tendency to mislead or deceive from the overall impression that the advertisement may be reasonably expected to create upon a person of average education or intelligence within the segment of the public to which it is directed.

632.69(14)(f) (f) Disclosures that are required under this subsection may not be minimized, rendered obscure, presented in an ambiguous fashion, or intermingled with the text of the advertisement so as to be confusing or misleading.

632.69(14)(g) (g) An advertisement may not do any of the following:

632.69(14)(g)1. 1. Omit material information or use words, phrases, statements, references, or illustrations if the omission or use has the capacity, tendency, or effect of misleading or deceiving an owner, purchaser, or prospective purchaser as to the nature or extent of any benefit, covered loss, premium payable, or state or federal tax consequences. A misleading statement is not remedied by any of the following:

632.69(14)(g)1.a. a. Making the life settlement contract or purchase agreement available for inspection prior to consummation of the sale.

632.69(14)(g)1.b. b. Offering to refund payment if the owner is not satisfied.

632.69(14)(g)1.c. c. Including in the life settlement contract or purchase agreement a “free look” period that satisfies or exceeds the requirements of law.

632.69(14)(g)2. 2. Use the name or title of a life insurance company or a policy unless the advertisement has been approved by the insurer.

632.69(14)(g)3. 3. Represent that premium payments will not be required on the policy that is the subject of a life settlement contract or purchase agreement in order to maintain the policy unless that is the fact.

632.69(14)(g)4. 4. State or imply that interest charged on an accelerated death benefit or loan is unfair, inequitable, or, in any manner, an incorrect or improper practice.

632.69(14)(g)5. 5. Use the words “free,” “no cost,” “without cost,” “no additional cost,” “at no extra cost,” or similar words or phrases with respect to any benefit or services, unless true. An advertisement may specify the charge for a benefit or service or may state that a charge is included in the payment or use other appropriate language.

632.69(14)(g)6. 6. Use testimonials, appraisals, analyses, or endorsements in advertisements unless they are genuine; represent the current opinion of the author; are applicable to the life settlement contract or purchase agreement, product, or service advertised; and are reproduced with sufficient completeness to avoid misleading or deceiving prospective owners or purchasers as to the nature or scope of the testimonial, appraisal, analysis, or endorsement. Any financial interest in or benefit received from the licensee by the person making a testimonial, appraisal, or analysis, directly or indirectly, shall be prominently disclosed in the advertisement. If an endorsement refers to benefits received under a life settlement contract or purchase agreement, the licensee shall retain all pertinent information forming a basis of the endorsement for a period of 5 years following its use.

632.69(14)(g)7. 7. State or imply that a life settlement contract or purchase agreement, benefit, or service has been approved or endorsed by a group, society, association, or other organization unless that is the fact and unless any relationship between the organization and the licensee is disclosed. If the entity making the endorsement is owned, controlled, or managed by the licensee, or receives any payment or other consideration from the licensee for making an endorsement or testimonial, that fact must be disclosed in the advertisement.

632.69(14)(g)8. 8. Contain statistical information unless the information accurately reflects recent and relevant facts. An advertisement shall identify the source of all statistics used in the advertisement.

632.69(14)(g)9. 9. Disparage insurers, providers, brokers, producers, policies, services, or methods of marketing.

632.69(14)(g)10. 10. Omit the name of the actual licensee from any advertisement. No advertisement may use a trade name, group designation, name of the parent company of a licensee, name of a division of a life settlement licensee, service mark, slogan, symbol, or other device or reference if the advertisement would have the capacity or tendency to mislead or deceive as to the true identity of the licensee or to create the impression that any entity other than the licensee would have any responsibility for the financial obligation under a life settlement contract or purchase agreement.

632.69(14)(g)11. 11. Use any combination of words, symbols, or physical materials that by the their content, phraseology, shape, color, or other characteristics are so similar to a combination of words, symbols, or physical materials used by a government program or agency that they tend to mislead or deceive prospective owners or purchasers into believing the advertisement is in some manner connected with a government program or agency.

632.69(14)(g)12. 12. Exaggerate the fact that a licensee under this section is licensed in the state where the advertisement appears or suggest or imply that competing licensees may not be so licensed. An advertisement may ask the audience to consult the licensee’s website or contact the office of the commissioner for licensing requirements and the status of a license.

632.69(14)(g)13. 13. Create the impression, directly or indirectly, that a licensee; its business practices or methods of operation; the merits, desirability, or advisability of any life settlement contract or purchase agreement; or any life insurance company are recommended, approved, or endorsed by any government entity.

632.69(14)(g)14. 14. Emphasize the speed with which the settlement will occur, except that the advertisement may disclose the average time from the completion of the application to the date of offer and from the acceptance of the offer to receipt of the settlement funds by the owner.

632.69(14)(g)15. 15. Emphasize the dollar amounts available to an owner, except that the advertisement may disclose the average purchase price as a percent of the face value obtained by owners contracting with the licensee during the prior 6 months.

632.69(14)(h) (h) The name of the licensee shall be clearly identified in all advertisements about the licensee or its life settlement contracts, purchase agreements, products, or services. If any specific life settlement contract or purchase agreement of a licensee is advertised, the contract or agreement shall be identified either by form number or other appropriate description. If an application is part of the advertisement, the name of the provider shall be shown on the application.

632.69(15) (15) Fraud prevention and control; fraudulent life settlement acts.

632.69(15)(a) (a) No person may commit a fraudulent life settlement act.

632.69(15)(b) (b) No person may knowingly or intentionally interfere with the enforcement of this subsection or sub. (13) or investigations of suspected or actual violations of this subsection or sub. (13).

632.69(15)(c) (c) No person in the business of life settlements may knowingly or intentionally permit any person convicted of a felony involving dishonesty or breach of trust to participate in the business of life settlements.

632.69(15)(d) (d)

632.69(15)(d)1. 1. Life settlement contracts, purchase agreements, and applications for life settlements, regardless of the form of transmission, shall contain the following statement or a substantially similar statement: “Any person who knowingly presents false information in an application for insurance, a life settlement, or a purchase agreement may be subject to civil and criminal penalties.”

632.69(15)(d)2. 2. A person may not use the lack of the statement required under subd. 1. as a defense to any prosecution for a violation of this subsection or sub. (13).

632.69(15)(e) (e)

632.69(15)(e)1. 1. Any person engaged in the business of life settlements having knowledge or a reasonable belief that a violation of this subsection or sub. (13) is being, will be, or has been committed shall provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

632.69(15)(e)2. 2. Any other person having knowledge or a reasonable belief that a violation of this subsection or sub. (13) is being, will be, or has been committed may provide to the commissioner the information required by, and in a manner prescribed by, the commissioner.

632.69(15)(f) (f)

632.69(15)(f)1. 1. In the absence of actual malice, no civil liability shall be imposed on and no cause of action shall arise from a person’s furnishing information concerning suspected, anticipated, or completed violations of this subsection or sub. (13) or suspected, anticipated, or completed fraudulent insurance acts, if the information is provided to or received from any of the following:

632.69(15)(f)1.a. a. The commissioner or the commissioner’s employees, agents, or representatives.

632.69(15)(f)1.b. b. Federal, state, or local law enforcement or regulatory officials or their employees, agents, or representatives.

632.69(15)(f)1.c. c. A person involved in the prevention and detection of fraud or that person’s agents, employees, or representatives.

632.69(15)(f)1.d. d. The National Association of Insurance Commissioners, the Financial Industry Regulatory Authority, the North American Securities Administrators Association, or their employees, agents, or representatives or other regulatory body overseeing life insurance, life settlements, securities, or investment fraud.

632.69(15)(f)1.e. e. The life insurer that issued the policy covering the life of the insured.

632.69(15)(f)2. 2. This paragraph does not abrogate or modify common law or statutory privileges or immunities enjoyed by a person who supplies information concerning suspected, anticipated, or completed fraudulent acts related to life settlements or insurance.

632.69(15)(g) (g) Information, documents, and evidence provided under par. (e) or obtained by the commissioner in an investigation of suspected or actual violations of this subsection or sub. (13) shall be privileged and confidential, shall not be a public record, and shall not be subject to discovery or subpoena in a civil or criminal action. The commissioner may release information, documents, and evidence provided under par. (e) or obtained in an investigation of suspected or actual violations of this subsection or sub. (13) in administrative or judicial proceedings to enforce laws administered by the commissioner, to federal, state, or local law enforcement or regulatory agencies, to an organization established for the purpose of detecting and preventing fraud related to life settlements, to the National Association of Insurance Commissioners, or, at the discretion of the commissioner, to a person in the business of life settlements that is aggrieved by a violation of this subsection or sub. (13). Release by the commissioner of information, documents, and evidence as set forth in this paragraph does not abrogate, modify, or waive the privilege established in this paragraph.

632.69(15)(h) (h) This section does not do any of the following:

632.69(15)(h)1. 1. Preempt the authority or relieve the duty of law enforcement or regulatory agencies other than the commissioner to investigate, examine, and prosecute suspected violations of law.

632.69(15)(h)2. 2. Prevent or prohibit a person from disclosing voluntarily information concerning life settlement fraud to a law enforcement or regulatory agency other than the commissioner.

632.69(15)(h)3. 3. Limit the powers granted elsewhere by the laws of this state to the commissioner to investigate and examine possible violations of law and to take appropriate action.

632.69(15)(i) (i)

632.69(15)(i)1. 1. Providers and brokers shall have in place antifraud initiatives reasonably calculated to detect, prosecute, and prevent violations of this subsection and sub. (13). The commissioner may modify the antifraud initiatives from time to time as necessary to ensure an effective antifraud program and to accomplish the purpose of this paragraph.

632.69(15)(i)2. 2. Antifraud initiatives shall include having fraud investigators, who may be employees of the provider or broker or who may be independent contractors, and an antifraud plan, which the provider or broker shall submit to the commissioner and which shall include all of the following:

632.69(15)(i)2.a. a. A description of the procedures that the provider or broker will use for detecting and investigating possible fraud and violations of this subsection and sub. (13) and for resolving material inconsistencies between medical records and insurance applications.

632.69(15)(i)2.b. b. A description of the procedures that the provider or broker will use for reporting possible violations of this subsection and sub. (13) to the commissioner.

632.69(15)(i)2.c. c. A description of the plan that the provider or broker will follow for antifraud education and training of underwriters and other personnel.

632.69(15)(i)2.d. d. A description or chart outlining the organizational arrangement of the antifraud personnel who are responsible for investigating and reporting possible violations of this subsection and sub. (13) and investigating unresolved material inconsistencies between medical records and insurance applications.