230 R.I. Code R. 230-RICR-20-60-10.8

Current through October 15, 2024

Section 230-RICR-20-60-10.8 - Life Settlement Contract Forms, Disclosures and Advertisements Filing Requirements

A. Providers shall file with and receive approved for every life settlement contract form, application form and disclosure form to be used with regard to life settlements contracts in Rhode Island. The forms shall contain the following minimum provisions.

1. Contract Forms. Life Settlement contracts shall contain all of the following:

a. A provision setting forth the requirements of R.I. Gen. Laws § 27-72-9(a)(5) describing the owner's right of rescission and the actions which the owner must take to exercise that right;

b. A provision stating that failure to tender the life settlement contract proceeds to the owner by the date disclosed to the owner shall render the life settlement contract voidable by the owner for lack of consideration until the time the proceeds are tendered to and accepted by the owner;

c. A provision that the contract together with the application shall constitute the entire contract between the parties.

d. If the life settlement provider has agreed to continue any supplemental benefits under the life insurance policy, a provision setting forth the terms upon which such benefits will be continued.

2. Application Forms. Applications shall contain all of the following:

a. A prominently displayed notice informing the owner of the following:

(1) Receipt of payment pursuant to a life settlement contract may affect eligibility for public assistance programs such as Medicaid, supplementary social security income, food stamps or other governmental benefits or entitlements.

(2) Receipt of payment pursuant to a life settlement contract may be taxable.

(3) Entering into a life settlement contract could limit a persons ability to purchase future insurance.

(4) If the owner is asked by another person to buy a life insurance policy or if the owner plans to buy the life insurance policy with a primary purpose of selling it to another person, then this transaction may be prohibited by Rhode Island law.

b. An acknowledgement of receipt of the consumer information booklet.

(1) The application must contain the following statement:

(AA) "Any person who knowingly presents false information in an application for insurance or life settlement contract is guilty of a crime and may be subject to fines and confinement in prison"

(BB) The warning statement shall be placed immediately above the space provided for the signature of the person executing the application and shall be printed in type which will produce a warning statement of conspicuous size.

(2) All forms requiring a signature of an owner in connection with a life settlement transaction shall contain the statement and shall be in the format as set forth in §§ 10.8(A)(2)(b)(1)(AA) and (BB) of this Part.

c. Disclosure Booklet. The provider or broker shall deliver a consumer information booklet to every applicant before the application for the life settlement contract is completed, and receipt of the consumer information booklet must be acknowledged by the applicant in writing. The consumer information booklet shall, at a minimum, include the following information.

(1) A description of how life settlements operate.

(2) A statement that offers should be obtained from several life settlement providers to make sure that the applicant has a competitive offer.

(3) The name, business address, telephone number and other contact information of each person or entity involved in the transaction including the broker, producer and independent third-party escrow agent, if any, and insurer along with a description of any affiliation between any of these parties.

(4) If a broker is used in conjunction with effecting a life settlement contract, the life settlement broker is required to disclose to the owner the following no later than the date the life settlement contract is signed:

(AA) The name, business address, telephone number and other contact information of the broker.

(BB) A full complete and accurate description of all offers, counter-offers, acceptances and rejections relating to the proposed life settlement contract.

(CC) A written disclosure of any affiliation or contractual arrangements between the broker and any person making an offer in connection with the proposed life settlement contract.

(DD) The name and amount of compensation received by each broker involved in the transaction.

(5) A description of possible alternatives to life settlements, including loans secured by the cash value of the life insurance policy, withdrawing some of the cash value and reducing the death benefit of the policy to lower future premiums. If the insured under the policy is terminally or chronically ill, the owner of the policy may be able to accelerate some or all of the death benefit during the lifetime of the insured if the policy provides an accelerated death benefit, together with a statement that the owner should seek advice from an insurance producer or other professional before using the cash value of the policy.

(6) That tax consequences may result from entering into a life settlement contract and that the applicant should consult with a qualified tax advisor.

(7) That the receipt of life settlement proceeds may affect eligibility for public assistance programs such as Medicaid, supplementary social security income, food stamps or other governmental benefits or entitlements and that the owner should consult the appropriate agency for more information.

(8) That the proceeds payable to the owner may not be exempt from the owner's creditors, personal representatives, trustees in bankruptcy and receivers in state and federal courts.

(9) The fact that entering into a life settlement contract may cause other rights or benefits, including conversion rights and waiver of premium benefits to be forfeited and the owners should seek assistance from a profession financial advisor.

(10) The following language: "all medical, financial or personal information solicited or obtained by a provider or broker about an insured, including the insured's identity or the identity of family members, a spouse or a significant other, may be disclosed as necessary to effect the life settlement contract between the owner and provider. If you are asked to provide this information, you will be asked to consent to the disclosure. The information may be provided to someone who buys the policy or provides funds for the purchase. You may be asked to renew your permission to share information every two (2) years"

(11) That the owner has the right to rescind a life settlement contract from the time of execution of the contract until fifteen (15) days after its execution by all parties or receipt of the disclosure document whichever is later and a description of what steps the owner must take to exercise this option.

(12) That the proceeds will be sent to the owner within three (3) business days after the provider has received the insurers acknowledgment that ownership of the policy has been transferred and the beneficiary has been designated.

(13) That the insured's medical, financial or other personal information may be disclosed to certain other parties if the insured has provided written consent that the life settlement provider or its authorized representative may contact the insured within a certain specified frequency for the purpose of determining the insured's health status.

(14) That, after a life settlement provider buys a life insurance policy, the policy may be resold to other parties.

(15) That if the owner is asked by another person to buy a life insurance policy or if the owner plans to buy a life insurance policy with a primary purpose of selling it to another person, then this transaction may be prohibited by Rhode Island Law.

(16) That the owner should consult a professional financial advisor, attorney or accountant to help the owner decide if a life settlement is the most suitable arrangement for the owner.

(17) That this disclosure is being delivered as a requirement of the Rhode Island Insurance Department.

B. The Department will reject any form filed if the Department, in its sole discretion, finds any of the following:

1. Fails to meet the requirements of R.I. Gen. Laws Chapter 27-72.

2. Is unreasonable.

3. Is contrary to the interests of the public.

4. Is otherwise misleading or unfair to the owner.

C. Advertising materials must be filed with the Department and may not be utilized until approved by the Department.

1. All advertisements must:

a. Be accurate, truthful and not misleading;

b. Not solicit or otherwise promote, directly or indirectly, the purchase of a policy for the sole purpose of or with an emphasis on settling the policy.

c. Not use the words "free", "no cost" or words of similar meaning soliciting or otherwise promoting the purchase of an insurance policy.

2. All advertisements shall be maintained by the broker and provider for a period of five (5) years after the settlement of the insurance contract and produced to the Department upon request or during examination.

D. All forms, disclosures and advertisements shall be submitted to the Department via SERFF and the applicant shall pay a filing fee of $25 per form or piece of advertising. The filing fee shall be paid by Electronic Funds Transfer (EFT) via SERFF.

230 R.I. Code R. 230-RICR-20-60-10.8