Florida has recently adopted amendments to its Viatical Settlement Act.
One of the new provisions, Section 626.99292 Notice to life insurance policyholders, provides:
“(1) A life insurer shall provide an individual life insurance policyholder with a statement informing him or her that if he or she is considering making changes in the status of his or her policy, he or she should consult with a licensed insurance or financial advisor. The statement may accompany or be included in notices or mailings otherwise provided to the policyholder.
“(2) The statement must also advise the policyholder that he or she may contact the department for more information and include a website address or other location or manner by which the policyholder may contact the department.”
The following may represent unresolved issues with respect to this required notice provision:
Individuals – Not life insurance trust, family limited partnerships, family limited liability companies, business entities, etc.?
Policyholder – Who is the policyholder of a group life insurance policy for purposes of this notice requirement? Typically the group policyholder is not an individual, although there are individual life insurance certificate holders.
‘a statement’; ‘The statement’ – One statement required and only one? Although the language seems clear on its face that only one notice should be required, some analysts of the provision have suggested that there is some ambiguity with the number of times the notice must be provided.
Change in “Status” – “Status” is not defined – A change in status could be a change in the beneficiaries, pledge of the policy, loan secured by the policy, increase or decrease in the death benefit, transfer of the policy, decision not to pay premiums, decision to pay premiums on a cost of insurance basis, decision to allow the policy to lapse, conversion of a group policy, conversion of a term policy to whole or universal life, cash out for CSV, etc.
Department – Although there seems to be a consensus that the term ‘department’ refers to the Florida Department of Financial Services, it is primarily the Florida Office of Insurance Regulation that has jurisdiction over life insurance companies, life insurance policies and viatical settlements, so it may be unclear what kind of guidance or ‘more information’ the DFS will be in a position to provide to consumers.
Mailings – Delivery of the original policy, annual premium notices, policy illustrations, grace period/lapse notices, etc.?
Timing – Once at policy inception?
Manner of Contacting Department Telephone number only?
Don’t expect any regulatory guidance anytime soon, and don’t be surprised if life insurance companies elect to follow rigidly the literal language of the statute.
Compliant notice in the mailing that includes the original life insurance policy sent to an individual policyholder at time of policy issuance.
If you are considering making changes in the status of your policy, you should consult with a licensed insurance or financial advisor. You may contact the Florida Department of Financial Services by telephone at 1-877-693-5236 for more information.
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