Covington Backs New Law Regulating Viatical Settlements

Ohio Gov. Bob Taft has signed a law that will provide the Ohio Department of Insurance authority to regulate viatical settlements and license persons selling viatical settlements. House Bill 551 was sponsored by State Representative Amy Salerno and strongly supported by Ohio Department of Insurance Director Lee Covington.

The bill received unanimous concurrence by the Ohio House of Representatives Dec. 5, and was moved to Governor Taft for his approval. Ohio’s legislation is patterned after the National Association of Insurance Commissioners’ Viatical Settlement Model Act, which was recently updated and formally approved in December at the NAIC’s winter meeting.

Ohio is the first state to adopt the new Viatical Settlement Model Act. The new law expands the definition of viator to include life or senior settlements. The expanded definition provides protection for the elderly by requiring certain disclosures no later than the time of application by the viatical settlement provider or broker.

The new law requires each viatical settlement contract entered into to provide the viator with an unconditional right to rescind the contract for least 15 days after the receipt of the viatical settlement proceeds. It also protects the viator’s identity. The viatical law also includes a definition of fraudulent viatical settlement acts and provides administrative and criminal penalties for violations.

As a requirement of licensing with the Ohio Department of Insurance, providers and brokers must provide an anti-fraud plan that describes how they will prevent, identify, and report fraud. The new law prohibits brokers and providers from entering a viatical settlement contract within two years of the issuing of a life insurance policy unless they meet one of the exceptions. It also expands disclosures clearly stating that a broker or provider works on behalf of the viator, must disclose how they will be compensated and must provide information about the escrow agent.