An Act To Provide Consumer Disclosures and Protect Consumer Options in Life Insurance
Maine Legislature, Session 124, LD 1063
Committee Amendment CA_A_S200 (Senate)
Amends: 24-A MRSA §6802-A, 24-A MRSA §6802, 24-A MRSA §6803-A, 24-A MRSA §6805, 24-A MRSA §6, 24-A MRSA §6808-A, 24-A MRSA §6809, 24-A MRSA §6812, 24-A MRSA §68

FIRST R-EGULA..R SESSION 
COMMITTEE AMENDMENT" A" to S.P. 397, L.D. 1063, Bill, "An Act To 
Provide Consumer Disclosures and Protect Consumer Options in Life Insurance" 
Amend the bill by striking out everything after the enacting clause and before the 
summary and inserting the following: 
'Sec. 1. 24-A MRSA §6802-A, sub-§6, as amended by PL 2007, c. 543, §1, is 
further amended to read: 
6. Fraudulent viatica I or life settlement act. "Fraudulent viatical or life settlement 
act" includes: 
A. Acts or omissions committed by any person who, knowingly or with intent to 
defraud, for the purpose of depr,iving another of property or for pecuniary gain, 
commits, or permits its employees or its agents to engage in, acts including: 
(1) Presenting, causing to be presented or preparing with lmowledge or belief 
that it will be presented to or by a settlement provider, settlement producer, 
financing entity, insurer, insurance producer or any other person false material 
information, or concealing material information, as part of, in support of or 
concerning a fact material to one or more of the following: 
(a) An application for the issuance of a settlement contract or insurance 
policy; 
(b) The underwriting of a settlement contract or insurance policy; 
(c) A claim for payment or benefit pursuant to a settlement contract or 
insurance policy; 
(d) Premiums paid on an insurance policy; 
(e) Payments and changes in ownership or beneficiary made in accordance 
with the terms of a settlement contract or insurance policy; 
(f) The reinstatement or conversion of an insurance policy; 
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COMMITTEE AMENDMENT" A" to S.P. 397, L.D. 1063 
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(g) The solicitation, offer, effectuation or sale of a settlement contract or 
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insurance policy; 
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(h) The issuance of written evidence of a settlement contract or insurance 
policy; or 
(i) A fmancing transaction; 
(2) Employing any device, scheme or artifice to defraud related to policies 
acquired pursuant to a settlement contract; 
(3) Entering into stranger-originated life insurance; or 
(4) Failing to disclose to the insurer when requested by the insurer that the 
prospective insured has undergone a life expectancy evaluation by any person 
other than the insurer or its authorized representatives in connection with the 
issuance of a policy; 
B. In the furtherance of a fraud or to prevent the detection of a fraud committing or 
permitting one's employees or agents to: 
(1) Remove, conceal, alter, destroy or s,equester from the superintendent the 
assets or records of a licensee or other person engaged in the business of 
settlements; 
(2) Misrepresent or conceal the financial condition of a licensee, financing 
entity, insurer or other person; 
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(3) Transact the business of settlements in violation of laws requiring a license, ' 
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certificate of authority or other legal authority for the transaction of the business,. 
of settlements; or 
(4) File with the superintendent or the chief insurance regulatory official of 
another jurisdiction a document containing false information or otherwise 
concealing information about a material fact from the superintendent; 
C. Embezzlement, theft, misappropriation or conversion of money, funds, premiums, 
credits or other property of a settlement provider, insurer, insured, viator, insurance 
policyowne,r or any other person engaged in the business of settlements or insurance; 
D. Recklessly entering into, brokering or otherwise dealing in a settlement contract, 
the subject of which is a life insurance policy that was obtained by presenting false 
information concerning any fact material to the policy or by concealing, for the 
purpose of misleading another, information concerning any fact material to the 
policy, when the viator or the viator's agent intended to defraud the policy's issuer. 
For the purposes of this paragraph, "recklessly" means engaging in conduct in 
consciously and clearly unjustifiable disregard of a substantial likelihood of the 
existence of the relevant facts or risks, such disregard involving a gross deviation 
from acceptable standards of conduct; 6f 
E. Attempting to commit; assisting, aiding or abetting in the commission of; or 
conspiring to commit the acts or omissions specified in this subsection",.;. 
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COMMITTEE AMENDMENT "A" to S.P. 397, L.D. 1063 
F. Engaging in any transaction, practice or course of business by a person who 
knows or reasonably should have known that the intent was to avoid the notice 
requirements of this chapter; 
G. 
With respect to a settlement producer, knowingly soliciting an offer from, 
effectuating a life settlement contract with or making a sale to any settlement 
provider, financing entity Dr related provider trust that is controlling, controlled by or 
under common control with the producer, unless this relationship is disclosed to the 
viator; 
H. 
With respect to a settlement provider, knowingly entering into a settlement 
contract if anything of value will be paid to a settlement producer controlling, 
controlled by or under common control with the provider or the financing entity or 
related provider trust that is involved in the settlement contract, unless this 
relationship is disclosed to the viator; and 
1. Any statement or representation to the applicant or policyholder in connection with 
the sale or financing of a life insurance policy to the effect that the insurance is free 
or without cost to the policyholder for any period of time, unless free coverage is 
provided in the policy in the manner described. 
Sec. 2. 24-A MRSA §6802-A, sub-§6-A, as enacted by PL 2007, c. 543, §2, is 
amended to read: 
6-A. Life expectancy evaluation. "Life expectancy evaluation" means the process 
to determine the arithmetic mean any evaluation of the number of months the insured 
under the life insurance policy to be settled can be expected to live, or of the probability 
that the insured will live beyond a specified date, considering medical records and 
appropriate experiential data. 
Sec. 3. 24-A MRSA §6802~A, sub-§9-A, as enacted by PL 2007, c. 543, §4, is 
amended to read: 
9-A .. Settlement contract. "Settlement contract" means a 'Nritten an agreement 
between a viator and a settlement provider establishing the terms under which 
compensation or anything of value will be paid, which compensation or value is less than 
the expected death benefit of the insurance policy or certificate, in return for the viator's 
assignment, transfer, sale, devise or bequest of the death benefit or ownership of any 
portion of the insurance policy or certificate of insurance. "Settlement contract" includes 
the transfer for compensation or value of ownership or beneficial interest in a trust or 
other entity that owns such policy if the trust or other entity was formed or availed of for 
the principal purpose . of acquiring one or more life insurance contracts, which life 
insurance contract insures the life of a person residing in this State. "Settlement contract" 
includes a premium finance loan made for a life insurance p()licy by a lender to a viator 
on or before the date of issuance of the policy when the viator or the insured receives on 
the date of the premium finance loan a guarantee of a future settlement value of the policy 
or when the viator or the insured agrees on the date of the premium finance loan to sell 
the policy or any portion of its death benefit on any date following the issuance of the 
policy .. "Settlement contract" does not include: 
A. A policy loan or accelerated death benefit made by the insurer pursuant to the 
policy's terms; 
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COMMITTEE AMENDMENT "A "to S.P. 397, L.b. 1063 
B. A collateral assignment of a policy by the owner of the policy, unless the assignee 
knows or reasonably expects that the owner does not intend to repay the loan; 
C. Loan proceeds that are used solely to pay: 
(1) Premiums for the policy; and 
(2) The costs of the loan, including, without limitation, interest, arrangement 
fees, utilization fees and similar fees, closing costs, legal fees and expenses, 
trustee fees and expenses and 3rd-party collateral provider fees and expenses, 
including fees payable to letter of credit issuers; 
D. A loan made by a bank or other licensed financial institution in which the lender 
takes an interest in a life insurance policy solely to secure repayment of a loan or, if 
there is a default on the loan and the policy is transferred, the transfer of such a policy 
by the lender, as long as neither the default itself nor the transfer of the policy in 
connection with such default is pursuant to an agreement or understanding with any 
other person for the purpose of evading regulation under this chapter; 
E. Unless the premium finance loan otherwise constitutes a settlement contract under 
this subsection, a loan made"by a lender that does not violate Title 9-A, Article 2; 
F. An agreement in which all the parties are closely related to the insured by blood or 
law or have a lawful substantial economic interest in the continued life, health and 
bodily safety of the person insured or are trusts established primarily for the benefit 
of such parties; 
G. Any designation, consent or agreement by an insured who is an "employee of an 
employer in connection with the purchase by the employer, or by a trust established 
by the employer, oflife insurance on the life of the employee; 
H. A bona fide business succession planning arrangement: 
(1) Between shareholders in a corporation or between a corporation and one or 
more of its shareholders or one or more trusts established by its shareholders; 
(2) Between partners in a partnership or between a partnership and one or more 
of its partners or one or more trusts established by its partners; or 
(3) 
Between members in a limited liability company or between a limited 
liability company and one or more of its members or one or more trusts 
established by its members; 
I. An agreement entered into by a service recipient, or a trust established by the 
service recipient, and a service provider, or a trust established by the service provider, 
who performs significant services for the service recipient's trade or business; or 
J. Any contract, transaction or arrangement other than those set forth in paragraphs A 
to I exempted from the definition of "settlement contract" by the superintendent by 
rule based on a determination that the contract, transaction or arrangement is not of 
the type intended to be regulated by this chapter. Rules adopted pursuant to this 
paragraph are routine technical rules as defined in Title 5, chapter 375, subchapter 
2-A. 
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COMMITIEE AMENDMENT" A 
"to S.P, 397, L.D. 1063 
Sec. 4. 24-A MRSA §6802-A, sub-§10, as enacted by PL 2003, c. 636, §5, is 
amended to read: 
10. Settlement producer. "Settlement producer" means any person who has life 
insurance producer authority, who acts or aids in any manner in the soliciting of a 
settlement on behalf of a viator and for a fee, commission or other valuable consideration 
offers or attempts to negotiate settlement contracts between a viator and one or more 
settlement providers. "Settlement producer" does not include an attorney, accountant, 
financing entity or person exercising a power of attorney granted by the viator retained to 
represent the viator and whose compensation is paid solely by the viator without regard to 
whether the settlement is effected. "Settlement producer" does not include a credit union 
or an employer or association that makes its employees or members aware of settlement 
contracts. Irrespective of the manner in which the settlement producer is compensated, a 
settlement producer is deemed to represent only the interests of the. viator and owes a 
fiduciary duty to the viator. 
Sec. 5. 24-A MRSA §6802-A, sub-§12-A, as enacted by PL 2007, c. 543, §5, is 
amended to read: 
12-A. 
Stranger-originated life insurance. 
"Stranger-originated life insurance" 
means an act or practice to initiate a life insurance policy for the benefit of a person who, 
at the time of the origination of the policy, has no insurable interest in the insured. 
"Stranger-originated life insurance" includes, but 1S not limited to, cases in which life 
insurance is purchased with resources or guarantees from or through a person who, at the 
time of the inception of the policy, could not lawfully initiate the policy and when, at the 
time of policy inception, there is an arrangement or agreement to directly or indirectly 
transfer the ownership of the policy or the policy benefits to another person. A "Stranger-
originated life insurance" also includes the creation of a trust that is created to give the 
appearance of insurable interest and is used the use of such a trust in order to initiate 
policies for investors violates in circumvention or violation of insurable interest laws and 
the prohibition against wagering· on life. "Stranger-originated life insurance" does not 
include those practices set forth in subsection 9-'A, paragraphs A to J or other lawful 
settlement transactions. 
Sec. 6. 24-A MRSA §6803-A is enacted to read: 
§6803-A. Fiduciary obligation of settlement producer 
Irrespective of the manner in which the settlement producer is compensated, a 
settlement producer may represent only the interests of the viator and owes a fiduciary 
duty to the viator. 
Sec. 7. 24-A MRSA §6805, as amended by PL 2003, c. 636, §8, is ful1her 
amended to read: 
§680S. Approval of settlements contracts; disclosure statements and applications 
A settlement contract must be in writing and signed by all parties to the contract. A 
person may not use any contract, disclosure statement or application form with a viator· 
who is a resident of this State unless it has been filed with and approved by the 
superintendent, pursuant to sections 2412 and 2413. The superintendent shall disapprove 
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COMMITIEE AMENDMENT "A "to S.P. 397, L.D. 1063 
a settlement contract form or disclosure statement form if, in the superintendent's opinion, 
the contract or provisions contained therein are unreasonable, contrary to the interests of 
the public or otherwise misleading or unfair to the viator. All such forms must be 
approved or denied by the superintendent within 60 calendar days following receipt of 
submission by the superintendent. 
Sec. S. 24-A MRSA §6S06, sub-§l, as amended by PL 2003, c. 636, §9, is 
further amended to read: 
1. Annual report. A settlement provider- licensee shall file with the superintendent 
by March 1 st of each year an annual statement containing such information as the 
superintendent prescribes by rule, including information related to settlement transactions 
on policies settled within 5 years of policy issuance. The superintendent may not adopt 
any rule that requires the submission of information that permits the identification of a 
viator or relates to transactions when the viator is not a resident of this State. The 
superintendent may not request, collect or compile personal information that identifies 
any viator or insured except in connection with the investigation of a specific complaint 
and with the prior written permission of the viator or insured or the viator's or insured's 
estate or representative to collect that information. 
Sec. 9. 24-A MRSA §6S0S, sub-§7-A is enacted to read: 
7-A. Potential inability to purchase additional insurance. The fact that, because 
of limits insurers may set on the amount of insurance on a single life, a change of 
ownership could leave the viator without the ability to purchase insurance in the future to 
replace the transferred policy; 
Sec. 10. 24-A MRSA §6S0S-A, sub-§2, as enacted by PL 2003, c. 636, § 11, is 
amended to read: 
2. Additional disclosures. A settlement provider shall provide the viator with at 
least the following disclosures no later than the date the settlement contract is signed by 
all parties. The disclosures must be conspicuously displayed in the settlement contract or 
in a separate document signed by the viator and the settlement provider or settlement 
producer and must provide the following information: 
A. The affiliation, if any, between the settlement provider and the issuer of the 
insurance policy to be acquired pursuant to a settlement contrac~; 
B. The name, address and telephone number of the settlement provider; 
C. If an insurance policy to be· purchased has been issued as a joint policy or 
involves family riders or any coverage of a life other than the insured's under the 
policy to be purchased, information regarding the possible loss of coverage on the 
other lives under the policy and advice to consult with the viator's insurance producer 
or the insurer issuing the policy for advice on the proposed settlement; 
D. The dollar amount of the current death benefit payable to the settlement provi~er 
under the policy or certificate. If known, the settlement provider shall also disclose 
the availability of any additional guaranteec;l insurance benefits, the dollar amount of 
any accidental death and dismemberment benefits under the policy or certificate and 
the settlement provider's interest in those benefits; aOO 
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COMMITTEE AMENDMENT" It" to S.P. 397, L.D. 1063 
E. The name, business address and telephone number of the independent 3rd-party 
escrow agent and the fact that the viator may inspect or receive copies of the relevant 
escrow or trust agreements or documents.,.; 
F. A reconciliation of the settlement provider's gross offer to the net amount to be 
received by the viator; 
G. The identity of all persons compensated directly or indirectly by the settlement 
provider for the settlement contract, the amount of compensation paid to each and the 
method of calculating that compensation; 
H. Notice that the insured may be contacted as permitted by subsection 1 for the 
purpose of determining the insured's health; 
I. An offer to disclose to the insured all life expectancy estimates obtained by the 
provider; and 
J. 
Notice that complaints and inquiries may be brought to the attention of the 
superintendent. 
Sec. n. 24-A MRSA §6808-A, sub-§2-A is enacted to read: 
2-A. Disclosure by settlement producers. A settlement producer shall provide the 
viator with at least the following disclosures no later than the date the settlement contract 
is signed by all parties. The disclosures must be conspicuously displayed in the settlement 
contract or in a separate document signed by the viator and the settlement producer and 
must provide the following 'information: 
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A. Notice that a settlement producer must exclusively represent the viator, not the 
insurer or the settlement provider, and owes a fiduciary duty to the viator; 
B. A description of all offers, counteroffers, acceptances and rejections relating to 
any proposed settlement of the policy; 
C. If any other persons are compensated directly or indirectly by the settlement 
producer for the settlement contract, their identity, the amount of compensation paid 
to each and the method of calculating that compensation; and 
D. Notice that complaints and inquiries may be brought to the attention of the 
superintendent. 
Sec. 12. 24-A MRSA §6808-A, sub-§4 is enacted to read: 
4. 
Disclosure of policyowner's rights. 
The superintendent shall develop an 
informational brochure to apprise consumers of their rights as owners of life insurance 
policies. The document must be made available at no cost to all insurance companies and 
life insurance producers and written in lay terms. 
A. The brochure must advise the consumer: 
'( 1) That life insurance is a critical part of a broader financial plan and that the 
consumer is encouraged, and has a right, to seek additional financial advice and 
opinions; 
(2) That possible alternatives to the lapse ofthe policy exist; and 
COMMITTEE AMENDMENT 
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COMMITIEE AMENDMENT "A" to S.P. 397, L.D. 1063 
(3) Of the defmitions of common industry terms. 
B. 'The brochure must contain the following statement in large, bold or otherwise 
conspicuous typeface calculated to draw the eye: "Life insurance is a critical part of a 
broader financial plan. There are many options available, and you have the right to 
shop around and seek advice from different financial advisers in order to find the 
option best suited to your needs." 
C. The brochure may include brief descriptions of common products available from 
settlement providers. These products must be described in general terms for 
informative purposes only and not identify any specific settlement provider. 
D. If the insured under an individual life insurance policy is 60 years of age or older, 
or is known by the insurer to be terminally ill or chronically ,ill, the insurer shall send 
notice to the policyowner that there may be alternative transactions available, 
including a copy of the superintendent's brochure, whenever: 
(1) The policyowner has requested the surrender of the policy in whole or in 
part; 
(2) The policyowner has requested an accelerated death benefit; 
(3) The insurer sends an initial notice that the policy may lapse; or 
(4) As the superintendent may require by rule. 
Sec. 13. 24-A MRSA §6809, sub-§4, as amended by PL 2003, c. 636, § 12, is 
further amended to read: 
4. 
Transfer of insurance policy. 
The settlement provider shall designate an 
independent escrow agent and instruct the viator to send the executed documents required 
to effect the change in ownership or assignment or change in beneficiary directly to the 
independent escrow agent. Within 3 business days after the date the escrow agent 
receives the document, or from the date the settlement provider receives the documents, if 
the viator erroneously provides the documents directly to the provider, the settlement 
provider shall payor transfer the proceeds of the settlement into an escrow or trust 
account maintained in a state or federally chartered financial institution whose deposits 
are insured by the Federal Deposit Insurance Corporation or its successor. Upon payment 
of the settlement proceeds into the eS,crow account, the escrow agent shall deliver the 
original change in ownership or assignment or change in beneficiary forms to the 
settlement provider or related provider trust. Upon the escrow agent's receipt of the 
acknowledgment of the properly completed transfer of ownership or assignment or 
designation of beneficiary from the insurance company, the escrow agent shall pay the 
settlement proceeds to the viator. 
Sec .. 14. 24-A MRSA §6812, sub-§6 is enacted to read: 
6. Protection of policyholder'S rights. An insurer may not engage in a transaction, 
act, practice or course of business or dealing that restricts, limits or impairs in any way 
the lawful transfer of ownership, change of beneficiary or assignment of a policy. This 
subsection does not prohibit a lawful contract provision granting irrevocable rights to a 
beneficiary or lawfully prohibiting assignment. 
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COMMITIEE AMENDMENT "A" to S.P. 397, L.D. 1063 
Sec. 15. 24-A MRSA §68t2-A is enacted to read: 
§6812-A. Inquiries and optional disclosures by life insurers 
1. Permitted inquiries regarding premium financing. In addition to any other 
information a life insurer may lawfully request in an application for insurance, the insurer 
may ask whether the proposed owner intends to pay premiums with the assistance of 
financing from a lender that will use the policy as collateral to support the financing, and 
if so, whether: 
A. The applicant has entered into any agreement or arrangement providing for the 
future sale of this life insurance policy; 
B. The loan arrangement for the policy provides funds sufficient to pay for some or 
all of the premiums, costs and expenses associated with obtaining and maintaining 
the applicant's life insurance policy; 
C. The applicant has entered into any agreement by which the applicant is to receive 
consideration in exchange for procuring the policy; and 
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D. The borrower has an insurable interest in the insured. 
2. 
Prohibited transactions. 
If the information obtained by the life insurer 
demonstrates that the loan provides funds that can be used for a purpose other than 
paying for the premiums, costs and expenses associated with obtaining and maintaining 
the life insurance policy and loan or that the transaction otherwise violates this chapter, 
the insurer shall reject the application. 
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3. Optional disclosures by the life insurer. The insurer may make disclosures to 
the applicant, the insured and other affected persons, either on the application, an 
amendment to the application or a separate document, in the following form: 
"If you have entered into a loan arrangement in which the policy is used as collateral and 
the policy does change ownership at some point in the future in satisfaction of the loan, 
the following may be true: 
A. A change of ownership could lead to a stranger owning an interest in the insured's 
life; 
B. Your ability to purchase future insurance on the insured's life could be limited 
because there is a limit to how much coverage insurers will issue on one life; 
C. Should there be a change of ownership and should you wish to obtain more 
insurance coverage on the insured's life in the future, the insured's higher issue age, a 
change in health status or other factors may reduce the ability to obtain coverage or 
may result in significantly higher premiums; and 
D. You should consult a· professional advisor because a change in ownership in 
satisfaction of the loan may result in tax consequences to the owner, depending on the 
structure of the loan." , 
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COMMITTEE AMENDMENT "A" to S.P. 397, L.D. 1063 
SUMMARY 
This amendment replaces the bill. The amendment requires additional disclosures to 
consumers related to viatical and life settlements. The amendment requires the 
Superintendent of Insurance to develop a brochure informing consumers about their 
rights as owners of life insurance policies, including the alternatives to the lapse of a life 
insurance policy. The amendment requires life insurance companies to provide the 
brochure to consumers who are 60 years of age or older or have a chronic or terminal 
illness under certain circumstances. The amendment also makes technical changes to 
current law based on recommendations from the Department of Professional and 
Financial Regulation, Bureau of Insurance. 
FISCAL NOTE REQUIRED 
(See attached) 
COMMI 
'EE AMENDMENT 
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Approved: 05/18/09 ,;:::!;pac:.. 
LD 1063 
LR 1097(02) 
An Act To Provide Consumer Disclosures and Protect Consumer Options in Life Insurance 
Fiscal Note for Bill as Amended by Committee Amendment ,)I " 
Committee: Insurance and Financial Services 
Fiscal Note Required: Yes 
Fiscal Note 
Minor cost increase - Other Special Revenue Funds 
Fiscal Detail and Notes 
Additional costs to the Bureau of Insurance in the Department of Professional and Financial Regulation can be 
absorbed by the bureau utilizing existing budgeted resources. 
. LRI097(02) - Fiscal Note - Page 1 of 1