OLR Bill Analysis

sHB 7262



This bill imposes as a minimum viatical settlement contract sale price the life insurance policy's “cash surrender value” or “accelerated death benefit” amount (see BACKGROUND). (These two amounts will often differ. Apparently the sale price has to be one or the other to comply, as the bill does not specify a lesser or greater than requirement. ) By law, unchanged by the bill, the sale price must be less than the policy's death benefit.

The bill also makes various changes in insurance company financial reporting requirements. Under current law, all insurers, HMOs, and fraternal benefit societies doing business in Connecticut must annually file financial statements by March 1 and audited financial reports by June 1 with the insurance commissioner. The bill (1) limits the annual reporting requirements to domestic and foreign companies, (2) requires the financial statements to be complete when filed, and (3) requires the companies to electronically file the statements and reports with the National Association of Insurance Commissioners (NAIC). Domestic companies that file on time with the NAIC must still submit paper copies to the insurance commissioner, but foreign companies do not.

The bill also requires all insurers, HMOs, and fraternal benefit societies that file quarterly financial statements with the commissioner to file them electronically with the NAIC. If timely filed with the NAIC, the company does not have to submit a paper copy to the insurance commissioner.

EFFECTIVE DATE: October 1, 2007


Viatical Settlement Contract

A viatical settlement is the sale of a life insurance policy by the policy owner or insured to a third party for compensation or other value. The buyer becomes the policy owner, beneficiary, or both; pays all future premiums; and collects the entire death benefit when the insured person dies. People decide to sell their life insurance policies for many reasons, including changes in the financial needs of dependents, a desire to eliminate or reduce premium payments, or the need for cash to meet current medical or living expenses.

By law, the Insurance Department regulates viatical settlements (CGS 38a-465, et seq. ). Viatical settlement companies and brokers must be licensed and the insurance commissioner must approve the contracts and forms used. Additionally, the seller of a life insurance policy has specific rights, including written disclosure of certain information before executing the sale, confidentiality of personal information provided to buyers, and a right to rescind the sale within 15 days from receiving the settlement proceeds.

Cash Surrender Value

Cash surrender value is the amount an insurer will pay on a given life insurance policy if the policy is cancelled before the insured's death.

Accelerated Death Benefit

An accelerated death benefit is a life insurance provision that pays to the insured person a portion of the policy's death benefit in a lump sum or installments.

Death Benefit

A life insurance policy's death benefit is the amount of money payable to a beneficiary upon the insured person's death.

Domestic, Foreign, Alien, and Unauthorized Companies

The Insurance Department licenses and regulates domestic, foreign, and alien companies to transact insurance in the state. A domestic company is formed under Connecticut laws. A foreign company is formed under the laws of another state or U. S. territory. An alien company is formed under another country's laws. An unauthorized company is not licensed or admitted to transact insurance business in the state.


Insurance and Real Estate Committee

Joint Favorable Substitute