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Standards adopted by the Association
Purchaser Disclosure
Members of the LISA agree
to make these disclosures to purchasers of Viatical and Life
Settlements prior to the acquisition of a policy or an interest in a
policy:
a)
The annual return on a viatical and life settlement transaction
depends on the accurate estimate of the insured's life expectancy
and the timing of his/her demise. An "annual return" can never be
"guaranteed".
b) The identity of
the party or parties who would be responsible for future premiums
after the investor purchases the policy, and how these premium
payments are guaranteed. If premiums are prepaid in escrow for a
certain period of time, the identity of the party who would pay
premiums if the insured lives beyond his/her life expectancy. The
policy may lapse if premiums are not paid.
c) If a policy is
on waiver of premium, and the insured's health improves to where
he/she is no longer disabled, the member company shall disclose who
would be responsible for the payment of premiums.
d) There are
certain risks peculiar to group policies, owned by employers or
other organizations. The primary risk is the possibility that the
owner or the insurance company may terminate the group policy. This
termination will trigger the need to convert the group coverage to
an individual policy. Member companies shall disclose if there are
any limitations or caps in the conversion rights and that additional
premiums will have to be paid once the policy is converted, as well
as identify the party responsible for the payment of such additional
premiums.
e) Viatical and
life settlement companies shall disclose who determines the life
expectancy of the insured, e.g., with in-house staff, independent
physicians, specialty firms that weigh medical and actuarial data,
etc. These parties make the determination of life expectancy based
on medical evidence presented to the viatical company by the
insured's physician and/or hospital. Developments in medical
treatments or unexpected changes in the insured's medical condition
could affect the accuracy of such determination.
f) Insurance
companies may contest death claims for policies that have not been
in effect for more than two years at the date of death and the death
benefit payment could be denied on various grounds. If the insured
commits suicide within two years of the issuance of the policy, the
insurance company may not pay the death benefits.
g) The purchase of
a viatical or life settlement should not be considered a liquid
investment, since it is impossible to predict the exact timing of
its maturity and the funds may not be available until the death of
the insured.
h) Member companies
should not offer purchasers examples of matured policies and rates
of return without disclosing how many other policies purchased by
that company are still outstanding - or have matured - beyond the
estimated life expectancy of the insured.
i)
Under certain conditions, the insurance company may cancel the
waiver of premium status on certain policies. In this event, premium
payments will then be required and member companies shall identify
the party or parties who shall be required to make those payments.
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