HOUSE BILL No. 2640
small employer benefit plans; relating to group policies; relating to risk-based capital
requirements; relating to licensure of insurance agents; relating to standard nonforfeiture
provisions for annuities; amending K.S.A. 40-428a, 40-2240 and 40-2258 and K.S.A. 2001
Supp. 17-1262, 40-2c01 and 40-4909 and repealing the existing sections; also repealing
K.S.A. 40-2,171, 40-2,172, 40-2,173, 40-2,174, 40-2,175, 40-2,176, 40-2,177, 40-2,178,
New Section 1. Sections 1 through 16 inclusive, and amendments
thereto, may be cited as the viatical settlements act of 2002.
New Sec. 2. As used in this act, the following words and phrases shall
have the meanings ascribed to them in this section:
(a) ``Advertising'' means any written, electronic or printed commu-
nication or any communication by means of recorded telephone messages
or transmitted on radio, television, the internet or similar communications
media, including film strips, motion pictures and videos, published, dis-
seminated, circulated or placed before the public, directly or indirectly,
for the purpose of creating an interest in or inducing a person to sell a
life insurance policy pursuant to a viatical settlement contract.
(b) ``Business of viatical settlements'' means an activity involved in,
but not limited to, offering, soliciting, negotiating, procuring, effectua-
tion, purchasing, investing, financing, monitoring, tracking, underwriting,
selling, transferring, assigning, pledging or hypothecating any viatical set-
(c) ``Chronically ill'' means:
(1) Being unable to perform at least two activities of daily living in-
cluding eating, toileting, transferring, bathing, dressing, continence or
such other activity as determined by rules and regulations adopted by the
(2) requiring substantial supervision to protect the individual from
threats to health and safety due to severe cognitive impairment.
(d) ``Commissioner'' means the commissioner of insurance.
(e) ``Financing entity'' means any underwriter, placement agent,
lender, purchaser of securities, purchaser of a policy or certificate from
a viatical settlement provider, credit enhancer or any entity that has a
direct ownership in a policy or certificate which is the subject of a viatical
settlement contract, but:
(1) Whose principal activity related to the transaction is providing
funds to effect the viatical settlement or purchase of one or more viati-
cated policies; and
(2) who has an agreement in writing with one or more licensed vi-
atical settlement providers to finance the acquisition of viatical settlement
Financing entity shall not include any nonaccredited investor or viatical
(f) ``Fraudulent viatical settlement act'' means and includes:
(1) Any act or omission committed by any person who, knowingly or
with intent to defraud, for the purpose of depriving another of property
or for pecuniary gain, commits, or permits such person's employees or
agents to engage in acts including:
(A) Presenting, causing to be presented or preparing with knowledge
or belief that it will be presented to or by a viatical settlement provider,
viatical settlement broker, viatical settlement purchaser, financing entity,
insurer, insurance producer or any other person, false material informa-
tion, or concealing material information, as part of, in support of or con-
cerning a fact material to one or more of the following:
(i) An application for the issuance of a viatical settlement contract or
(ii) the underwriting of a viatical settlement contract or insurance
(iii) a claim for payment or benefit pursuant to a viatical settlement
contract or insurance policy;
(iv) premiums paid on an insurance policy;
(v) payments and changes in ownership or beneficiary made in ac-
cordance with the terms of a viatical settlement contract or insurance
(vi) the reinstatement or conversion of an insurance policy;
(vii) in the solicitation, offer, effectuation or sale of a viatical settle-
ment contract or insurance policy;
(viii) the issuance of written evidence of viatical settlement contract
or insurance; or
(ix) a financing transaction.
(B) Employing any device, scheme or artifice to defraud related to
(2) any act done or committed in the furtherance of a fraud or to
prevent the detection of a fraud any person commits or permits its em-
ployees or its agents to:
(A) Remove, conceal, alter, destroy or sequester from the commis-
sioner the assets or records of a licensee or other person engaged in the
business of viatical settlements;
(B) misrepresent or conceal the financial condition of a licensee, fi-
nancing entity, insurer or other person;
(C) transact the business of viatical settlements in violation of laws
requiring a license, certificate of authority or other legal authority for the
transaction of the business of viatical settlements; or
(D) file with the commissioner or the chief insurance regulatory of-
ficial of another jurisdiction a document containing false information or
otherwise conceals information about a material fact from the commis-
(3) embezzlement, theft, misappropriation or conversion of moneys,
funds, premiums, credits or other property of a viatical settlement pro-
vider, insurer, insured, viator, insurance policy owner or any other person
engaged in the business of viatical settlements or insurance; or
(4) recklessly entering into, brokering, otherwise dealing in a viatical
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, where the viator
or the viator's agent intended to defraud the policy's issuer. ``Recklessly''
means engaging in the conduct in conscious and clearly unjustifiable dis-
regard of a substantial likelihood of the existence of the relevant facts or
risks, such disregard involving a gross deviation from acceptable standards
(5) attempting to commit, assisting, aiding or abetting in the com-
mission of, or conspiracy to commit the acts or omissions specified in this
(g) ``NAIC'' means the national association of insurance commission-
(h) ``Person'' means a natural person or a legal entity, including, but
not limited to, an individual, partnership, limited liability company, as-
sociation, trust or corporation.
(i) ``Policy'' means an individual or group policy, group certificate,
contract or arrangement of life insurance affecting the rights of a resident
of this state or bearing a reasonable relation to this state, regardless of
whether delivered or issued for delivery in this state.
(j) ``Related provider trust'' means a titling trust or other trust estab-
lished by a licensed viatical settlement provider or a financing entity for
the sole purpose of holding the ownership or beneficial interest in pur-
chased policies in connection with a financing transaction. The trust shall
have a written agreement with the licensed viatical settlement provider
under which the licensed viatical settlement provider is responsible for
ensuring compliance with all statutory and regulatory requirements and
under which the trust agrees to make all records and files related to
viatical settlement transactions available to the commissioner as if those
records and files were maintained directly by the licensed viatical settle-
(k) ``Special purpose entity'' means any corporation, partnership,
trust, limited liability company or other similar entity formed solely to
provide, either directly or indirectly, access to institutional capital markets
for a financing entity or licensed viatical settlement provider.
(l) ``Terminally ill'' means having an illness or sickness that can rea-
sonably be expected to result in death in 24 months or less.
(m) ``Viatical settlement broker'' means a person that on behalf of a
viator and for a fee, commission or other valuable consideration offers or
attempts to negotiate viatical settlement contracts between a viator and
one or more viatical settlement providers. Notwithstanding the manner
in which the viatical settlement broker is compensated, a viatical settle-
ment broker is deemed to represent only the viator and owes a fiduciary
duty to the viator to act according to the viator's instructions and in the
best interest of the viator. The term does not include an attorney, certified
public accountant or a financial planner accredited by a nationally rec-
ognized accreditation agency, who is retained to represent the viator and
whose compensation is not paid directly or indirectly by the viatical set-
tlement provider or purchaser.
(n) ``Viatical settlement contract'' means a written agreement estab-
lishing 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. A viatical set-
tlement contract also includes a contract for a loan or other financing
transaction with a viator secured primarily by an individual or group life
insurance policy, other than a loan by a life insurance company pursuant
to the terms of the life insurance contract, or a loan secured by the cash
value of a policy. A viatical settlement contract includes an agreement
with a viator to transfer ownership or change the beneficiary designation
at a later date regardless of the date that compensation is paid to the
(o) ``Viatical settlement provider'' means a person, other than a viator,
who enters into or effectuates a viatical settlement contract. Viatical set-
tlement provider does not include:
(1) A bank, savings bank, savings and loan association, credit union
or other licensed lending institution that takes an assignment of a life
insurance policy as collateral for a loan;
(2) the issuer of a life insurance policy providing accelerated benefits
under K.S.A. 40-401, and amendments thereto, and pursuant to the con-
(3) an authorized or eligible insurer that provides stop loss coverage
to a viatical settlement provider, purchaser, financing entity, special pur-
pose entity or related provider trust;
(4) a natural person who enters into or effectuates no more than one
agreement in a calendar year for the transfer of life insurance policies for
any value less than the expected death benefit;
(5) a financing entity;
(6) a special purpose entity;
(7) a related provider trust;
(8) a viatical settlement purchaser; or
(9) an accredited investor or qualified institutional buyer as such term
is defined respectively in regulation D, rule 501 or rule 144A of the fed-
eral securities act of 1933, as in effect upon the effective date of this act,
and who purchases a viaticated policy from a viatical settlement provider.
(p) ``Viator'' means the owner of a life insurance policy or a certificate
holder under a group policy who enters or seeks to enter into a viatical
settlement contract. For the purposes of this act, a viator shall not be
limited to an owner of a life insurance policy or a certificate holder under
a group policy insuring the life of an individual with a terminal or chronic
illness or condition except where specifically addressed. Viator shall not
(1) A licensee under this act;
(2) an accredited investor or qualified institutional buyer as such term
eral securities act of 1933, as in effect upon the effective date of this act;
(3) a financing entity;
(4) a special purpose entity; or
(5) a related provider trust.
(q) ``Viaticated policy'' means a life insurance policy or certificate that
has been acquired by a viatical settlement provider pursuant to a viatical
(r) ``Viatical settlement purchaser'' means a person who gives a sum
of money as consideration for a life insurance policy or an interest in the
death benefits of a life insurance policy, or a person who owns or acquires
or is entitled to a beneficial interest in a trust that owns a viatical settle-
ment contract or is the beneficiary of a life insurance policy that has been
or will be the subject of a viatical settlement contract, for the purpose of
deriving an economic benefit. Viatical settlement purchaser shall not in-
New Sec. 3. (a) No person shall operate as a viatical settlement pro-
vider or viatical settlement broker without first obtaining a license from
the commissioner or the insurance regulatory official of the state of res-
idence of the viator. If there is more than one viator on a single policy
and the viators are residents of different states, the viatical settlement
shall be governed by the law of the state in which the viator having the
largest percentage ownership resides or, if the viators hold equal own-
ership, the state of residence of one viator agreed upon in writing by all
(b) Application for a viatical settlement provider license shall be made
to the commissioner by the applicant on a form prescribed by the com-
missioner, and these applications shall be accompanied by a nonrefund-
able fee of $1,000.
(c) Licenses for viatical settlement providers may be renewed from
year to year on the anniversary date upon payment of the annual renewal
fee of $500. Failure to pay the fees by the renewal date results in expi-
ration of the license.
(d) Application for a viatical settlement broker license shall be made
missioner. Each application shall be accompanied by a nonrefundable
application fee of $100.
(e) Licenses for a viatical settlement broker license may be renewed
from year to year on the anniversary date upon payment of the annual
renewal fee of $50. Failure to pay the fees by the renewal date results in
expiration of such license.
(f) The applicant shall provide information on forms required by the
commissioner. The commissioner shall have authority, at any time, to
require the applicant to fully disclose the identity of all stockholders,
partners, officers, members and employees, and the commissioner, in the
exercise of the commissioner's discretion, may refuse to issue a license in
the name of a legal entity if not satisfied that any officer, employee, stock-
holder, partner or member thereof who may materially influence the
applicant's conduct meets the standards of this act.
(g) A license issued to a legal entity authorizes all partners, officers,
members and designated employees to act as viatical settlement providers
or viatical settlement brokers, as applicable, under the license, and all
those persons shall be named in the application and any supplements to
(h) Upon the filing of an application and the payment of the license
fee, the commissioner shall make an investigation of each applicant and
issue a license if the commissioner finds that the applicant:
(1) If a viatical settlement provider, has provided a detailed plan of
(2) is competent and trustworthy and intends to act in good faith in
the capacity involved by the license applied for;
(3) has a good business reputation and has had experience, training
or education so as to be qualified in the business for which the license is
(4) if a legal entity, provides a certificate of good standing from the
state of its domicile; and
(5) if a viatical settlement provider or viatical settlement broker, has
provided an anti-fraud plan that meets the requirements of paragraph (g)
of section 12, and amendments thereto.
(i) The commissioner shall not issue a license to a nonresident appli-
cant, unless a written designation of an agent for service of process is filed
and maintained with the commissioner or the applicant has filed with the
commissioner, the applicant's written irrevocable consent that any action
against the applicant may be commenced against the applicant by service
of process on the commissioner.
(j) A viatical settlement provider or viatical settlement broker shall
provide to the commissioner new or revised information about officers,
10% or more stockholders, partners, directors, members or designated
employees within 30 days of the change.
New Sec. 4. (a) The commissioner may refuse to issue, suspend, re-
voke or refuse to renew the license of a viatical settlement provider or
viatical settlement broker in the event that investigation by the commis-
sioner discloses that:
(1) There was any material misrepresentation in the application for
(2) the licensee or any officer, partner, member or key management
personnel has been convicted of fraudulent or dishonest practices, is sub-
ject to a final administrative action in this state or another state or is
otherwise shown to be untrustworthy or incompetent;
(3) the viatical settlement provider demonstrates a pattern of unrea-
sonable payments to viators;
(4) the licensee or any officer, partner, member or key management
personnel has been found guilty of, or has pleaded guilty or nolo conten-
dere to, any felony, or to a misdemeanor involving fraud or moral turpi-
tude, regardless of whether a judgment of conviction has been entered
by the court;
(5) the viatical settlement provider has entered into any viatical set-
tlement contract that has not been approved pursuant to this act;
(6) the viatical settlement provider has failed to honor contractual
obligations set out in a viatical settlement contract;
(7) the licensee no longer meets the requirements for initial licen-
(8) the viatical settlement provider has assigned, transferred or
pledged a viaticated policy to a person other than a viatical settlement
provider licensed in this state, viatical settlement purchaser, an accredited
investor or qualified institutional buyer as defined respectively in regu-
lation D, rule 501 or rule 144A of the federal securities act of 1933, as in
effect on the effective date of this act, financing entity, special purpose
entity or related provider trust; or
(9) the licensee or any officer, partner, member or key management
personnel has violated any provision of this act.
(b) If the commissioner denies a license application or suspends, re-
vokes or refuses to renew the license of a viatical settlement provider or
viatical settlement broker, the commissioner shall conduct a hearing in
accordance with the Kansas administrative procedure act.
New Sec. 5. No person shall use a viatical settlement contract or
provide to a viator a disclosure statement form in this state unless filed
with and approved by the commissioner. The commissioner shall disap-
prove a viatical settlement contract form or disclosure statement form if,
in the commissioner's opinion, the contract or provisions contained
therein are unreasonable, contrary to the interests of the public or oth-
erwise misleading or unfair to the viator. At the commissioner's discretion,
the commissioner may require the submission of advertising material to
New Sec. 6. (a) Each licensee shall file with the commissioner on or
before March 1 of each year an annual statement containing such infor-
mation as the commissioner may prescribe by rule and regulation.
(b) Except as otherwise allowed or required by law, a viatical settle-
ment provider, viatical settlement broker, insurance company, insurance
producer, information bureau, rating agency or company, or any other
person with actual knowledge of an insured's identity, shall not disclose
that identity as an insured, or the insured's financial or medical infor-
mation to any other person unless the disclosure is:
(1) Necessary to effect a viatical settlement between the viator and a
viatical settlement provider and the viator and insured have provided
prior written consent to the disclosure;
(2) provided in response to an investigation or examination by the
commissioner or any other governmental officer or agency or pursuant
to the requirements of paragraph (c) of section 12, and amendments
(3) a term of or condition to the transfer of a policy by one viatical
settlement provider to another viatical settlement provider;
(4) necessary to permit a financing entity, related provider trust or
special purpose entity to finance the purchase of policies by a viatical
settlement provider and the viator and insured have provided prior writ-
ten consent to the disclosure;
(5) necessary to allow the viatical settlement provider or viatical set-
tlement broker or their authorized representatives to make contacts for
the purpose of determining health status; or
(6) required to purchase stop loss coverage.
New Sec. 7. (a) (1) The commissioner may conduct an examination
under this act of a licensee as often as the commissioner in such com-
missioner's sole discretion deems appropriate.
(2) For purposes of completing an examination of a licensee under
this act, the commissioner may examine or investigate any person, or the
business of any person, in so far as the examination or investigation, in
the sole discretion of the commissioner, is necessary or material to the
examination of the licensee.
(3) In lieu of an examination under this act of any foreign or alien
licensee licensed in this state, the commissioner, at the commissioner's
discretion, may accept an examination report on the licensee as prepared
by the commissioner for the licensee's state of domicile or port-of-entry
(b) (1) Any person required to be licensed by this act shall for five
years retain copies of all:
(A) Proposed, offered or executed contracts, underwriting docu-
ments, policy forms, and applications from the date of the proposal, offer
or execution of the contract, whichever is later;
(B) all checks, drafts or other evidence and documentation related to
the payment, transfer, deposit or release of funds from the date of the
(C) all other records and documents related to the requirements of
(2) This section shall not relieve any person licensed under this act
of the obligation to produce these documents and provide copies thereof
to the commissioner after the retention period has expired if the person
has retained such documents.
(3) Records required to be retained by this section must be legible
and complete and may be retained in paper, photograph, microprocess,
magnetic, mechanical, electronic media or by any process that accurately
reproduces or forms a durable medium for the reproduction of a record.
(c) (1) Upon determining that an examination should be conducted,
the commissioner shall issue an examination warrant appointing one or
more examiners to perform the examination and instructing them as to
the scope of the examination. The commissioner may also employ such
other guidelines or procedures as the commissioner may deem appro-
(2) Every licensee or person from whom information is sought, its
officers, directors and agents shall provide to the examiners timely, con-
venient and free access at all reasonable hours at its offices to all books,
records, accounts, papers, documents, assets and computer or other re-
cordings relating to the property, assets, business and affairs of the li-
censee being examined. The officers, directors, employees and agents of
the licensee or person shall facilitate the examination and aid in the ex-
amination so far as it is in their power to do so. The refusal of a licensee,
by its officers, directors, employees or agents, to submit to examination
or to comply with any reasonable written request of the commissioner
shall be grounds for suspension or refusal of, or nonrenewal of any license
or authority held by the licensee to engage in the viatical settlement busi-
ness or other business subject to the commissioner's jurisdiction. Any
proceedings for suspension, revocation or refusal of any license or au-
thority shall be conducted pursuant to the Kansas administrative proce-
(3) The commissioner shall have the power to issue subpoenas, to
administer oaths and to examine under oath any person as to any matter
pertinent to the examination. Upon the failure or refusal of a person to
obey a subpoena, the commissioner may petition a court of competent
jurisdiction, and upon proper showing, the court may enter an order com-
pelling the witness to appear and testify or produce documentary evi-
dence. Failure to obey the court order shall be punishable as contempt
(4) When making an examination under this act, the commissioner
may retain attorneys, appraisers, independent actuaries, independent cer-
tified public accountants or other professionals and specialists as exam-
iners, the reasonable cost of which shall be borne by the licensee that is
the subject of the examination.
(5) Nothing contained in this act shall be construed to limit the com-
missioner's authority to terminate or suspend an examination in order to
pursue other legal or regulatory action pursuant to the insurance laws of
this state. Findings of fact and conclusions made pursuant to any exami-
nation shall be prima facie evidence in any legal or regulatory action.
(6) Nothing contained in this act shall be construed to limit the com-
missioner's authority to use and, if appropriate, to make public any final
or preliminary examination report, any examiner or licensee work papers
or other documents, or any other information discovered or developed
during the course of any examination in the furtherance of any legal or
regulatory action which the commissioner, in such commissioner's sole
discretion, may deem appropriate.
(d) (1) Examination reports shall be comprised of only facts appear-
ing upon the books, records or other documents of the licensee, its agents
or other persons examined, or as ascertained from the testimony of its
officers or agents or other persons examined concerning its affairs, and
such conclusions and recommendations as the examiners find reasonably
warranted from the facts.
(2) Not later than 60 days following completion of the examination,
the examiner in charge shall file with the commissioner a verified written
report of examination under oath. Upon receipt of the verified report,
the commissioner shall transmit the report to the licensee examined, to-
gether with a notice that shall afford the licensee examined a reasonable
opportunity of not more than 30 days to make a written submission or
rebuttal with respect to any matters contained in the examination report.
(3) In the event the commissioner determines that regulatory action
is appropriate as a result of an examination, the commissioner may initiate
any proceedings or actions provided by law.
(e) (1) Names and individual identification data for all viators shall
be considered private and confidential information and shall not be dis-
closed by the commissioner, unless required by law.
(2) Except as otherwise provided in this act, all examination reports,
working papers, recorded information, documents and copies thereof
produced by, obtained by or disclosed to the commissioner or any other
person in the course of an examination made under this act, or in the
course of analysis or investigation by the commissioner of the financial
condition or market conduct of a licensee shall be confidential by law and
privileged, shall not be subject to the provisions of the Kansas open re-
cords act, K.S.A. 45-215 et seq., and amendments thereto, shall not be
subject to subpoena, and shall not be subject to discovery or admissible
in evidence in any private civil action. The commissioner is authorized to
use the documents, materials or other information in the furtherance of
any regulatory or legal action brought as part of the commissioner's of-
(3) Documents, materials or other information, including, but not
limited to, all working papers, and copies thereof, in the possession or
control of the NAIC and its affiliates and subsidiaries shall be confidential
by law and privileged, shall not be subject to subpoena, and shall not be
subject to discovery or admissible in evidence in any private civil action
if they are:
(A) Created, produced or obtained by or disclosed to the NAIC and
its affiliates and subsidiaries in the course of assisting an examination
made under this act, or assisting a commissioner in the analysis or inves-
tigation of the financial condition or market conduct of a licensee; or
(B) disclosed to the NAIC and its affiliates and subsidiaries under
paragraph (4) of subsection (e) by the commissioner.
For the purposes of paragraph (2) of subsection (e), the term ``act''
includes the law of another state or jurisdiction that is substantially similar
to this act.
(4) Neither the commissioner nor any person that received the doc-
uments, material or other information while acting under the authority
of the commissioner, including the NAIC and its affiliates and subsidia-
ries, shall be permitted to testify in any private civil action concerning any
confidential documents, materials or information subject to paragraph (1)
of subsection (e).
(5) In order to assist in the performance of the commissioner's duties,
the commissioner may:
(A) Share documents, materials or other information, including the
confidential and privileged documents, materials or information subject
to paragraph (1) of subsection (e), with other state, federal and interna-
tional regulatory agencies, with the NAIC and its affiliates and subsidia-
ries, and with state, federal and international law enforcement authorities,
provided that the recipient agrees to maintain the confidentiality and
privileged status of the document, material, communication or other in-
(B) receive documents, materials, communications or information,
including otherwise confidential and privileged documents, materials or
information, from the NAIC and its affiliates and subsidiaries, and from
regulatory and law enforcement officials of other foreign or domestic
jurisdictions, and shall maintain as confidential or privileged any docu-
ment, material or information received with notice or the understanding
that it is confidential or privileged under the laws of the jurisdiction that
is the source of the document, material or information; and
(C) enter into agreements governing sharing and use of information
consistent with this subsection.
(6) No waiver of any applicable privilege or claim of confidentiality
in the documents, materials or information shall occur as a result of dis-
closure to the commissioner under this section or as a result of sharing
as authorized in paragraph (4) of subsection (e).
(7) A privilege established under the law of any state or jurisdiction
that is substantially similar to the privilege established under this subsec-
tion shall be available and enforced in any proceeding in, and in any court
of, this state.
(8) Nothing contained in this act shall prevent or be construed as
prohibiting the commissioner from disclosing the content of an exami-
nation report, preliminary examination report or results, or any matter
relating thereto, to the commissioner of any other state or country, or to
law enforcement officials of this or any other state or agency of the federal
government at any time or to the NAIC, so long as such agency or office
receiving the report or matters relating thereto agrees in writing to hold
it confidential and in a manner consistent with this act.
(9) The provisions of this subsection shall expire July 1, 2007, unless
the legislature acts to reenact such provisions. The provisions of this sec-
tion shall be reviewed by the legislature prior to July 1, 2007.
(f) (1) An examiner may not be appointed by the commissioner if the
examiner, either directly or indirectly, has a conflict of interest or is af-
filiated with the management of or owns a pecuniary interest in any per-
son subject to examination under this act. This section shall not be con-
strued to automatically preclude an examiner from being:
(A) A viator;
(B) an insured in a viaticated insurance policy; or
(C) a beneficiary in an insurance policy that is proposed to be viati-
(2) Notwithstanding the requirements of this clause, the commis-
sioner may retain from time to time, on an individual basis, qualified
actuaries, certified public accountants or other similar individuals who are
independently practicing their professions, even though these persons
may from time to time be similarly employed or retained by persons
subject to examination under this act.
(g) Unless provided otherwise, all fees and procedures for examina-
tions under this act shall be in accordance with K.S.A. 40-223, and amend-
(h) (1) No cause of action shall arise nor shall any liability be imposed
against the commissioner, the commissioner's authorized representatives
or any examiner appointed by the commissioner for any statements made
or conduct performed in good faith while carrying out the provisions of
(2) No cause of action shall arise, nor shall any liability be imposed
against any person for the act of communicating or delivering information
or data to the commissioner or the commissioner's authorized represen-
tative or examiner pursuant to an examination made under this act, if the
act of communication or delivery was performed in good faith and without
fraudulent intent or the intent to deceive. This paragraph does not ab-
rogate or modify in any way any common law or statutory privilege or
immunity heretofore enjoyed by any person identified in paragraph (1).
(3) A person identified in paragraph (1) or (2) shall be entitled to an
award of attorney fees and costs if such person is the prevailing party in
a civil cause of action for libel, slander or any other relevant tort arising
out of activities in carrying out the provisions of this act and the party
bringing the action was not substantially justified in doing so. For pur-
poses of this section a proceeding is ``substantially justified'' if it had a
reasonable basis in law or fact at the time that it was initiated.
(i) The commissioner may investigate suspected fraudulent viatical
settlement acts and persons engaged in the business of viatical settle-
New Sec. 8. (a) With each application for a viatical settlement, a
viatical settlement provider or viatical settlement broker shall provide the
viator with at least the following disclosures no later than the time the
application for the viatical settlement contract is signed by all parties. The
disclosures shall be provided in a separate document that is signed by the
viator and the viatical settlement provider or viatical settlement broker,
and shall provide the following information:
(1) There are possible alternatives to viatical settlement contracts in-
cluding any accelerated death benefits or policy loans offered under the
viator's life insurance policy.
(2) Some or all of the proceeds of the viatical settlement may be
taxable under federal income tax and state franchise and income taxes,
and assistance should be sought from a professional tax advisor.
(3) Proceeds of the viatical settlement could be subject to the claims
(4) Receipt of the proceeds of a viatical settlement may adversely
affect the viator's eligibility for medicaid or other government benefits or
entitlements, and advice should be obtained from the appropriate gov-
(5) The viator has the right to rescind a viatical settlement contract
for 15 calendar days after the receipt of the viatical settlement proceeds
by the viator, as provided in subsection (c) of section 9, and amendments
thereto. If the insured dies during the rescission period, the settlement
contract shall be deemed to have been rescinded, subject to repayment
of all viatical settlement proceeds and any premiums, loans and loan in-
terest to the viatical settlement provider or purchaser.
(6) Funds will be sent to the viator within three business days after
the viatical settlement provider has received the insurer or group admin-
istrator's acknowledgment that ownership of the policy or interest in the
certificate has been transferred and the beneficiary has been designated.
(7) Entering into a viatical settlement contract may cause other rights
or benefits, including conversion rights and waiver of premium benefits
that may exist under the policy or certificate, to be forfeited by the viator.
Assistance should be sought from a financial adviser.
(8) Disclosure to a viator shall include distribution of a brochure de-
scribing the process of viatical settlements. The form for the brochure
shall be developed by the commissioner.
(9) The disclosure document shall contain the following language:
``All medical, financial or personal information solicited or obtained by a
viatical settlement provider or viatical settlement broker about an insured,
including the insured's identity or the identity of family members, a
spouse or a significant other may be disclosed as necessary to effect the
viatical settlement between the viator and the viatical settlement provider.
If you are asked to provide this information, you will be asked to consent
to the disclosure. The information may be provided to someone who buys
the policy or provides funds for the purchase. You may be asked to renew
your permission to share information every two years.''
(10) The insured may be contacted by either the viatical settlement
provider or viatical settlement broker or such viatical settlement pro-
vider's or viatical settlement broker's authorized representative for the
purpose of determining the insured's health status. This contact is limited
to once every three months if the insured has a life expectancy of more
than one year, and no more than once per month if the insured has a life
expectancy of one year or less.
(b) A viatical settlement provider shall provide the viator with at least
the following disclosures no later than the date the viatical settlement
contract is signed by all parties. The disclosures shall be conspicuously
displayed in the viatical settlement contract or in a separate document
signed by the viator and the viatical settlement provider or viatical settle-
ment broker, and contain the following information:
(1) The affiliation, if any, between the viatical settlement provider
and the issuer of the insurance policy to be viaticated.
(2) The name, address and telephone number of the viatical settle-
(3) A viatical settlement broker shall disclose to a prospective viator
the amount and method of calculating the broker's compensation. The
term ``compensation'' includes anything of value paid or given to a viatical
settlement broker for the placement of a policy.
(4) If an insurance policy to be viaticated has been issued as a joint
policy or involves family riders or any coverage of a life other than the
insured under the policy to be viaticated, the viator shall be informed of
the possible loss of coverage on the other lives under the policy and shall
be advised to consult with such viator's insurance producer or the insurer
issuing the policy for advice on the proposed viatical settlement.
(5) State the dollar amount of the current death benefit payable to
the viatical settlement provider under the policy or certificate. If known,
the viatical settlement provider shall also disclose the availability of any
additional guaranteed insurance benefits, the dollar amount of any acci-
dental death and dismemberment benefits under the policy or certificate
and the viatical settlement provider's interest in those benefits.
(6) State the name, business address and telephone number of the
independent third party escrow agent, and the fact that the viator or
owner may inspect or receive copies of the relevant escrow or trust agree-
ments or documents.
New Sec. 9. (a) (1) A viatical settlement provider entering into a
viatical settlement contract shall first obtain:
(A) If the viator is the insured, a written statement from a licensed
attending physician that the viator is of sound mind and under no con-
straint or undue influence to enter into a viatical settlement contract; and
(B) a document in which the insured consents to the release of such
insured's medical records to a viatical settlement provider, viatical settle-
ment broker and the insurance company that issued the life insurance
policy covering the life of the insured.
(2) Within 20 days after a viator executes documents necessary to
transfer any rights under an insurance policy or within 20 days of entering
any agreement, option, promise or any other form of understanding, ex-
pressed or implied, to viaticate the policy, the viatical settlement provider
shall give written notice to the insurer that issued that insurance policy
that the policy has or will become a viaticated policy. The notice shall be
accompanied by the documents required by paragraph (3).
(3) The viatical settlement provider shall deliver a copy of the medical
release required under clause (B) of paragraph (1), a copy of the viator's
application for the viatical settlement contract, the notice required under
paragraph (2) and a request for verification of coverage to the insurer
that issued the life policy that is the subject of the viatical transaction.
The form for verification shall be developed by the commissioner.
(4) The insurer shall respond to a request for verification of coverage
submitted on an approved form by a viatical settlement provider within
30 calendar days of the date the request is received and shall indicate
whether, based on the medical evidence and documents provided, the
insurer intends to pursue an investigation at this time regarding the va-
lidity of the insurance contract.
(5) Prior to or at the time of execution of the viatical settlement con-
tract, the viatical settlement provider shall obtain a witnessed document
in which the viator consents to the viatical settlement contract, represents
that the viator has a full and complete understanding of the viatical set-
tlement contract, that such viator has a full and complete understanding
of the benefits of the life insurance policy, acknowledges that such viator
is entering into the viatical settlement contract freely and voluntarily and,
for persons with a terminal or chronic illness or condition, acknowledges
that the insured has a terminal or chronic illness and that the terminal or
chronic illness or condition was diagnosed after the life insurance policy
(6) If a viatical settlement broker performs any of these activities
required of the viatical settlement provider, the viatical settlement pro-
vider is deemed to have fulfilled the requirements of this section.
(b) (1) All medical information solicited or obtained by any licensee
shall be subject to the applicable provisions of state law relating to con-
fidentiality of medical information.
(2) The provisions of this subsection shall expire July 1, 2007, unless
(c) All viatical settlement contracts entered into in this state shall
provide the viator with an unconditional right to rescind the contract for
at least 15 calendar days from the receipt of the viatical settlement pro-
ceeds. If the insured dies during the rescission period, the viatical settle-
ment contract shall be deemed to have been rescinded, subject to repay-
ment to the viatical settlement provider or purchaser of all viatical
settlement proceeds, and any premiums, loans and loan interest that have
been paid by the viatical settlement provider or purchaser.
(d) The viatical settlement provider shall instruct the viator to send
the executed documents required to effect the change in ownership, as-
signment or change in beneficiary directly to the independent escrow
agent. Within three business days after the date the escrow agent receives
the document, or from the date the viatical settlement provider receives
the documents, if the viator erroneously provides the documents directly
to the provider, the provider shall pay or transfer the proceeds of the
viatical 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. Upon payment of the settle-
ment proceeds into the escrow account, the escrow agent shall deliver
the original change in ownership, assignment or change in beneficiary
forms to the viatical settlement provider or related provider trust. Upon
the escrow agent's receipt of the acknowledgment of the properly com-
pleted transfer of ownership, assignment or designation of beneficiary
from the insurance company, the escrow agent shall pay the settlement
proceeds to the viator.
(e) Failure to tender consideration to the viator for the viatical set-
tlement contract within the time disclosed pursuant to clause (6) of sub-
section (a) of section 8, and amendments thereto, renders the viatical
settlement contract voidable by the viator for lack of consideration until
the time consideration is tendered to and accepted by the viator.
(f) Contacts with the insured for the purpose of determining the
health status of the insured by the viatical settlement provider or viatical
settlement broker after the viatical settlement has occurred shall only be
made by the viatical settlement provider or viatical settlement broker
licensed in this state or its authorized representatives and shall be limited
to once every three months for insureds with a life expectancy of more
than one year, and to no more than once per month for insureds with a
life expectancy of one year or less. The viatical settlement provider or
viatical settlement broker shall explain the procedure for these contacts
at the time the viatical settlement contract is entered into. The limitations
set forth in this subsection shall not apply to any contacts with an insured
for reasons other than determining the insured's health status. Viatical
settlement providers and viatical settlement brokers shall be responsible
for the actions of their authorized representatives.
New Sec. 10. It shall be a violation of this act for any person to enter
into a viatical settlement contract within a two-year period commencing
with the date of issuance of the insurance policy or certificate unless the
viator certifies to the viatical settlement provider that one or more of the
following conditions have been met within the two-year period:
(a) The policy was issued upon the viator's exercise of conversion
rights arising out of a group or individual policy, provided the total of the
time covered under the conversion policy plus the time covered under
the prior policy is at least 24 months. The time covered under a group
policy shall be calculated without regard to any change in insurance car-
riers, provided the coverage has been continuous and under the same
(b) the viator is a charitable organization exempt from taxation under
26 U.S.C. § 501 (c)(3);
(c) the viator is not a natural person;
(d) (1) The viator submits independent evidence to the viatical set-
tlement provider that one or more of the following conditions have been
met within the two-year period:
(A) The viator or insured is terminally or chronically ill;
(B) the viator's spouse dies;
(C) the viator divorces such viator's spouse;
(D) the viator retires from full-time employment;
(E) the viator becomes physically or mentally disabled and a physician
determines that the disability prevents the viator from maintaining full-
(F) the viator was the insured's employer at the time the policy or
certificate was issued and the employment relationship terminated;
(G) a final order, judgment or decree is entered by a court of com-
petent jurisdiction, on the application of a creditor of the viator, adjudi-
cating the viator bankrupt or insolvent, or approving a petition seeking
reorganization of the viator or appointing a receiver, trustee or liquidator
to all or a substantial part of the viator's assets;
(H) the viator experiences a significant decrease in income that is
unexpected and that impairs the viator's reasonable ability to pay the
policy premium; or
(I) the viator or insured disposes of such viator's or insured's own-
ership interests in a closely held corporation.
(2) Copies of the independent evidence described in paragraph (1)
of this subsection and documents required by subsection (a) of section 9,
and amendments thereto shall be submitted to the insurer when the vi-
atical settlement provider submits a request to the insurer for verification
of coverage. The copies shall be accompanied by a letter of attestation
from the viatical settlement provider that the copies are true and correct
copies of the documents received by the viatical settlement provider.
(e) If the viatical settlement provider submits to the insurer a copy
of the owner or insured's certification described in subsection (d) when
the provider submits a request to the insurer to effect the transfer of the
policy or certificate to the viatical settlement provider, the copy shall be
deemed to conclusively establish that the viatical settlement contract sat-
isfies the requirements of this section and the insurer shall timely respond
to the request.
New Sec. 11. The purpose of this section is to provide prospective
viators with clear and unambiguous statements in the advertisement of
viatical settlements and to assure the clear, truthful and adequate disclo-
sure of the benefits, risks, limitations and exclusions of any viatical settle-
ment contract. This purpose is intended to be accomplished by the es-
tablishment of guidelines and standards of permissible and impermissible
conduct in the advertising of viatical settlements to assure that product
descriptions are presented in a manner that prevents unfair, deceptive or
misleading advertising and is conducive to accurate presentation and de-
scription of viatical settlements through the advertising media and ma-
terial used by viatical settlement licensees.
(a) This section shall apply to any advertising of viatical settlement
contracts or related products or services intended for dissemination in
this state, including internet advertising viewed by persons located in this
state. Where disclosure requirements are established pursuant to federal
regulation, this section shall be interpreted so as to minimize or eliminate
conflict with federal regulation wherever possible.
(b) Every viatical settlement licensee shall establish and at all times
maintain a system of control over the content, form and method of dis-
semination of all advertisements of its contracts, products and services.
All advertisements, regardless of by whom written, created, designed or
presented, shall be the responsibility of the viatical settlement licensee,
as well as the individual who created or presented the advertisement. A
system of control shall include regular routine notification, at least once
a year, to agents and others authorized by the viatical settlement licensee
who disseminate advertisements of the requirements and procedures for
approval prior to the use of any advertisements not furnished by the
viatical settlement licensee.
(c) Advertisements shall be truthful and not misleading in fact or by
implication. The form and content of an advertisement of a viatical set-
tlement contract, product or service shall be sufficiently complete and
clear so as to avoid deception. It shall not have the capacity or tendency
to mislead or deceive. Whether an advertisement has the capacity or
tendency to mislead or deceive shall be determined by the commissioner
from the overall impression that the advertisement may be reasonably
expected to create upon a person of average education or intelligence
within the segment of the public to which it is directed.
(d) The information required to be disclosed under this section shall
not be minimized, rendered obscure, or presented in an ambiguous fash-
ion or intermingled with the text of the advertisement so as to be con-
fusing or misleading.
(1) An advertisement shall not omit material information or use
words, phrases, statements, references or illustrations if the omission or
use has the capacity, tendency or effect of misleading or deceiving viators
as to the nature or extent of any benefit, loss covered, premium payable
or state or federal tax consequence. The fact that the viatical settlement
contract offered is made available for inspection prior to consummation
of the sale, an offer is made to refund the payment if the viator is not
satisfied or that the viatical settlement contract includes a ``free look''
period that satisfies or exceeds legal requirements, shall not remedy mis-
(2) No advertisement shall use the name or title of a life insurance
company or a life insurance policy unless the advertisement has been
approved by the insurer.
(3) No advertisement shall state or imply that interest charged on an
accelerated death benefit or a policy loan is unfair, inequitable or in any
manner an incorrect or improper practice.
(4) The words ``free,'' ``no cost,'' ``without cost,'' ``no additional cost,''
``at no extra cost'' or words of similar import shall not be used with respect
to any benefit or service unless true. An advertisement may specify the
charge for a benefit or a service or may state that a charge is included in
the payment or use other appropriate language.
(5) Testimonials, appraisals or analysis used in advertisements must
be genuine; represent the current opinion of the author; be applicable to
the viatical settlement contract, product or service advertised, if any; and
be accurately reproduced with sufficient completeness to avoid mislead-
ing or deceiving prospective viators as to the nature or scope of the tes-
timonials, appraisal, analysis or endorsement. In using testimonials, ap-
praisals or analysis, the viatical settlement licensee makes as its own all
the statements contained therein, and the statements are subject to all
the provisions of this section.
(A) If the individual making a testimonial, appraisal, analysis or an
endorsement has a financial interest in the viatical settlement provider or
related entity as a stockholder, director, officer, employee or otherwise,
or receives any benefit directly or indirectly other than required union
scale wages, that fact shall be prominently disclosed in the advertisement.
(B) An advertisement shall not state or imply that a viatical settlement
contract, benefit or service has been approved or endorsed by a group of
individuals, society, association or other organization unless that is the
fact and unless any relationship between an organization and the viatical
settlement licensee is disclosed. If the entity making the endorsement or
testimonial is owned, controlled or managed by the viatical settlement
licensee, or receives any payment or other consideration from the viatical
settlement licensee for making an endorsement or testimonial, that fact
shall be disclosed in the advertisement.
(C) When an endorsement refers to benefits received under a viatical
settlement contract, all pertinent information shall be retained for a pe-
riod of five years after its use.
(e) No advertisement shall contain statistical information unless it ac-
curately reflects recent and relevant facts. The source of all statistics used
in an advertisement shall be identified.
(f) No advertisement shall disparage insurers, viatical settlement pro-
viders, viatical settlement brokers, insurance producers, policies, services
or methods of marketing.
(g) The name of the viatical settlement licensee shall be clearly iden-
tified in all advertisements about the licensee or its viatical settlement
contract, products or services, and if any specific viatical settlement con-
tract is advertised, the viatical settlement contract shall be identified ei-
ther by form number or some other appropriate description. If an appli-
cation is part of the advertisement, the name of the viatical settlement
provider shall be shown on the application.
(h) No advertisement shall use a trade name, group designation,
name of the parent company of a viatical settlement licensee, name of a
particular division of the viatical settlement licensee, service mark, slogan,
symbol or other device or reference without disclosing the name of the
viatical settlement licensee, if the advertisement would have the capacity
or tendency to mislead or deceive as to the true identity of the viatical
settlement licensee, or to create the impression that a company other
than the viatical settlement licensee would have any responsibility for the
financial obligation under a viatical settlement contract.
(i) No advertisement shall use any combination of words, symbols or
physical materials that by their content, phraseology, shape, color or other
characteristics are so similar to a combination of words, symbols or phys-
ical materials used by a government program or agency or otherwise ap-
pear to be of such a nature that they tend to mislead prospective viators
into believing that the solicitation is in some manner connected with a
government program or agency.
(j) An advertisement may state that a viatical settlement licensee is
licensed in the state where the advertisement appears, provided it does
not exaggerate that fact or suggest or imply that competing viatical set-
tlement licensee may not be so licensed. The advertisement may ask the
audience to consult the licensee's web site or contact the department of
insurance to find out if the state requires licensing and, if so, whether the
viatical settlement provider or viatical settlement broker is licensed.
(k) No advertisement shall create the impression that the viatical set-
tlement provider, its financial condition or status, the payment of its
claims or the merits, desirability or advisability of its viatical settlement
contracts are recommended or endorsed by any government entity.
(l) The name of the actual licensee shall be stated in all of its adver-
tisements. No advertisement shall use a trade name, any group designa-
tion, name of any affiliate or controlling entity of the licensee, service
mark, slogan, symbol or other device in a manner that would have the
capacity or tendency to mislead or deceive as to the true identity of the
actual licensee or create the false impression that an affiliate or controlling
entity would have any responsibility for the financial obligation of the
(m) No advertisement shall, directly or indirectly, create the impres-
sion that any division or agency of the state or of the united states gov-
ernment endorses, approves or favors:
(1) Any viatical settlement licensee or its business practices or meth-
ods of operation;
(2) the merits, desirability or advisability of any viatical settlement
(3) any viatical settlement contract; or
(4) any life insurance policy or life insurance company.
(n) If the advertiser emphasizes the speed with which the viatication
will occur, the advertising shall disclose the average time frame from
completed application to the date of offer and from acceptance of the
offer to receipt of the funds by the viator.
(o) If the advertising emphasizes the dollar amounts available to via-
tors, the advertising shall disclose the average purchase price as a percent
of face value obtained by viators contracting with the licensee during the
past six months.
New Sec. 12. (a) No person shall:
(1) Commit a fraudulent viatical settlement act.
(2) Knowingly or intentionally interfere with the enforcement of any
provision of this act or any investigation of suspected or actual violations
of this act.
(3) Knowingly or intentionally permit any person, employed by a per-
son in the business of viatical settlements, convicted of a felony involving
dishonesty or breach of trust to participate in the business of viatical
settlements. No person in the business of viatical settlements shall know-
ingly or intentionally permit any person convicted of a felony involving
(b) (1) Viatical settlements contracts and applications for viatical set-
tlements, regardless of the form of transmission, shall contain the follow-
ing statement or a substantially similar statement:
``Any person who knowingly presents false information in an application
for insurance or viatical settlement contract is guilty of a crime and may
be subject to fines and confinement in prison.''
(2) The lack of a statement as required in paragraph (1) shall not
constitute a defense in any prosecution for a fraudulent viatical settlement
(c) (1) Any person engaged in the business of viatical settlements
having knowledge or a reasonable belief that a fraudulent viatical settle-
ment act is being, will be or has been committed shall provide to the
commissioner the information required by, and in a manner prescribed
by, the commissioner.
(2) Any other person having knowledge or a reasonable belief that a
fraudulent viatical settlement act is being, will be or has been committed
may provide to the commissioner the information required by, and in a
manner prescribed by, the commissioner.
(d) (1) No civil liability shall be imposed on and no cause of action
shall arise from a person's furnishing information concerning suspected,
anticipated or completed fraudulent viatical settlement acts or suspected
or completed fraudulent insurance acts, if the information is provided to
or received from:
(A) The commissioner or the commissioner's employees, agents or
(B) federal, state or local law enforcement or regulatory officials or
their employees, agents or representatives;
(C) any person involved in the prevention and detection of fraudulent
viatical settlement acts or that person's agents, employees or represen-
(D) the NAIC, national association of securities dealers, the north
american securities administrators association, or their employees, agents
or representatives, or other regulatory body overseeing life insurance,
viatical settlements, securities or investment fraud; or
(E) the life insurer that issued the life insurance policy covering the
life of the insured.
(2) Paragraph (1) shall not apply to statements made with actual mal-
ice. In an action brought against a person for filing a report or furnishing
other information concerning a fraudulent viatical settlement act or a
fraudulent insurance act, the party bringing the action shall plead specif-
ically any allegation that paragraph (1) does not apply because the person
filing the report or furnishing the information did so with actual malice.
(3) A person identified in paragraph (1) shall be entitled to an award
of attorney fees and costs if such person is the prevailing party in a civil
cause of action for libel, slander or any other relevant tort arising out of
activities in carrying out the provisions of this act and the party bringing
the action was not substantially justified in doing so. For purposes of this
section a proceeding is substantially justified if it had a reasonable basis
in law or fact at the time that it was initiated.
(4) This section does not abrogate or modify common law or statutory
privileges or immunities enjoyed by a person described in paragraph (1).
(e) (1) The documents and evidence provided pursuant to subsection
(d) of this section or obtained by the commissioner in an investigation of
suspected or actual fraudulent viatical settlement acts shall be privileged
and confidential and shall not be a public record and shall not be subject
to discovery or subpoena in a civil or criminal action.
(2) Paragraph (1) of this subsection shall not prohibit release by the
commissioner of documents and evidence obtained in an investigation of
suspected or actual fraudulent viatical settlement acts:
(A) In administrative or judicial proceedings to enforce laws admin-
istered by the commissioner;
(B) to federal, state or local law enforcement or regulatory agencies,
to an organization established for the purpose of detecting and preventing
fraudulent viatical settlement acts or to the NAIC;
(C) at the discretion of the commissioner or pursuant to a court order,
to a person in the business of viatical settlements that is aggrieved by a
fraudulent viatical settlement act; or
(D) at the discretion of the commissioner or pursuant to a court or-
der, to a person that is aggrieved by a fraudulent viatical settlement act.
(3) Release of documents and evidence under subparagraphs (A) and
(B) of paragraph (2) of this subsection does not abrogate or modify the
privilege granted in paragraph (1).
(4) The provisions of this subsection shall expire July 1, 2007, unless
(f) This act shall not:
(1) Preempt the authority or relieve the duty of other law enforce-
ment or regulatory agencies to investigate, examine and prosecute sus-
pected violations of law;
(2) prevent or prohibit a person from disclosing voluntarily infor-
mation concerning viatical settlement fraud to a law enforcement or reg-
ulatory agency other than the insurance department; or
(3) limit the powers granted elsewhere by the laws of this state to the
commissioner or an insurance fraud unit to investigate and examine pos-
sible violations of law and to take appropriate action against wrongdoers.
(g) Viatical settlement providers and viatical settlement brokers shall
have in place antifraud initiatives reasonably calculated to detect, prose-
cute and prevent fraudulent viatical settlement acts. At the discretion of
the commissioner, the commissioner may order, or a licensee may request
and the commissioner may grant, such modifications of the following
required initiatives as necessary to ensure an effective antifraud program.
The modifications may be more or less restrictive than the required ini-
tiatives so long as the modifications reasonably may be expected to ac-
complish the purpose of this section. Antifraud initiatives shall include:
(1) Fraud investigators, who may be viatical settlement providers or
viatical settlement broker employees or independent contractors; and
(2) an antifraud plan, which shall be submitted to the commissioner.
The antifraud plan shall include, but not be limited to:
(A) A description of the procedures for detecting and investigating
possible fraudulent viatical settlement acts and procedures for resolving
material inconsistencies between medical records and insurance appli-
(B) a description of the procedures for reporting possible fraudulent
viatical settlement acts to the commissioner;
(C) a description of the plan for antifraud education and training of
underwriters and other personnel; and
(D) a description or chart outlining the organizational arrangement
of the antifraud personnel who are responsible for the investigation and
reporting of possible fraudulent viatical settlement acts and investigating
unresolved material inconsistencies between medical records and insur-
ance applications; and
(3) antifraud plans submitted to the commissioner shall be privileged
New Sec. 13. (a) If the commissioner determines after notice and
opportunity for a hearing that any person has engaged or is engaging in
any act or practice constituting a violation of any provision of this act, the
Kansas insurance statutes or any rule and regulation or order thereunder,
the commissioner may in the exercise of discretion, order any one or more
of the following:
(1) Payment of a monetary penalty of not more than $1,000 for each
and every act or violation, unless the person knew or reasonably should
have known such person was in violation of this act, the Kansas insurance
statutes or any rule and regulation or order thereunder, in which case the
penalty shall be not more than $2,000 for each and every act or violation;
(2) suspension or revocation of the person's license or certificate if
such person knew or reasonably should have known that such person was
in violation of this act, the Kansas insurance statutes or any rule and
regulation or order thereunder; or
(3) that such person cease and desist from the unlawful act or practice
and take such affirmative action as in the judgment of the commissioner
will carry out the purposes of the violated or potentially violated provision.
(b) If any person fails to file any report or other information with the
commissioner as required by statute or fails to respond to any proper
inquiry of the commissioner, the commissioner, after notice and oppor-
tunity for hearing, may impose a penalty of up to $500 for each violation
or act, along with an additional penalty of up to $100 for each week
thereafter that such report or other information is not provided to the
(c) If the commissioner makes written findings of fact that there is a
situation involving an immediate danger to the public health, safety or
welfare or the public interest will be irreparably harmed by delay in is-
suing an order under paragraph (3) of subsection (a), the commissioner
may issue an emergency temporary cease and desist order. Such order,
even when not an order within the meaning of K.S.A. 77-502, and amend-
ments thereto, shall be subject to the same procedures as an emergency
order issued under K.S.A. 77-536, and amendments thereto. Upon the
entry of such an order, the commissioner shall promptly notify the person
subject to the order that: (1) It has been entered; (2) the reasons therefor;
and (3) that upon written request within 15 days after service of the order
the matter will be set for a hearing which shall be conducted in accord-
ance with the provisions of the Kansas administrative procedure act. If
no hearing is requested and none is ordered by the commissioner, the
order will remain in effect until it is modified or vacated by the commis-
sioner. If a hearing is requested or ordered, the commissioner, after no-
tice of and opportunity for hearing to the person subject to the order, by
written findings of fact and conclusions of law, shall vacate, modify or
make permanent the order.
(d) (1) Any person who violates the provisions of this act shall be
guilty of a:
(A) Severity level 7, nonperson felony if the value of the viatical set-
tlement contract is $25,000 or more;
(B) severity level 9, nonperson felony if the value of the viatical set-
tlement contract is at least $500 but less than $25,000; or
(C) class A nonperson misdemeanor if the value of the viatical settle-
ment contract is less than $500.
(2) If the value of the insurance premium is less than $500 and such
agent or broker has, within five years immediately preceding commission
of the crime, been convicted of violating this section two or more times
shall be guilty of a severity level 9, nonperson felony.
(e) Restitution may be ordered in addition to, but not in lieu of, any
other penalty imposed under this act.
New Sec. 14. Any violation of this act shall also be considered an
unfair or deceptive act or practice under K.S.A. 40-2404, and amend-
ments thereto, and subject to the penalties contained in K.S.A. 40-2401
et seq., and amendments thereto.
New Sec. 15. The commissioner shall have the authority to:
(a) Promulgate rules and regulations necessary to implement the pro-
visions of this act;
(b) establish standards for evaluating reasonableness of payments un-
der viatical settlement contracts for persons who are terminally or chron-
ically ill. Such authority includes, but is not limited to, regulation of dis-
count rates used to determine the amount paid in exchange for
assignment, transfer, sale, devise or bequest of a benefit under a life
(c) establish appropriate licensing requirements, fees and standards
for continued licensure for viatical settlement providers or viatical settle-
(d) require a bond or other mechanism for financial accountability
for viatical settlement providers and viatical settlement brokers; and
(e) adopt rules and regulations governing the relationship and re-
sponsibilities of both insurers and viatical settlement providers or viatical
settlement brokers during the viatication of a life insurance policy or
New Sec. 16. A viatical settlement provider or viatical settlement
broker transacting business in this state may continue to do so pending
approval or disapproval of the viatical settlement provider or viatical set-
tlement broker's application for a license as long as the application is filed
with the commissioner by July 1, 2002.
Sec. 17. K.S.A. 2001 Supp. 17-1262 is hereby amended to read as
follows: 17-1262. Except as expressly provided in this section, the fol-
lowing transactions shall be exempt from the registration requirements
of K.S.A. 17-1254, 17-1255, 17-1257, 17-1258, 17-1259 and 17-1260, and
(a) Any isolated transaction, whether effected through a broker-
dealer or not.
(b) Any nonissuer distribution by or through a registered broker-
dealer of outstanding securities at a price reasonably related to the current
market price of such securities, if any recognized securities manual ap-
proved by the commissioner, pursuant to rules and regulations or orders
(1) The names of the issuer's officers and directors; and
(2) audited financial statements, including a balance sheet of the is-
suer as of a date within 18 months and an income or loss statement for
either the full fiscal year preceding that date or the most recent full year
of operations. If the commissioner finds that the sale of certain securities
in this state under this exemption would work or tend to work a fraud on
purchasers thereof, the commissioner may revoke the exemption pro-
vided by this subsection with respect to such securities by issuing an order
to that effect and providing notice of such order to all registered broker-
(c) Any nonissuer transaction by a registered broker-dealer pursuant
to an unsolicited order or offer to buy. The commissioner may require,
by rules and regulations, that: (1) The customer acknowledge upon a
specified form that the sale was unsolicited; and (2) a signed copy of each
such form be preserved by the broker-dealer for a specified period.
(d) Any transactions in a bond or other evidence of indebtedness
secured by a real or chattel mortgage or deed of trust, or by an agreement
for the sale of real estate or chattels, if the entire mortgage, deed of trust
or agreement, together with all the bonds or other evidences of indebt-
edness secured thereby, is offered and sold as a unit.
(e) Any transaction by an executor, administrator, sheriff, marshal,
receiver, trustee in bankruptcy, guardian or conservator; any transaction
executed by a bona fide pledgee without any purpose of evading this act
or any transaction incident to a judicially approved reorganization in
which a security is issued in exchange for one or more outstanding se-
curities, claims or property interests.
(f) Any offer or sale to a bank, savings institution, trust company,
insurance company, investment company as defined in the investment
company act of 1940, pension or profit-sharing trust or other financial
institution or institutional buyer or to a broker-dealer or underwriter.
(g) Any offer or sale of a preorganization certificate or subscription
if: (1) No commission or other remuneration is paid or given directly or
indirectly for soliciting any prospective subscriber and no advertising has
been published in connection with any such sale; (2) no payment is made
by any subscriber; and (3) such certificate or subscription is expressly
voidable by the subscriber until such subscriber has been notified of final
acceptance or completion of the organization and until the securities sub-
scribed for have been registered. The commissioner may require, by rules
and regulations or by order, reports of sales under this exemption.
(h) Any transaction pursuant to an offer to existing security holders
of the issuer, including persons who at the time of the transaction are
holders of convertible securities, nontransferable warrants or transferable
warrants exercisable within 90 days of their issuance, if: (1) No commis-
sion or other remuneration (other than a standby commission) is paid or
given directly or indirectly for soliciting any security holder in this state;
or (2) the issuer first files a notice specifying the terms of the offer and
the commissioner does not by order disallow the exemption within the
next five full business days.
(i) Any offer (but not a sale) of a security if: (1) Registration state-
ments for such security have been filed under both this act and the se-
curities act of 1933 if no stop order or refusal order is in effect and no
public proceeding or examination looking toward such an order is pending
under either act; or (2) a registration statement for such security has been
filed under K.S.A. 17-1258, and amendments thereto, no stop order or
emergency order issued pursuant to K.S.A. 17-1260, and amendments
thereto, is in effect and the offer is made on behalf of the issuer by a
(j) The issuance of any stock dividend, whether the corporation dis-
tributing the dividend is the issuer of the stock or not, if nothing of value
is given by stockholders for the distribution other than the surrender of
a right to a cash dividend where the stockholder can elect to take a div-
idend in cash or stock.
(k) A transaction involving the distribution of the securities of an is-
suer to the security holders of another person in connection with a
merger, consolidation, exchange of securities, sale of assets or other re-
organizations to which the issuer, or its parent or subsidiary, and the other
person, or its parent or subsidiary, are parties, if:
(1) The securities to be distributed are registered under the securities
act of 1933 before the consummation of the transaction; or
(2) the securities to be distributed are not required to be registered
under the securities act of 1933, written notice of the transaction and a
copy of the materials, if any, by which approval of the transaction will be
solicited is given to the commissioner at least 10 days before the consum-
mation of the transaction and the commissioner does not disallow, by
order, the exemption within the next 10 days.
(l) The offer or sale of securities by an issuer that is a corporation,
limited partnership or limited liability company formed under the laws
of the state of Kansas, if: (1) The aggregate number of sales by the issuer
in the twelve-month period ending on the date of the sale does not exceed
20 sales; (2) the seller believes that the purchaser is purchasing for in-
vestment; (3) no commission nor other remuneration is paid or given,
directly or indirectly, for soliciting the purchaser; and (4) neither the
issuer nor any person acting on its behalf shall offer or sell the securities
by any form of general solicitation or general advertising, including, but
not limited to, the following: (A) Any advertisement, article, notice or
other communication published in any newspaper, magazine or similar
media or broadcast over television or radio or (B) any seminar or meeting
whose attendees have been invited by any general solicitation or general
In calculating the number of sales in a twelve-month period, sales made
in violation of K.S.A. 17-1255, and amendments thereto, and sales exempt
from registration under subsection (a) or (l) shall be taken into account.
For purposes of the exemption in this subsection, a husband and wife
shall be considered as one purchaser. A corporation, partnership, asso-
ciation, joint-stock company, trust or other unincorporated organization
shall be considered as one purchaser unless it was organized for the pur-
pose of acquiring the purchased securities. In such case each beneficial
owner of equity interest or equity securities in the entity shall be consid-
ered a separate purchaser. The commissioner may withdraw this exemp-
tion or impose conditions upon its use.
(m) Any transaction pursuant to rules and regulations adopted by the
commissioner for limited offerings which was adopted for the purpose of
furthering the objectives of compatibility with federal exemptions and
uniformity among the states.
(n) Any transaction pursuant to rules and regulations adopted by the
commissioner concerning the offer or sale of an oil, gas or mining lease,
fee or title if the commissioner finds that registration is not necessary or
appropriate for the protection of investors.
(o) Any offer or sale by an investment company, as defined by K.S.A.
16-630, and amendments thereto, of its investment certificates.
(p) The offer or sale of a security, issued by Kansas Venture Capital,
Inc., or its successors.
(p) Any transaction through a registered broker-dealer or agent in-
volving a viatical investment. By rules, regulation or order, the commis-
sioner may require the filing of a notice and specify conditions for this
Sec. 18. K.S.A. 40-2240 is hereby amended to read as follows: 40-
2240. (a) Any small employer as defined in subsection (4) of K.S.A. 40-
2209d, and amendments thereto, may establish a small employer health
benefit plan for the purpose of providing a health benefit plan as de-
scribed in subsection (u) of K.S.A. 40-2209d, and amendments thereto,
covering such employers' eligible employees and such employees' family
members. If an association or trust is used for such purposes, the asso-
ciation or trust may not condition eligibility or membership on the health
status of members or employees.
(b) Employers desiring to offer a small employer health benefit plan
shall notify the commissioner and provide the commissioner with infor-
mation on the number of employees and family members to be covered
by the insurance described in K.S.A. 40-2209d, and amendments thereto.
The commissioner shall provide assistance to employers desiring to or-
ganize and maintain any such benefit plan and may aid in the acquisition
of the health care insurance by the small employer health benefit plan.
The commissioner shall issue a certificate to every employer participating
in any such small employer health benefit plan entitling such employer
to claim the tax credit authorized by K.S.A. 40-2246 and amendments
thereto subject to the following limitation: No certificate shall be issued
to any employer seeking the same after certificates have already been
issued under this act to employers offering health benefits described in
K.S.A. 40-2209d, and amendments thereto, to employees and family
members entitling such employers to claim the credits for taxable years
which commence after December 31, 1999, and before January 1, 2002.
Sec. 19. K.S.A. 40-2258 is hereby amended to read as follows: 40-
2258. (a) An accident and sickness insurer which offers coverage through
a group policy providing hospital, medical or surgical expense benefits
pursuant to K.S.A. 40-2209 and amendments thereto which includes
mental health benefits shall be subject to the following requirements:
(1) If the policy does not include an aggregate lifetime limit on sub-
stantially all hospital, medical and surgical expense benefits, the policy
may not impose any aggregate lifetime limit on mental health benefits;
(2) if the policy includes an aggregate lifetime limit on substantially
all hospital, medical and surgical expense benefits the plan shall either:
(A) Apply the applicable lifetime limit both to the hospital, medical and
surgical expense benefits to which it otherwise would apply and to mental
health benefits and not distinguished in the application of such limit be-
tween such hospital, medical and surgical expense benefits and mental
health benefits; or (B) not include any aggregate lifetime limit on mental
health benefits that is less than the applicable lifetime limit on hospital,
medical and surgical expense benefits;
(3) if the policy does not include an annual limit on substantially all
hospital, medical and surgical expense benefits, the plan or coverage may
not impose any annual limit on mental health benefits; and
(4) if the policy includes an annual limit on substantially all hospital,
medical and surgical expense benefits the policy shall either: (A) Apply
the applicable annual limit both to hospital, medical and surgical expense
benefits to which it otherwise would apply and to mental health benefits
and not distinguish in the application of such limit between such hospital,
medical and surgical expense benefits and mental health benefits; or (B)
not include any annual limit on mental health benefits that is less than
the applicable annual limit.
(b) If the group policy providing hospital, medical or surgical expense
benefits is not otherwise covered by subsection (a) and either does not
apply a lifetime or annual benefit or applies different lifetime or annual
benefits to different categories of hospital, medical and surgical expense
benefits, the commissioner may adopt rules and regulations under which
subsections (a)(2) and (a)(4) are applied to such policies with respect to
mental health benefits by substituting for the applicable lifetime or annual
limits an average limit that is computed taking into account the weighted
average of the lifetime or annual limits applicable to such categories.
(c) Nothing in this section shall be construed as either:
(1) Requiring an accident and sickness policy to offer mental health
benefits except as otherwise required by K.S.A. 40-2,105 and amend-
ments thereto; or
(2) affecting any terms and conditions of a policy which does include
mental health benefits including provisions regarding cost sharing, limits
on the number of visits or days of coverage, requirements relating to
medical necessity, requirements relating to the amount, duration or scope
of mental health benefits under the plan or coverage, except as specifically
provided in subsection (a).
(d) This section shall not apply to any group accident and health in-
surance policy which is sold to a small employer as defined in K.S.A. 40-
2209 and amendments thereto.
(e) This section shall not apply with respect to a group policy provid-
ing hospital, medical or surgical expense benefits if the application of this
section will result in an increase in the cost under the plan of at least 1%.
(f) In the case of a group policy providing hospital, medical or surgical
expense benefits that offers an eligible employee, member or dependent
two or more benefit package options under the policy, subsections (a)
and (b) shall be applied separately with respect to each such option.
(g) As used in this section:
(1) ``Aggregate lifetime limit'' means, with respect to benefits under
a group policy providing hospital, medical or surgical expense benefits, a
dollar limitation on the total amount that may be paid with respect to
such benefits under the policy with respect to an eligible employee, mem-
ber or dependent;
(2) ``annual limit'' means, with respect to benefits under a group pol-
icy providing hospital, medical or surgical expense benefits, a dollar lim-
itation on the total amount of benefits that may be paid with respect to
such benefits in a 12-month period under the policy with respect to an
eligible employee, member or dependent;
(3) ``hospital, medical or surgical expense benefits'' means benefits
with respect to hospital, medical or surgical services, as defined under
the terms of the policy, but does not include mental health benefits;
(4) ``mental health benefits'' means benefits with respect to mental
health services, as defined under the terms of the policy, but does not
include benefits with respect to treatment of substance abuse or chemical
(h) This section shall be effective for group policies providing hos-
pital, medical or surgical expense benefits which are entered into or re-
newed after January 1, 1998. This section shall not apply to benefits for
services furnished on or after September 30, 2001 December 31, 2002.
(i) The commissioner is hereby authorized to adopt such rules and
regulations as may be necessary to carry out the provisions of this section.
Sec. 20. K.S.A. 40-428a is hereby amended to read as follows: 40-
428a. (a) This section shall be known as the standard nonforfeiture law
for individual deferred annuities.
(b) This section shall not apply to any reinsurance, group annuity
purchased under a retirement plan or plan of deferred compensation
established or maintained by an employer (including a partnership or sole
proprietorship) or by an employee organization, or by both, other than a
plan providing individual retirement accounts or individual retirement
annuities under section 408 of the internal revenue code, as now or here-
after amended, premium deposit fund, variable annuity, investment an-
nuity, immediate annuity, any deferred annuity contract after annuity pay-
ments have commenced, or reversionary annuity, nor to any contract
which shall be delivered outside this state through an agent or other
representative of the company issuing the contract.
(c) In the case of contracts issued on or after the operative date of
this section as defined in subsection (1) paragraph (1) of this subsection,
no contract of annuity, except as stated in subsection (b), shall be deliv-
ered or issued for delivery in this state unless it contains in substance the
following provisions, or corresponding provisions which in the opinion of
the commissioner are at least as favorable to the contractholder, upon
cessation of payment of considerations under the contract.
(1) That upon cessation of payment of considerations under a con-
tract, the company will grant a paid-up annuity benefit on a plan stipu-
lated in the contract of such value as is specified in subsection (e), (f),
(g), (h), and (j).
(2) If a contract provides for a lump sum settlement at maturity, or
at any other time, that upon surrender of the contract at or prior to the
commencement of any annuity payments, the company will pay in lieu of
any paid-up annuity benefit a cash surrender benefit of such amount as
is specified in subsections (e), (f), (h), and (j). The company shall reserve
the right to defer the payment of such cash surrender benefit for a period
of six (6) months after demand therefor with surrender of the contract.
(3) A statement of the mortality table, if any, and interest rates used
in calculating any minimum paid-up annuity, cash surrender or death
benefits that are guaranteed under the contract, together with sufficient
information to determine the amounts of such benefits.
(4) A statement that any paid-up annuity, cash surrender or death
benefits that may be available under the contract are not less than the
minimum benefits required by any statute of the state in which the con-
tract is delivered and an explanation of the manner in which such benefits
are altered by the existence of any additional amounts credited by the
company to the contract, any indebtedness to the company on the con-
tract or any prior withdrawals from or partial surrenders of the contract.
Notwithstanding the requirements of this subsection, any deferred an-
nuity contract may provide that if no considerations have been received
under a contract for a period of two (2) full years and the portion of the
paid-up annuity benefit at maturity on the plan stipulated in the contract
arising from considerations paid prior to such period would be less than
twenty dollars ($20) $20 monthly, the company may at its option termi-
nate such contract by payment in cash of the then present value of such
portion of the paid-up annuity benefit, calculated on the basis of the
mortality table, if any, and interest rate specified in the contract for de-
termining the paid-up annuity benefit, and by such payment shall be
relieved of any further obligation under such contract.
(d) The minimum values as specified in subsections (e), (f), (g), (h)
and (j) of any paid-up annuity, cash surrender or death benefits available
under an annuity contract shall be based upon minimum nonforfeiture
amounts as defined in this subsection.
(1) With respect to contracts providing for flexible considerations, the
minimum nonforfeiture amount at any time at or prior to the commence-
ment of any annuity payments shall be equal to an accumulation up to
such time at a rate of interest of three percent (3%) 3% per annum of
percentages of the net considerations (as hereinafter defined) paid prior
to such time, decreased by the sum of:
(i) (A) Any prior withdrawals from or partial surrenders of the con-
tract accumulated at a rate of interest of three percent (3%) 3% per
(ii) (B) the amount of any indebtedness to the company on the con-
tract, including interest due and accrued, and increased by any existing
additional amounts credited by the company to the contract.
The net considerations for a given contract year used to define the
minimum nonforfeiture amount shall be an amount not less than zero
and shall be equal to the corresponding gross considerations credited to
the contract during that contract year less an annual contract charge of
thirty dollars ($30) $30 and less a collection charge of one dollar and
twenty-five cents ($1.25) $1.25 per consideration credited to the contract
during that contract year. The percentages of net considerations shall be
sixty-five percent (65%) 65% of the net consideration for the first contract
year and eighty-seven and one-half percent (871/2%) 87.5% of the net
considerations for the second and later contract years. Notwithstanding
the provisions of the preceding sentence, the percentage shall be sixty-
five percent (65%) 65% of the portion of the total net consideration for
any renewal contract year which exceeds by not more than two times the
sum of those portions of the net considerations in all prior contract years
for which the percentage was sixty-five percent (65%) 65%. Notwith-
standing any other provision of this paragraph, for any contract issued
on or after July 1, 2002, and before July 1, 2005, the interest rate at which
net considerations, prior withdrawals and partial surrenders shall be ac-
cumulated, for the purpose of determining nonforfeiture amounts, shall
be 1.5% per annum.
(2) With respect to contracts providing for fixed scheduled consid-
erations, minimum nonforfeiture amounts shall be calculated on the as-
sumption that considerations are paid annually in advance and shall be
defined as for contracts with flexible considerations which are paid an-
nually with two exceptions:
(a) (A) The portion of the net consideration for the first contract year
to be accumulated shall be the sum of sixty-five percent (65%) 65% of
the net consideration for the first contract year plus twenty-two and one-
half percent (221/2%) 22.5% of the excess of the net consideration for the
first contract year over the lesser of the net considerations for the second
and third contract years.
(b) (B) The annual contract charge shall be the lesser of (i) thirty
dollars ($30) $30 or (ii) ten percent (10%) 10% of the gross annual con-
(3) With respect to contracts providing for a single consideration,
minimum nonforfeiture amounts shall be defined as for contracts with
flexible considerations except that the percentage of net consideration
used to determine the minimum nonforfeiture amount shall be equal to
ninety percent (90%) 90% and the net consideration shall be the gross
consideration less a contract charge of seventy-five dollars ($75) $75.
(e) Any paid-up annuity benefit available under a contract shall be
such that its present value on the date annuity payments are to commence
is at least equal to the minimum nonforfeiture amount on that date. Such
present value shall be computed using the mortality table, if any, and the
interest rate specified in the contract for determining the minimum paid-
up annuity benefits guaranteed in the contract.
(f) For contracts which provide cash surrender benefits, such cash
surrender benefits available prior to maturity shall not be less than the
present value as of the date of surrender of that portion of the maturity
value of the paid-up annuity benefit which would be provided under the
contract at maturity arising from considerations paid prior to the time of
cash surrender reduced by the amount appropriate to reflect any prior
withdrawals from or partial surrenders of the contract, such present value
being calculated on the basis of an interest rate not more than one percent
(1%) 1% higher than the interest rate specified in the contract for accu-
mulating the net considerations to determine such maturity value, de-
creased by the amount of any indebtedness to the company on the con-
additional amounts credited by the company to the contract. In no event
shall any cash surrender benefit be less than the minimum nonforfeiture
amount at that time. The death benefit under such contracts shall be at
least equal to the cash surrender benefit.
(g) For contracts which do not provide cash surrender benefits, the
present value of any paid-up annuity benefit available as a nonforfeiture
option at any time prior to maturity shall not be less than the present
value of that portion of the maturity value of the paid-up annuity benefit
provided under the contract arising from considerations paid prior to the
time the contract is surrendered in exchange for, or changed to, a de-
ferred paid-up annuity, such present value being calculated for the period
prior to the maturity date on the basis of the interest rate specified in the
contract for accumulating the net considerations to determine such ma-
turity value, and increased by any existing additional amounts credited by
the company to the contract. For contracts which do not provide any
death benefits prior to the commencement of any annuity payments, such
present values shall be calculated on the basis of such interest rate and
the mortality table specified in the contract for determining the maturity
value of the paid-up annuity benefit. However, in no event shall the pres-
ent value of a paid-up annuity benefit be less than the minimum nonfor-
feiture amount at that time.
(h) For the purpose of determining the benefits calculated under
subsections (f) and (g), in the case of annuity contracts under which an
election may be made to have annuity payments commence at optional
maturity dates, the maturity date shall be deemed to be the latest date
for which election shall be permitted by the contract, but shall not be
deemed to be later than the anniversary of the contract next following
the annuitant's seventieth birthday or the tenth anniversary of the con-
tract, whichever is later.
(i) Any contract which does not provide cash surrender benefits or
does not provide death benefits at least equal to the minimum nonfor-
feiture amount prior to the commencement of any annuity payments shall
include a statement in a prominent place in the contract that such benefits
are not provided.
(j) Any paid-up annuity, cash surrender or death benefits available at
any time, other than on the contract anniversary under any contract with
fixed scheduled considerations, shall be calculated with allowance for the
lapse of time and the payment of any scheduled considerations beyond
the beginning of the contract year in which cessation of payment of con-
siderations under the contract occurs.
(k) For any contract which provides, within the same contract by rider
or supplemental contract provision, both annuity benefits and life insur-
ance benefits that are in excess of the greater of cash surrender benefits
or a return of the gross considerations with interest, the minimum non-
forfeiture benefits shall be equal to the sum of the minimum nonforfei-
ture benefits for the annuity portion and the minimum nonforfeiture ben-
efits, if any, for the life insurance portion computed as if each portion
were a separate contract. Notwithstanding the provisions of subsections
(e), (f), (g), (h) and (j), additional benefits payable (1) in the event of total
and permanent disability, (2) as reversionary annuity or deferred rever-
sionary annuity benefits, or (3) as other policy benefits additional to life
insurance, endowment, and annuity benefits, and considerations for all
such additional benefits, shall be disregarded in ascertaining the mini-
mum nonforfeiture amounts, paid-up annuity, cash surrender and death
benefits that may be required by this section. The inclusion of such ad-
ditional benefits shall not be required in any paid-up benefits, unless such
additional benefits separately would require minimum nonforfeiture
amounts, paid-up annuity, cash surrender and death benefits.
(l) After July 1, 1978, any company may file with the commissioner
a written notice of its election to comply with the provisions of this section
after a specified date before July 1, 1980. After the filing of such notice,
then upon such specified date, which shall be the operative date of this
section for such company, this section shall become operative with respect
to annuity contracts thereafter issued by such company. If a company
makes no such election, the operative date of this section for such com-
pany shall be July 1, 1980.
Sec. 21. K.S.A. 2001 Supp. 40-4909 is hereby amended to read as
follows: 40-4909. (a) The commissioner may deny, suspend, revoke or
refuse renewal of any license issued under this act if the commissioner
finds that the applicant or license holder has:
(1) Provided incorrect, misleading, incomplete or untrue information
in the license application.
(A) Any provision of chapter 40 of the Kansas Statutes Annotated,
and amendments thereto, or any rule and regulation promulgated there-
(B) any subpoena or order of the commissioner;
(C) any insurance law or regulation of another state; or
(D) any subpoena or order issued by the regulatory official for insur-
ance in another state.
(3) Obtained or attempted to obtain a license under this act through
misrepresentation or fraud.
(4) Improperly withheld, misappropriated or converted any moneys
or properties received in the course of doing insurance business.
(5) Intentionally misrepresented the provisions, terms and conditions
of an actual or proposed insurance contract or application for insurance.
(6) Been convicted of a misdemeanor or felony.
(7) Admitted to or been found to have committed any insurance un-
fair trade practice or fraud in violation of K.S.A. 40-2404 and amendments
(8) Used any fraudulent, coercive, or dishonest practice, or demon-
strated any incompetence, untrustworthiness or financial irresponsibility
in the conduct of business in this state or elsewhere.
(9) Had an insurance agent license, or its equivalent, denied, sus-
pended or revoked in any other state, district or territory.
(10) Forged another person's name to an application for insurance or
to any document related to an insurance transaction.
(11) Improperly used notes or any other reference material to com-
plete an examination for an insurance license issued under this act.
(12) Knowingly accepted insurance business from an individual who
is not licensed.
(13) Failed to comply with any administrative or court order imposing
a child support obligation upon the applicant or license holder.
(14) Failed to pay any state income tax or comply with any adminis-
trative or court order directing payment of state income tax.
(15) Rebated the whole or any part of any insurance premium or
offered in connection with the presentation of any contract of insurance
any other inducement not contained in the contract of insurance.
(16) Made any misleading representation or incomplete comparison
of policies to any person for the purposes of inducing or tending to induce
such person to lapse, forfeit or surrender such person's insurance then in
(b) In addition, the commissioner may suspend, revoke or refuse re-
newal of any license issued under this act if the commissioner finds that
the interests of the insurer or the insurable interests of the public are not
properly served under such license.
(c) Any action taken under this section which affects any license or
imposes any administrative penalty shall be taken only after notice and
an opportunity for a hearing conducted in accordance with the provisions
of the Kansas administrative procedures act.
(d) The license of any business entity may be suspended, revoked or
refused renewal if the insurance commissioner finds that any violation
committed by an individual licensee employed by or acting on behalf of
such business entity was known by or should have been known by one or
more of the partners, officers or managers acting on behalf of the business
(1) Such violation was not reported to the insurance commissioner
by such business entity; or
(2) such business entity failed to take any corrective action.
(e) None of the following actions shall deprive the commissioner of
any jurisdiction or right to institute or proceed with any disciplinary pro-
ceeding against such license, to render a decision suspending, revoking
or refusing to renew such license, or to establish and make a record of
the facts of any violation of law for any lawful purpose:
(1) The imposition of an administrative penalty under this section;
(2) the lapse or suspension of any license issued under this act by
operation of law;
(3) the licensee's failure to renew any license issued under this act;
(4) the licensee's voluntary surrender of any license issued under this
act. No such disciplinary proceeding shall be instituted against any li-
censee after the expiration of two years from the termination of the li-
(f) Whenever the commissioner imposes any administrative penalty
or denies, suspends, revokes or refuses renewal of any license pursuant
to subsection (a), any costs incurred as a result of conducting an admin-
istrative hearing authorized under the provisions of this section shall be
assessed against the person who is the subject of the hearing or any busi-
ness entity represented by such person who is the party to the matters
giving rise to the hearing. As used in this subsection, ``costs'' shall include
witness fees, mileage allowances, any costs associated with the reproduc-
tion of documents which become a part of the hearing record and the
expense of making a record of the hearing.
(g) No person whose license as an agent or broker had been sus-
pended or revoked shall be employed by any insurance company doing
business in this state either directly, indirectly, as an independent con-
tractor or otherwise to negotiate or effect contracts of insurance, sure-
tyship or indemnity or perform any act toward the solicitation of or trans-
action of any business of insurance during the period of such suspension
(h) In lieu of taking any action under subsection (a), the commis-
(1) Censure the person; or
(2) issue an order imposing an administrative penalty up to a maxi-
mum of $500 for each violation but not to exceed $2,500 for the same
violation occurring within any six consecutive calendar months from the
date of the original violation unless such person knew or should have
known that the violative act could give rise to disciplinary action under
subsection (a). If such person knew or reasonably should have known the
violative act could give rise to any disciplinary proceeding authorized by
subsection (a), the commissioner may impose a penalty up to a maximum
of $1,000 for each violation but not to exceed $5,000 for the same violation
occurring within any six consecutive calendar months from the date of
the imposition of the original administrative penalty.
Sec. 22. K.S.A. 2001 Supp. 40-2c01 is hereby amended to read as
follows: 40-2c01. As used in this act:
(a) ``Adjusted RBC report'' means an RBC report which has been
adjusted by the commissioner in accordance with K.S.A. 40-2c04, and
(b) ``Corrective order'' means an order issued by the commissioner
specifying corrective actions which the commissioner has determined are
required to address a RBC level event.
(c) ``Domestic insurer'' means any insurance company or risk reten-
tion group which is licensed and organized in this state.
(d) ``Foreign insurer'' means any insurance company or risk retention
group not domiciled in this state which is licensed or registered to do
business in this state pursuant to article 41 of chapter 40 of the Kansas
Statutes Annotated or K.S.A. 40-209, and amendments thereto.
(e) ``NAIC'' means the national association of insurance commission-
(f) ``Life and health insurer'' means any insurance company licensed
under article 4 or 5 of chapter 40 of the Kansas Statutes Annotated or a
licensed property and casualty insurer writing only accident and health
(g) ``Property and casualty insurer'' means any insurance company
licensed under articles 9, 10, 11, 12, 12a, 15 or 16 of chapter 40 of the
Kansas Statutes Annotated, but shall not include monoline mortgage
guaranty insurers, financial guaranty insurers and title insurers.
(h) ``Negative trend'' means, with respect to a life and health insurer,
a negative trend over a period of time, as determined in accordance with
the ``trend test calculation'' included in the RBC instructions defined in
(i) ``RBC'' means risk-based capital.
(j) ``RBC instructions'' mean the risk-based capital instructions prom-
ulgated by the NAIC, which are in effect on December 31, 2000 2001.
(k) ``RBC level'' means an insurer's company action level RBC, reg-
ulatory action level RBC, authorized control level RBC, or mandatory
control level RBC where:
(1) ``Company action level RBC'' means, with respect to any insurer,
the product of 2.0 and its authorized control level RBC;
(2) ``regulatory action level RBC'' means the product of 1.5 and its
authorized control level RBC;
(3) ``authorized control level RBC'' means the number determined
under the risk-based capital formula in accordance with the RBC instruc-
(4) ``mandatory control level RBC'' means the product of .70 and the
authorized control level RBC.
(l) ``RBC plan'' means a comprehensive financial plan containing the
elements specified in K.S.A. 40-2c06, and amendments thereto. If the
commissioner rejects the RBC plan, and it is revised by the insurer, with
or without the commissioner's recommendation, the plan shall be called
the ``revised RBC plan.''
(m) ``RBC report'' means the report required by K.S.A. 40-2c02, and
(n) ``Total adjusted capital'' means the sum of:
(1) An insurer's capital and surplus or surplus only if a mutual insurer;
(2) such other items, if any, as the RBC instructions may provide.
(o) ``Commissioner'' means the commissioner of insurance.
Sec. 23. K.S.A. 40-2,171, 40-2,172, 40-2,173, 40-2,174, 40-2,175, 40-
2,176, 40-2,177, 40-2,178, 40-2,179, 40-2,180, 40-2,181, 40-2,182, 40-
2,183, 40-428a, 40-2240 and 40-2258 and K.S.A. 2001 Supp. 17-1262, 40-
2c01 and 40-4909 are hereby repealed.
Sec. 24. This act shall take effect and be in force from and after its
publication in the Kansas register.
Approved May 17, 2002.
Published in the Kansas Register May 23, 2002.
Date Composed: 10/10/2002 Date Modified: 10/10/2002