Texas Department of Insurance

Insurance Industry Information

Agent and Company Alert

Zero Premium Life Insurance

It has come to the attention of the Texas Department of Insurance ("Department") that a nontraditional product is being offered in the Stranger-Owned Life Insurance (STOLI) market.  Texas agents are being solicited to assist in the sale of what are frequently called "estate maximization plans," "zero premium life insurance" or "no cost to the insured" policies to consumers, most commonly elderly persons between the ages of 65 and 85.

The Department is investigating and gathering details regarding these offerings. This bulletin is to alert you as a Texas insurance agent to exercise caution with respect to these transactions.

Life insurance helps protect the people who depend on the insured for financial support. It can help pay final expenses and other expenses that the insured would have paid for through earnings, including mortgage payments, bills, dependent or child care and college tuition. Insurance agents and companies must be licensed by the Department to legally sell life insurance in the state.

Texas law provides that an individual may consent to another person purchasing insurance on his or her life. Texas law also allows owners of life insurance policies to sell existing life insurance policies to entities called viatical or life settlement providers. Viatical or life settlement providers and brokers are required to hold a certificate of registration issued by the Department in order to do business in Texas.

If, as a Texas agent, you are considering:

• Soliciting or selling life insurance products to your clients where another person purchases insurance on the client’s life in exchange for an immediate lump sum payment or a partial payment of the policy’s face value to beneficiaries upon the insured’s death;
• Soliciting or selling life insurance products to your clients for the sole purpose of their selling the policy to a viatical or life settlement provider; or
• Materially participating in transactions leading up to the purchase of life insurance for the above stated purposes; then

the Department offers the following suggestions:

• Inspect the insurance application and sales materials closely. If in doubt about the veracity or legitimacy of these products, contact the Department to make sure all forms and items have been properly filed and approved.
• Obtain all details about the program and have a complete understanding of your obligations. If necessary, discuss this information with an attorney.
• Confirm that all persons and entities involved in your transaction are properly licensed and registered by the Department. Agent, insurer, premium finance companies, and life or viatical settlement provider and broker licensure and registration can be verified at the Department’s website (www.tdi.state.tx.us), or through the Department’s toll-free Consumer Help Line (1-800-252-3439).
• Carefully consider the transactions in connection with potential violations of the Insurance Code, including those practices outlined in Insurance Code Chapter 541 which include rebating, improper inducements, misrepresentations, and other deceptive trade practices.
• Remember that filing an application for insurance containing materially false information may be prosecuted as insurance fraud and subject the actor to civil and criminal penalties.
• Insurance companies should investigate sudden spikes in production and business produced outside an agent's normal geographic territory.  
• Use common sense. Remember the warning "If it seems too good to be true, it probably is."

The Texas Insurance Code gives insurers and agents an affirmative duty to report suspicion of fraud, and provides certain immunities from civil liability for reporting suspected fraud to the Department.  Insurance companies have an obligation to notify the Department if they terminate an agent for cause. Texas law also provides for the assessment of various administrative penalties, including the revocation of an insurance agent's license, for failure to comply with any specific provision of the Texas Insurance Code, including, but not limited to, those regarding:

• unauthorized insurance;
• deceptive trade practices;
• advertising violations;
• rebating and other prohibited inducements;
• misrepresentation of terms and conditions of an insurance policy;
• misappropriation of money belonging to an insurer or insured; and
• fraudulent or dishonest conduct.

Insurance Industry Resource

• Advertising Workgroup Resource Page
• 2008 HelpInsure.com Price Comparisons Data Call FAQ's
• Data Calls and Registrations 
• Bond Resources  
• Companies Authorized to Offer GAP Insurance Coverage
• Company Licensing & Registration
• Compliance Workshop's
• E-Commerce and Insurance Regulation: A Q&A for Agents and Companies 
• Enforcement Actions
• Financial Responsibility Verification Program (FRVP)
• Health Maintenance Organizations
• Life & Health
• Rehabilitation & Liquidation Oversight
• Prompt Pay FAQs
• Property & Casualty Data Calls
• Property & Casualty Form/Rate Filings
• SDR - Special Deputy Receiver
• Surplus Lines 
• Title Insurance
• Voluntary Inspection Program
• Web Accessible Data Submission - Public Authentication
• Windstorm Inspection Program
• Workers' Compensation

Notices

Key Links
Links to Key / Most Requested Industry Pages
Managed Care Payor
Managed Care Payor Resource Page
Related Web Link
Uniform Certificate of Authority Application
ROC Reports on TDI Web Site
ROC Reports at www.tdi.state.tx.us/wc/regulation/index/roc.html
SB 14
SB14 FAQ
Windstorm
Windstorm Application Status and Re-Print Certificates