The two principal industry organizations are both based in Washington, D.C.: the Viatical and Life Settlement Association of America (VLSAA), and the National Viatical Association (NVA). Both organizations prescribe a code of ethics for their members. Like other trade and industry associations, these organizations attempt to represent their members in various areas and to promote the interests of their members and the public that the members serve. The primary difference between the two organizations is their focus: the NVA is concerned with the proper treatment of viators, the VLSAA approaches viatical transactions from the purchaser’s point of view.
Viatical and Life Settlement Association of America (VLSAA)
The Viatical and Life Settlement Association of America (VLSAA) was founded in 1995 as a non-profit trade association for members of the viatical and life settlement industry, associated businesses and consumers. It is the largest association in the business. The VLSAA complies fully with all applicable laws, anti-trust laws, federal, state and local laws and all trade regulation and legal requirements.
Since its inception, the VLSAA has been a leader in promoting responsible legislation and regulation of the industry. It has contributed conceptual and detailed language to actual laws governing the industry in most states throughout the United States.
These efforts have resulted in improved public information, public awareness and created a competitive market place for the purpose of serving the consumer a valuable financial service.
Members of the VLSAA must design an internal anti-fraud policy -- and file a copy of it with the Association. This plan must address use of viator’s medical information and efforts to review it, how to handle material inconsistancies in the application, coordination with state regulators in fighting fraud, and employee education and training. VLSAA members agree to not transact business using “wet paper”, i.e., policies still in their contestability period. Members must also agree to abide with its Code of Ethics and make various disclosures to purchasers of viaticated policies, including:
annual return is based on the insured‘s life expectancy, which cannot be guaranteed
the identity of the party responsible for payment of future premiums.
possible future premium payments due to improved health or reaching a limiting age under a waiver of premium provision
the identity of the person who evaluated the insured’s life expectancy
in the case of group coverage, possible termination of the group policy by the group owner and possible actions necessary to keep the coverage in force
the contestability of any possible claims by the insurance company under the contestability period, suicide clause, etc.
that investments in viaticated policies are illiquid, and
proper disclosure of company experience in regard to illustrations or example of past performance.
National Viatical Association (NVA)
The National Viatical Association (NVA) is dedicated to the ethical, professional, and compassionate management of pre-death purchase of life insurance policies of a terminally ill individuals. Realizing the rapid growth of the viatical industry, the National Viatical Association (NVA) was formed in 1993. NVA headquarters is located in Washington, D.C. The association sets the standards for the viatical industry and operates on behalf of its members and the individuals they serve.
Standards of Business Practice
Members of the National Viatical Association pledge to conduct their daily business practices in such a manner as:
To conform to all Federal and State laws and regulations;
To uphold the high standards as outlined in this Association's Code of Ethics;
To hold in the strictest of confidence the viator's medical history or current medical condition;
To encourage the viator to secure the advice and counsel of a financial planner, insurance professional, attorney and/or tax accountant before viaticating any policy;
To inform viators that the viatication of any policy might reduce or completely eliminate some government (Federal or State) entitlement programs that he/she might currently be receiving; therefore, seek advice from the proper governmental agencies;
To inform the viator as to whether or not the underwriting insurance company on the policy he/she wishes to viaticate has an accelerated death benefit program; and, whether he/she qualifies;
To assure the viator that at no time would my company solicit an investor that would be in a position to influence the treatment of the particular viator's illness;
To see that committed funds to a particular policy be placed with an escrow agent immediately upon receipt of the necessary documents to transfer ownership and/or beneficiary designation of the policy;
To see that the committed funds are released to the viator in strict compliance with the applicable contractual agreement upon the receipt from the insurer that the transfer of ownership and beneficiary designation has been accomplished;
To prohibit certain business practices by viatical settlement companies:
unfair and deceptive acts;
high pressure sales tactics;
direct solicitation of viators;
discrimination in the making of viatical settlement offers;
collusion in bidding, including communication of any offers made to a particular viator on a particular policy;
To perform our fiduciary responsibilities with respect to our clients so as not to create any adverse transactions.
Code of Ethics
As a member of the National Viatical Association, I pledge to:
Hold the selling of viatical settlements as a profession in high esteem.
Keep the needs of my clients always uppermost in all transactions.
Respect my clients' trust in me and never do anything which would betray that trust or confidence.
Provide, to the best of my ability, all information to my client which would assist him/her in making a well informed decision.
Use no advertising which may be false or misleading.
Conduct my business with such a high degree of professionalism that other's emulating my example would only help to elevate the standards of our vocation.
Be fair and just to my competitors.
Engage in no practice which might reflect unfavorably on myself or this industry.
Funding Company Discipline
In the recent past, the life-settlement industry has evolved significantly as institutional funding brought new quality standards, consumer protection, and transactional discipline. Viatical settlement providers with institutional financing have been thoroughly scrutinized and adhere to specific guidelines and underwriting practices. Considering the hundreds of millions of dollars each institution commits to the life settlement industry, only the leading settlement providers will get institutional funding. Institutionally funded companies have gone through meticulous due diligence to get their funding, which sets them worlds apart from life-settlement companies that seek individual investors. Companies that do not have institutional funding should be thoroughly evaluated because they may present consumer and transactional risks not associated with companies that fund policy purchases with institutional funds. Life-settlement companies that only purchase life insurance policies with institutional funds eliminate consumer risks and ensure the transaction's legitimacy. These companies also encourage a more regulated industry.