The Department explained that if any policy purchased from a New York resident is from aviator, (see New York Insurance Law [section] 7801(b)), the purchaser would have to be licensed as a viatical settlement company
and the producer of such policy would have to be licensed as a viatical settlement broker.
According to an article in the July 31, 1992 issue of The Wall Street Journal, "the first viatical settlement company
was started in 1989 by Robert Worley, Jr.
With most viatical settlements, the insured has no control over the death benefit because the policy belongs to the viatical settlement company
after the transaction is completed.
which he said was the nation's first institutionally funded and publicly held viatical settlement company
One way to defraud the investor is to sell a viatical knowing that the insured lied about his or her health condition when applying for the policy, as did one Florida viatical settlement company
To determine the life expectancy of the viator, the viatical settlement company
has a board of physicians evaluate the person's illness, basing their findings on medical records, laboratory reports and current actuarial tables.
4) The viatical settlement company
may then hold the policy, sell the policy to an individual investor, or pool the policy with others and sell fractions of the pool to investors.
In the first possible event, the insured irrevocably assigns his life insurance policy to a Viatical settlement company
in consideration of a payment of an accelerated death benefit by the company (not the company that issued the policy).
In Private Letter Ruling 9443020 (July 22, 1994), the IRS was asked whether an amount paid to a terminally ill person insured by a viatical settlement company
upon the assignment of a life insurance contract was excludable from income under IRC section 101(a).
In addition, these new rules also apply to the sale or assignment of a terminally or chronically ill individual's life insurance policy to a qualified viatical settlement company
(one that typically purchases those policies for a percentage of face value).