SB1723 100TH GENERAL ASSEMBLY

LRB100 09238 SMS 19394 b

100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
SB1723

Introduced 2/9/2017, by Sen. Antonio Muņoz

SYNOPSIS AS INTRODUCED:

New Act

Creates the Insurance Industry Innovation Act. Creates the Innovation Division within the Department of Insurance to promote insurance product innovations. Provides that the Innovation Division shall be under the direction of the Deputy Director of the Innovation Division. Sets forth duties of the Deputy Director. Provides that an individual may petition the Department to waive or modify certain requirements in State statutes or Department rules related to an insurance innovation the individual offers or intends to offer. Provides that the petition shall demonstrate that the insurance innovation would serve the public interest, improve access to insurance products or services, and does not present systematic risk to the State and promotes consumer protection. Provides the process by which a petition is submitted to the Department and the process by which the Department may approve or reject the petition. Provides that, if the Department approves a petition, the person may enter into an enforceable compliance agreement with the Department, which includes the terms under which the insurance innovation may be offered. Provides that one year after the effective date, and annually thereafter, the Department shall report to the General Assembly on the aggregate impact of the enforceable compliance agreements. Provides that the Act is repealed on December 31, 2022. Effective January 1, 2018.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning regulation.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Insurance Industry Innovation Act.

Section 5. Definitions. In this Act:

"Covered person" means a person that offers or intends to offer an insurance innovation by submitting a petition to the Department of Insurance.

"Department" means the Department of Insurance.

"Deputy Director" means the Deputy Director of the Innovation Division of the Department of Insurance.

"Director" means the Director of Insurance.

"Enforceable compliance agreement" means a contractual agreement described in subsection (a) of Section 20.

"Insurance innovation" means an innovative service or product that is or may be subject to regulation by the Department of Insurance.

"Innovation Division" means the Innovation Division in the Department of Insurance.

Section 10. Department identification of regulatory ideas. No later than 60 days after the effective date of this Act, and annually thereafter, the Department shall publish on its website an exclusive list that identifies areas of existing regulation:

(1) that apply or may apply to an insurance innovation; and

(2) that the Department would consider modifying or waiving if the Department were to receive a petition under Section 20 relating to that regulation.

Section 15. Innovation Division.

(a) The Department shall establish an Innovation Division to promote insurance product innovations and to assist a covered person whose petition has been approved under Section 25.

(b) The Director shall appoint an individual to serve as the Deputy Director of the Innovation Division.

(c) The duties of the Deputy Director shall include:

(1) supporting the Department in the development of insurance innovations; and

(2) establishing procedures to reduce the time and cost of offering an insurance innovation to the public and enable greater access to insurance innovations.

(d) With respect to a covered person whose petition has been approved under Section 25, the Insurance Division shall:

(1) work with the covered person to address issues of how existing regulatory frameworks apply to the insurance innovation that is the subject of the petition;

(2) assist the covered person in complying with the requirements of State statutes of the insurance innovation; and

(3) assist the covered person in responding to any challenges to a modification or a waiver granted under subsection (e).

(e) With respect to a covered person whose petition has been approved under Section 20, if the Department has a rational basis for doing so and if the Department determines that a provision of a State statute under which the Department has rulemaking authority or a Department rule is burdensome to the covered person, the Department shall, acting through the Innovation Division, modify or waive the application of the State statute or the Department regulation.

(f) Not later than 90 days after the effective date of this Act, the Department shall modify any offices or programs at the Department that promote insurance innovations or assist covered persons in developing insurance innovations to operate within the Innovation Division. Any legal action or proceeding commenced by or against such office or program of the Department, including no-action letters and staff advisory opinions, shall be transferred to the Innovation Division.

(g) Not later than 6 months after the effective date of this Act, and annually thereafter, the Department shall submit a report to the General Assembly, and shall present testimony to the General Assembly, on the activities of the Innovation Division, including a description of the petitions considered, the rationale for acceptance or rejection of petitions, and the efforts of the Innovation Division to encourage insurance innovations.

Section 20. Petition to the Department.

(a) A covered person may submit a petition to the Department, through the Innovation Division, in such form and in such manner as the Innovation Division may require, to request to enter into an enforceable compliance agreement containing a modification or waiver of a rule of the Department or State statutory requirement under which the Department has rulemaking authority with respect to the covered person or an insurance innovation the covered person offers or intends to offer.

(b) A petition submitted under this Section, shall:

(1) include an alternative compliance strategy that proposes a method to comply with the Department rule or State statutory requirement; and

(2) demonstrate that under the alternative compliance strategy, the insurance innovation:

(A) would serve the public interest;

(B) improves access to insurance products or services; and

(C) does not present systemic risk to the State and promotes consumer protection.

(c) One or more covered persons that offers or intends to offer similar financial innovations may jointly submit a petition under this Section.

(d) During the period after a covered person submits a petition under this Section and before the Department makes a determination on the petition pursuant to Section 25, the Department may not take an enforcement action against a covered person relating to the insurance innovation that was the subject of the petition.

If the Department determines that an insurance innovation that a covered person has submitted presents an immediate danger to consumers or presents systemic risk to the State, the Department may prohibit a covered person from offering such financial innovation while the Department makes a determination on the petition.

(e) No later than 30 days after receiving a petition, the Department shall publish the petition on the Department's website and provide a 60-day period for public notice and comment.

The Department may waive the notice and comment period if the Department determines that the covered person submitting the petition is similarly situated to another covered person that has been granted approval of a petition pursuant to Section 25.

The Department shall maintain the confidentiality of any nonpublicly available data or information in any petition submitted under this Section. The Department shall give reasonable consideration to maintaining the confidentiality of data or information identified by the covered person in the petition submitting under this Section as nonpublicly available data or information.

Section 25. Department determination of petition.

(a) No later than 30 days after the end of the comment period pursuant to subsection (e) of Section 20, or if the comment period was waived, not later than 60 days after receipt of a petition under Section 20, the Director shall complete a review of the petition and notify the covered person, in writing, of the Department's determination of the petition.

(b) If the covered person submitting the petition shows that it is more likely than not that the covered person meets the requirements for establishing an alternative compliance strategy, the Department shall:

(1) approve the petition; and

(2) enter into an enforceable compliance agreement with the covered person in accordance with the requirements of Section 30.

(c) If the Department rejects a petition, the Director shall provide the covered person with a written notice explaining the reason for rejecting the petition, including:

(1) evidence that the covered person did not satisfy the requirements for establishing an alternative compliance strategy;

(2) an identification of the rules of the Department applicable to the covered person with respect to the insurance innovation; and

(3) a description of:

(A) any beneficial effects, including an identification of persons likely to benefit, from rejecting the petition;

(B) any potential costs, including an identification of persons likely to bear the costs, of rejecting the petition; and

(C) the baseline used by the Department to measure the likely economic consequences of rejecting the petition.

(d) No later than 90 days after receiving a notice of disapproval, a covered person may revise and resubmit a petition to the agency under Section 20.

(e) If the Department disapproves a petition submitted in good faith under this Section, the Department shall provide the covered person a reasonable amount of time before the Department takes an enforcement action against the covered person relating to the insurance innovation that was the subject of the petition.

Section 30. Enforceable compliance agreement.

(a) If the Department approves a petition under Section 25, the covered person may enter into an enforceable compliance agreement with the Department, which shall include the terms under which the covered person may develop or offer the approved insurance innovation to the public and any requirements of the covered person and the Department with respect to the insurance innovation.

(b) The Department, by rule, shall establish requirements relating to enforceable compliance agreements that include:

(1) procedures for modifying the terms of the agreement;

(2) consequences for failure to comply with the terms of the agreement;

(3) a compliance examination process that solicits feedback from other agencies on the agreement and occurs not less frequently than annually;

(4) a termination date for the agreement that is at least one year after the date on which the agreement is entered into;

(5) procedures for extending the termination date;

(6) procedures for judicial review; and

(7) procedures for maintaining the confidentiality of any information disclosed to the Department in making the agreement.

(c) If a covered person and the Department enter into an enforceable compliance agreement:

(1) another agency may not commence an enforcement action against the covered person with respect to the insurance innovation that is the subject of the enforceable compliance agreement; and

(2) a State agency may not commence an enforcement action against the covered person with respect to the insurance innovation that is the subject of the enforceable compliance agreement if the covered person provides the State agency with the enforcement compliance agreement and a statement of policies and procedures the covered person has in place to comply with State laws that are applicable to the financial innovation.

(d) Notwithstanding subsection (c) of this Section, the State may commence an enforcement action against a covered person with respect to an insurance innovation that is the subject of an enforceable compliance agreement if, in an action brought by the State in a court of competent jurisdiction, the court determines that the Department's action was arbitrary and capricious and the insurance innovation has substantially harmed consumers within the State.

(e) A covered person may elect to arbitrate any action initiated by another person relating to a financial innovation that is the subject of the enforceable compliance agreement.

Section 35. Report to the General Assembly. No later than one year after the effective date of this Act, and annually thereafter, the Department shall submit to the General Assembly a report on the aggregate impact of enforceable compliance agreements entered into under this Act, which shall include:

(1) the number and characteristics of the agreements;

(2) the most innovative and least burdensome tools that the Innovation Division has implemented for achieving regulatory ends;

(3) the existing State laws, rules, or practices that the Department identifies as the most burdensome to innovation in developing or providing insurance products and services, that adversely affect competition in the insurance industry, or that restrict improvements for consumers of insurance products or services; and

(4) an identification of the overlap or fragmentation of regulation of financial products or services and recommendations for reducing, consolidating, or eliminating such overlap or fragmentation.

Section 40. Funding. The Department, by rule, shall establish the cost of each application for petition.

Section 45. Rulemaking authority. The Director may adopt reasonable rules as necessary to implement the purposes and provisions of this Act.

Section 50. Repeal. This Act is repealed on December 31, 2022.

Section 99. Effective date. This Act takes effect January 1, 2018.