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 Provides that the Act is repealed on December 31, 2022.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.


LRB100 09238 SMS 19394 b

FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

SB1723LRB100 09238 SMS 19394 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Insurance Industry Innovation Act.
 
6    Section 5. Definitions. In this Act:
7    "Covered person" means a person that offers or intends to
8offer an insurance innovation by submitting a petition to the
9Department of Insurance.
10    "Department" means the Department of Insurance.
11    "Deputy Director" means the Deputy Director of the
12Innovation Division of the Department of Insurance.
13    "Director" means the Director of Insurance.
14    "Enforceable compliance agreement" means a contractual
15agreement described in subsection (a) of Section 20.
16    "Insurance innovation" means an innovative service or
17product that is or may be subject to regulation by the
18Department of Insurance.
19    "Innovation Division" means the Innovation Division in the
20Department of Insurance.
 
21    Section 10. Department identification of regulatory ideas.
22No later than 60 days after the effective date of this Act, and

 

 

SB1723- 2 -LRB100 09238 SMS 19394 b

1annually thereafter, the Department shall publish on its
2website an exclusive list that identifies areas of existing
3regulation:
4        (1) that apply or may apply to an insurance innovation;
5    and
6        (2) that the Department would consider modifying or
7    waiving if the Department were to receive a petition under
8    Section 20 relating to that regulation.
 
9    Section 15. Innovation Division.
10    (a) The Department shall establish an Innovation Division
11to promote insurance product innovations and to assist a
12covered person whose petition has been approved under Section
1325.
14    (b) The Director shall appoint an individual to serve as
15the Deputy Director of the Innovation Division.
16    (c) The duties of the Deputy Director shall include:
17        (1) supporting the Department in the development of
18    insurance innovations; and
19        (2) establishing procedures to reduce the time and cost
20    of offering an insurance innovation to the public and
21    enable greater access to insurance innovations.
22    (d) With respect to a covered person whose petition has
23been approved under Section 25, the Insurance Division shall:
24        (1) work with the covered person to address issues of
25    how existing regulatory frameworks apply to the insurance

 

 

SB1723- 3 -LRB100 09238 SMS 19394 b

1    innovation that is the subject of the petition;
2        (2) assist the covered person in complying with the
3    requirements of State statutes of the insurance
4    innovation; and
5        (3) assist the covered person in responding to any
6    challenges to a modification or a waiver granted under
7    subsection (e).
8    (e) With respect to a covered person whose petition has
9been approved under Section 20, if the Department has a
10rational basis for doing so and if the Department determines
11that a provision of a State statute under which the Department
12has rulemaking authority or a Department rule is burdensome to
13the covered person, the Department shall, acting through the
14Innovation Division, modify or waive the application of the
15State statute or the Department regulation.
16    (f) Not later than 90 days after the effective date of this
17Act, the Department shall modify any offices or programs at the
18Department that promote insurance innovations or assist
19covered persons in developing insurance innovations to operate
20within the Innovation Division. Any legal action or proceeding
21commenced by or against such office or program of the
22Department, including no-action letters and staff advisory
23opinions, shall be transferred to the Innovation Division.
24    (g) Not later than 6 months after the effective date of
25this Act, and annually thereafter, the Department shall submit
26a report to the General Assembly, and shall present testimony

 

 

SB1723- 4 -LRB100 09238 SMS 19394 b

1to the General Assembly, on the activities of the Innovation
2Division, including a description of the petitions considered,
3the rationale for acceptance or rejection of petitions, and the
4efforts of the Innovation Division to encourage insurance
5innovations.
 
6    Section 20. Petition to the Department.
7    (a) A covered person may submit a petition to the
8Department, through the Innovation Division, in such form and
9in such manner as the Innovation Division may require, to
10request to enter into an enforceable compliance agreement
11containing a modification or waiver of a rule of the Department
12or State statutory requirement under which the Department has
13rulemaking authority with respect to the covered person or an
14insurance innovation the covered person offers or intends to
15offer.
16    (b) A petition submitted under this Section, shall:
17        (1) include an alternative compliance strategy that
18    proposes a method to comply with the Department rule or
19    State statutory requirement; and
20        (2) demonstrate that under the alternative compliance
21    strategy, the insurance innovation:
22            (A) would serve the public interest;
23            (B) improves access to insurance products or
24        services; and
25            (C) does not present systemic risk to the State and

 

 

SB1723- 5 -LRB100 09238 SMS 19394 b

1        promotes consumer protection.
2    (c) One or more covered persons that offers or intends to
3offer similar financial innovations may jointly submit a
4petition under this Section.
5    (d) During the period after a covered person submits a
6petition under this Section and before the Department makes a
7determination on the petition pursuant to Section 25, the
8Department may not take an enforcement action against a covered
9person relating to the insurance innovation that was the
10subject of the petition.
11    If the Department determines that an insurance innovation
12that a covered person has submitted presents an immediate
13danger to consumers or presents systemic risk to the State, the
14Department may prohibit a covered person from offering such
15financial innovation while the Department makes a
16determination on the petition.
17    (e) No later than 30 days after receiving a petition, the
18Department shall publish the petition on the Department's
19website and provide a 60-day period for public notice and
20comment.
21    The Department may waive the notice and comment period if
22the Department determines that the covered person submitting
23the petition is similarly situated to another covered person
24that has been granted approval of a petition pursuant to
25Section 25.
26    The Department shall maintain the confidentiality of any

 

 

SB1723- 6 -LRB100 09238 SMS 19394 b

1nonpublicly available data or information in any petition
2submitted under this Section. The Department shall give
3reasonable consideration to maintaining the confidentiality of
4data or information identified by the covered person in the
5petition submitting under this Section as nonpublicly
6available data or information.
 
7    Section 25. Department determination of petition.
8    (a) No later than 30 days after the end of the comment
9period pursuant to subsection (e) of Section 20, or if the
10comment period was waived, not later than 60 days after receipt
11of a petition under Section 20, the Director shall complete a
12review of the petition and notify the covered person, in
13writing, of the Department's determination of the petition.
14    (b) If the covered person submitting the petition shows
15that it is more likely than not that the covered person meets
16the requirements for establishing an alternative compliance
17strategy, the Department shall:
18        (1) approve the petition; and
19        (2) enter into an enforceable compliance agreement
20    with the covered person in accordance with the requirements
21    of Section 30.
22    (c) If the Department rejects a petition, the Director
23shall provide the covered person with a written notice
24explaining the reason for rejecting the petition, including:
25        (1) evidence that the covered person did not satisfy

 

 

SB1723- 7 -LRB100 09238 SMS 19394 b

1    the requirements for establishing an alternative
2    compliance strategy;
3        (2) an identification of the rules of the Department
4    applicable to the covered person with respect to the
5    insurance innovation; and
6        (3) a description of:
7            (A) any beneficial effects, including an
8        identification of persons likely to benefit, from
9        rejecting the petition;
10            (B) any potential costs, including an
11        identification of persons likely to bear the costs, of
12        rejecting the petition; and
13            (C) the baseline used by the Department to measure
14        the likely economic consequences of rejecting the
15        petition.
16    (d) No later than 90 days after receiving a notice of
17disapproval, a covered person may revise and resubmit a
18petition to the agency under Section 20.
19    (e) If the Department disapproves a petition submitted in
20good faith under this Section, the Department shall provide the
21covered person a reasonable amount of time before the
22Department takes an enforcement action against the covered
23person relating to the insurance innovation that was the
24subject of the petition.
 
25    Section 30. Enforceable compliance agreement.

 

 

SB1723- 8 -LRB100 09238 SMS 19394 b

1    (a) If the Department approves a petition under Section 25,
2the covered person may enter into an enforceable compliance
3agreement with the Department, which shall include the terms
4under which the covered person may develop or offer the
5approved insurance innovation to the public and any
6requirements of the covered person and the Department with
7respect to the insurance innovation.
8    (b) The Department, by rule, shall establish requirements
9relating to enforceable compliance agreements that include:
10        (1) procedures for modifying the terms of the
11    agreement;
12        (2) consequences for failure to comply with the terms
13    of the agreement;
14        (3) a compliance examination process that solicits
15    feedback from other agencies on the agreement and occurs
16    not less frequently than annually;
17        (4) a termination date for the agreement that is at
18    least one year after the date on which the agreement is
19    entered into;
20        (5) procedures for extending the termination date;
21        (6) procedures for judicial review; and
22        (7) procedures for maintaining the confidentiality of
23    any information disclosed to the Department in making the
24    agreement.
25    (c) If a covered person and the Department enter into an
26enforceable compliance agreement:

 

 

SB1723- 9 -LRB100 09238 SMS 19394 b

1        (1) another agency may not commence an enforcement
2    action against the covered person with respect to the
3    insurance innovation that is the subject of the enforceable
4    compliance agreement; and
5        (2) a State agency may not commence an enforcement
6    action against the covered person with respect to the
7    insurance innovation that is the subject of the enforceable
8    compliance agreement if the covered person provides the
9    State agency with the enforcement compliance agreement and
10    a statement of policies and procedures the covered person
11    has in place to comply with State laws that are applicable
12    to the financial innovation.
13    (d) Notwithstanding subsection (c) of this Section, the
14State may commence an enforcement action against a covered
15person with respect to an insurance innovation that is the
16subject of an enforceable compliance agreement if, in an action
17brought by the State in a court of competent jurisdiction, the
18court determines that the Department's action was arbitrary and
19capricious and the insurance innovation has substantially
20harmed consumers within the State.
21    (e) A covered person may elect to arbitrate any action
22initiated by another person relating to a financial innovation
23that is the subject of the enforceable compliance agreement.
 
24    Section 35. Report to the General Assembly. No later than
25one year after the effective date of this Act, and annually

 

 

SB1723- 10 -LRB100 09238 SMS 19394 b

1thereafter, the Department shall submit to the General Assembly
2a report on the aggregate impact of enforceable compliance
3agreements entered into under this Act, which shall include:
4        (1) the number and characteristics of the agreements;
5        (2) the most innovative and least burdensome tools that
6    the Innovation Division has implemented for achieving
7    regulatory ends;
8        (3) the existing State laws, rules, or practices that
9    the Department identifies as the most burdensome to
10    innovation in developing or providing insurance products
11    and services, that adversely affect competition in the
12    insurance industry, or that restrict improvements for
13    consumers of insurance products or services; and
14        (4) an identification of the overlap or fragmentation
15    of regulation of financial products or services and
16    recommendations for reducing, consolidating, or
17    eliminating such overlap or fragmentation.
 
18    Section 40. Funding. The Department, by rule, shall
19establish the cost of each application for petition.
 
20    Section 45. Rulemaking authority. The Director may adopt
21reasonable rules as necessary to implement the purposes and
22provisions of this Act.
 
23    Section 50. Repeal. This Act is repealed on December 31,

 

 

SB1723- 11 -LRB100 09238 SMS 19394 b

12022.
 
2    Section 99. Effective date. This Act takes effect January
31, 2018.