SB1688 95TH GENERAL ASSEMBLY

LRB095 07160 KBJ 27288 b

95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
SB1688

Introduced 2/9/2007, by Sen. Don Harmon

SYNOPSIS AS INTRODUCED:

215 ILCS 5/500-82 new

Amends the Illinois Insurance Code. Sets out the types of insurance producers that are exempt from the provisions of the Section. Requires an insurance producer to disclose in writing certain information to customers prior to binding coverage, disclose to each customer its compensation relating to that customer's policy prior to binding or renewing coverage, and disclose to each customer at the end of each calendar year all compensation received during the preceding year or anticipated to be received from any insurer or third party in connection with the placement of, renewal of, servicing of, or consultation on that customer's policy. Provides that an insurance producer may retain interest earned on premiums collected on behalf of insurers only after prior notification to the customers from whom such premiums are collected. Makes other changes.

A BILL FOR

AN ACT concerning insurance.

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

Section 5. The Illinois Insurance Code is amended by adding Section 500-82 as follows:

(215 ILCS 5/500-82 new)

Sec. 500-82. Business practices of certain insurance producers.

(a) The following types of insurance producers shall be exempt from the provisions of this Section:

(1) an insurance producer that is obligated by contract to sell, solicit, or negotiate insurance on behalf of only one insurer or group of affiliated insurers;

(2) an insurance producer that acts only as an intermediary between an insurer and another insurance producer, for example, a managing general agent, a sales manager, or a wholesale broker;

(3) a reinsurance intermediary; and

(4) a limited lines producer.

(b) In this Section:

"Affiliate" is a person that controls, is controlled by or is under common control with another person.

"Compensation" is any remuneration of material value received by an insurance producer in connection with the placement of, renewal of, servicing of, or consultation on any policy, including, but not limited to, money credits, loans, forgiveness of principal or interest, vacations, prizes, gifts, or the payment of employee salaries or expenses.

"Customer" is a person who signs an application or submission for insurance or the authorized representative of an insured or prospective insured who actually negotiates the placement or renewal of insurance. A person shall not be considered a customer for purposes of this Section if the person is merely a participant in or beneficiary of an employee benefit plan or is covered by a group or blanket insurance policy or group annuity contract sold, solicited, or negotiated by the insurance producer or an affiliate.

"Government authority" is any judicial, insurance regulatory, or other administrative authority of the United States or any state.

(c) In placing, renewing, servicing, or consulting on any policy, an insurance producer shall:

(1) prior to binding coverage, disclose in writing the following to each customer:

(A) all quotes and indications sought and all quotes and indications received by the insurance producer in connection with the coverage of the customer's risk with all terms, including, but not limited to, any interest of the insurance producer in or contractual agreements with any of the prospective insurers; and

(B) for each quote or indication, all compensation to be received by the insurance producer from any insurer or third party in connection with the placement of, renewal of, servicing of, or consultation on insurance for that customer, in dollars if known at the time or as a percent of premium if the dollar amount is not known at the time, or if the amount of such compensation is contingent, a description of the method and specific factors that will be utilized to calculate such compensation;

(2) provide disclosure to each customer of its compensation in plain, unambiguous written language in dollars if known at the time or as a percent of premium, or if the amount of such compensation is contingent, a description of the method and specific factors that will be utilized to calculate such compensation relating to that customer's policy and obtain written consent therefor from each customer prior to binding or renewing coverage; and

(3) disclose to each customer at the end of each calendar year all compensation received during the preceding year or anticipated to be received from any insurer or third party in connection with the placement, renewal, servicing of, or consultation on that customer's policy.

(d) An insurance producer may retain interest earned on premiums collected on behalf of insurers only after prior notification to the customers from whom such premiums are collected.