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92_HB5800 LRB9215940JSpc 1 AN ACT concerning insurance. 2 Be it enacted by the People of the State of Illinois, 3 represented in the General Assembly: 4 Section 5. The Illinois Insurance Code is amended by 5 changing Section 500-80 as follows: 6 (215 ILCS 5/500-80) 7 Sec. 500-80. Commissions. 8 (a) An insurer or insurance producer may not pay a 9 commission, service fee, brokerage, or other valuable 10 consideration to a person for selling, soliciting, or 11 negotiating insurance in this State if that person is 12 required to be licensed under this Article and is not so 13 licensed at the time of selling, soliciting, or negotiating 14 the insurance. 15 (b) A person may not accept a commission, service fee, 16 brokerage, or other valuable consideration for selling, 17 soliciting, or negotiating insurance in this State if that 18 person is required to be licensed under this Article and is 19 not so licensed. 20 (c) Renewal or other deferred commissions may be paid to 21 a person for selling, soliciting, or negotiating insurance in 22 this State if the person was required to be licensed under 23 this Article at the time of the sale, solicitation, or 24 negotiation and was so licensed at that time. 25 (d) An insurer or insurance producer may pay or assign 26 commissions, service fees, brokerages, or other valuable 27 consideration to an insurance agency or to persons who do not 28 sell, solicit, or negotiate insurance in this State, unless 29 the payment would violate Section 151 of this Code. 30 (e) When an insurance producer or business entity 31 charges a fee or compensation separate from commissions -2- LRB9215940JSpc 1 deductible from, or directly attributable to, premiums on 2 insurance policies or contracts, it must comply with all of 3 the following: 4 (1) It must provide written disclosure to the 5 consumer or contracting party that clearly specifies the 6 amount or extent of the compensation or fee prior to the 7 delivery of the corresponding policy. A copy of the 8 written disclosure must be maintained by the producer or 9 business entity that collects the compensation or fee for 10 a period of 3 years. 11 (2) If the combined compensation or fee exceeds 10% 12 of a directly attributable premium amount of a 13 corresponding contract or policy, the disclosure must 14 also include the signature of the consumer or contracting 15 party acknowledging the compensation or fee. 16 (3) The compensation or fee shall be returned to 17 the consumer or contracting party within 30 days after 18 the properly documented receipt of a notice to the 19 producer or business entity that the corresponding 20 contract or policy has been cancelled. The amount to be 21 returned shall be calculated on a pro-rated basis for the 22 remaining time the policy will not be in force, not to 23 exceed 90 days. Compensation or fees returned shall not 24 include or offset for any processing or cancellation 25 charges attributable to effecting the return. 26 (4) If the consumer or contracting party's policy 27 file contains documentation that the producer performed a 28 service corresponding to the applicable coverage or 29 policy and the written disclosure stated that the fees 30 were fully earned, then those fees shall be fully earned 31 at inception of the disclosure statement's execution. 32
Except as to commissions deductible from premiums on33 insurance policies or contracts for insurance, an34 insurance producer or business entity does not have any-3- LRB9215940JSpc 1 right to compensation from an insured or prospective2 insured for or on account of the transaction of insurance3 business unless the right to compensation is stated on a4 separate written memorandum that clearly specifies the5 amount or extent of the service fee and that is provided6 to the applicant or insured before the performance of the7 service or the issuance of the policy, whichever is8 first. A copy of the memorandum must be maintained by9 any producer who collects or receives the service fee or10 any portion of the service fee. If the compensation or11 service fee exceeds 10% of the premium amount or12 potential premium amount of the contract or policy, the13 memorandum shall include the signature of the insured or14 prospective insured acknowledging the compensation or15 service fee.16 (f) Any compensation or service fee received on a17 contract or policy that is later canceled, within the first18 half of the contract or policy period, for any reason must be19 returned to the insured by the insurance producer or business20 entity at a prorated amount. The prorated amount shall be21 based on the length of the term of the policy or contract22 compared to the time that contract or policy was in force23 such that the amount returned reflects the portion of the24 term of the contract or policy during which the contract was25 not in force. There shall be no compensation or service fee26 assessed or received on a contract or policy by the insurance27 producer or business entity for processing such cancellation.28 (Source: P.A. 92-386, eff. 1-1-02.) 29 Section 99. Effective date. This Act takes effect upon 30 becoming law.
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