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Public Act 92-0587
SB1996 Enrolled LRB9215940JSpc
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
changing Section 500-80 as follows:
(215 ILCS 5/500-80)
Sec. 500-80. Commissions.
(a) An insurer or insurance producer may not pay a
commission, service fee, brokerage, or other valuable
consideration to a person for selling, soliciting, or
negotiating insurance in this State if that person is
required to be licensed under this Article and is not so
licensed at the time of selling, soliciting, or negotiating
the insurance.
(b) A person may not accept a commission, service fee,
brokerage, or other valuable consideration for selling,
soliciting, or negotiating insurance in this State if that
person is required to be licensed under this Article and is
not so licensed.
(c) Renewal or other deferred commissions may be paid to
a person for selling, soliciting, or negotiating insurance in
this State if the person was required to be licensed under
this Article at the time of the sale, solicitation, or
negotiation and was so licensed at that time.
(d) An insurer or insurance producer may pay or assign
commissions, service fees, brokerages, or other valuable
consideration to an insurance agency or to persons who do not
sell, solicit, or negotiate insurance in this State, unless
the payment would violate Section 151 of this Code.
(e) When an insurance producer or business entity
charges any fee or compensation separate from commissions
deductible from, or directly attributable to, premiums on
insurance policies or contracts, it must comply with all of
the following:
(1) It must provide written disclosure to the
consumer or contracting party that clearly specifies the
amount or extent of the compensation or fee prior to the
delivery of the corresponding policy. A copy of the
written disclosure must be maintained by the producer or
business entity that collects the compensation or fee for
a period of 7 years.
(2) If the combined compensation or fee exceeds 10%
of a directly attributable premium amount of a
corresponding contract or policy, the disclosure must
also include the signature of the consumer or contracting
party acknowledging the compensation or fee.
(3) If an insurance policy or contract is cancelled
for any reason within 90 days following the inception
date, the producer or business entity shall refund to the
consumer a prorated portion of the fee or compensation
within 30 days after the producer or business entity
receives proper documentation that the corresponding
insurance policy or contract has been cancelled. At no
time shall a producer or business entity charge the
consumer a fee or compensation for cancellation of any
insurance policy or contract.
(4) If the policy file contains documentation that
the producer performed a service corresponding to the
applicable coverage or policy and the written disclosure
stated that the fees were fully earned, then those fees
shall be fully earned at inception of the disclosure's
execution. Except as to commissions deductible from
premiums on insurance policies or contracts for
insurance, an insurance producer or business entity does
not have any right to compensation from an insured or
prospective insured for or on account of the transaction
of insurance business unless the right to compensation is
stated on a separate written memorandum that clearly
specifies the amount or extent of the service fee and
that is provided to the applicant or insured before the
performance of the service or the issuance of the policy,
whichever is first. A copy of the memorandum must be
maintained by any producer who collects or receives the
service fee or any portion of the service fee. If the
compensation or service fee exceeds 10% of the premium
amount or potential premium amount of the contract or
policy, the memorandum shall include the signature of the
insured or prospective insured acknowledging the
compensation or service fee.
(f) Any compensation or service fee received on a
contract or policy that is later canceled, within the first
half of the contract or policy period, for any reason must be
returned to the insured by the insurance producer or business
entity at a prorated amount. The prorated amount shall be
based on the length of the term of the policy or contract
compared to the time that contract or policy was in force
such that the amount returned reflects the portion of the
term of the contract or policy during which the contract was
not in force. There shall be no compensation or service fee
assessed or received on a contract or policy by the insurance
producer or business entity for processing such cancellation.
(Source: P.A. 92-386, eff. 1-1-02.)
Section 99. Effective date. This Act takes effect upon
becoming law.
Passed in the General Assembly April 23, 2002.
Approved June 26, 2002.
Effective June 26, 2002.
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