S.B. 230

This document includes Senate Committee Amendments incorporated into the bill on Wed, Feb 26, 2014 at 9:14 AM by lpoole. -->              1     

INSURANCE MODIFICATIONS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Jerry W. Stevenson

             5     
House Sponsor: James A. Dunnigan

             6     

             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Insurance Code to address travel insurance.
             10      Highlighted Provisions:
             11          This bill:
             12          .    enacts the Travel Insurance Act, including:
             13              .    defining terms;
             14              .    providing for the issuance of a limited lines insurance producer license;
             15              .    establishing requirements related to travel retailers;
             16              .    addressing offering or disseminating travel insurance;
             17              .    providing that travel insurance can be an individual, group, or master policy;
             18      and
             19              .    addressing market conduct and penalties;
             20          .    addresses sharing of commissions; and
             21          .    makes technical and conforming changes.
             22      Money Appropriated in this Bill:
             23          None
             24      Other Special Clauses:
             25          None
             26      Utah Code Sections Affected:
             27      AMENDS:



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             28
         31A-23a-106, as last amended by Laws of Utah 2013, Chapter 319
             29          31A-23a-504, as last amended by Laws of Utah 2013, Chapter 319
             30      ENACTS:
             31          31A-23a-901, Utah Code Annotated 1953
             32          31A-23a-902, Utah Code Annotated 1953
             33          31A-23a-903, Utah Code Annotated 1953
             34          31A-23a-904, Utah Code Annotated 1953
             35          31A-23a-905, Utah Code Annotated 1953
             36          31A-23a-906, Utah Code Annotated 1953
             37          31A-23a-907, Utah Code Annotated 1953
             38     

             39      Be it enacted by the Legislature of the state of Utah:
             40          Section 1. Section 31A-23a-106 is amended to read:
             41           31A-23a-106. License types.
             42          (1) (a) A resident or nonresident license issued under this chapter shall be issued under
             43      the license types described under Subsection (2).
             44          (b) A license type and a line of authority pertaining to a license type describe the type
             45      of licensee and the lines of business that a licensee may sell, solicit, or negotiate. A license
             46      type is intended to describe the matters to be considered under any education, examination, and
             47      training required of a license applicant under Sections 31A-23a-108 , 31A-23a-202 , and
             48      31A-23a-203 .
             49          (2) (a) A producer license type includes the following lines of authority:
             50          (i) life insurance, including a nonvariable contract;
             51          (ii) variable contracts, including variable life and annuity, if the producer has the life
             52      insurance line of authority;
             53          (iii) accident and health insurance, including a contract issued to a policyholder under
             54      Chapter 7, Nonprofit Health Service Insurance Corporations, or Chapter 8, Health Maintenance
             55      Organizations and Limited Health Plans;
             56          (iv) property insurance;
             57          (v) casualty insurance, including a surety or other bond;
             58          (vi) title insurance under one or more of the following categories:



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             59
         (A) search, including authority to act as a title marketing representative;
             60          (B) escrow, including authority to act as a title marketing representative; and
             61          (C) title marketing representative only; and
             62          (vii) personal lines insurance.
             63          (b) A surplus lines producer license type includes the following lines of authority:
             64          (i) property insurance, if the person holds an underlying producer license with the
             65      property line of insurance; and
             66          (ii) casualty insurance, if the person holds an underlying producer license with the
             67      casualty line of authority.
             68          (c) A limited line producer license type includes the following limited lines of
             69      authority:
             70          (i) limited line credit insurance;
             71          (ii) travel insurance, as set forth in Part 9, Travel Insurance Act;
             72          (iii) motor club insurance;
             73          (iv) car rental related insurance;
             74          (v) legal expense insurance;
             75          (vi) crop insurance;
             76          (vii) self-service storage insurance;
             77          (viii) bail bond producer;
             78          (ix) guaranteed asset protection waiver; and
             79          (x) portable electronics insurance.
             80          (d) A consultant license type includes the following lines of authority:
             81          (i) life insurance, including a nonvariable contract;
             82          (ii) variable contracts, including variable life and annuity, if the consultant has the life
             83      insurance line of authority;
             84          (iii) accident and health insurance, including a contract issued to a policyholder under
             85      Chapter 7, Nonprofit Health Service Insurance Corporations, or Chapter 8, Health Maintenance
             86      Organizations and Limited Health Plans;
             87          (iv) property insurance;
             88          (v) casualty insurance, including a surety or other bond; and
             89          (vi) personal lines insurance.



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             90
         (e) A managing general agent license type includes the following lines of authority:
             91          (i) life insurance, including a nonvariable contract;
             92          (ii) variable contracts, including variable life and annuity, if the managing general
             93      agent has the life insurance line of authority;
             94          (iii) accident and health insurance, including a contract issued to a policyholder under
             95      Chapter 7, Nonprofit Health Service Insurance Corporations, or Chapter 8, Health Maintenance
             96      Organizations and Limited Health Plans;
             97          (iv) property insurance;
             98          (v) casualty insurance, including a surety or other bond; and
             99          (vi) personal lines insurance.
             100          (f) A reinsurance intermediary license type includes the following lines of authority:
             101          (i) life insurance, including a nonvariable contract;
             102          (ii) variable contracts, including variable life and annuity, if the reinsurance
             103      intermediary has the life insurance line of authority;
             104          (iii) accident and health insurance, including a contract issued to a policyholder under
             105      Chapter 7, Nonprofit Health Service Insurance Corporations, or Chapter 8, Health Maintenance
             106      Organizations and Limited Health Plans;
             107          (iv) property insurance;
             108          (v) casualty insurance, including a surety or other bond; and
             109          (vi) personal lines insurance.
             110          (g) A person who holds a license under Subsection (2)(a) has the qualifications
             111      necessary to act as a holder of a license under Subsection (2)(c), except that the person may not
             112      act under Subsection (2)(c)(viii) or (ix).
             113          (3) (a) The commissioner may by rule recognize other producer, surplus lines producer,
             114      limited line producer, consultant, managing general agent, or reinsurance intermediary lines of
             115      authority as to kinds of insurance not listed under Subsections (2)(a) through (f).
             116          (b) Notwithstanding Subsection (3)(a), for purposes of title insurance the Title and
             117      Escrow Commission may by rule, with the concurrence of the commissioner and subject to
             118      Section 31A-2-404 , recognize other categories for an individual title insurance producer or
             119      agency title insurance producer line of authority not listed under Subsection (2)(a)(vi).
             120          (4) The variable contracts line of authority requires:



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             121
         (a) for a producer, licensure by the Financial Industry Regulatory Authority as a:
             122          (i) registered broker-dealer; or
             123          (ii) broker-dealer agent, with a current registration with a broker-dealer; and
             124          (b) for a consultant, registration with the Securities and Exchange Commission or
             125      licensure by the Utah Division of Securities as an:
             126          (i) investment adviser; or
             127          (ii) investment adviser representative, with a current association with an investment
             128      adviser.
             129          (5) A surplus lines producer is a producer who has a surplus lines license.
             130          Section 2. Section 31A-23a-504 is amended to read:
             131           31A-23a-504. Sharing commissions.
             132          (1) (a) Except as provided in Subsection 31A-15-103 (3), a licensee under this chapter
             133      or an insurer may only pay consideration or reimburse out-of-pocket expenses to a person if the
             134      licensee knows that the person is licensed under this chapter as to the particular type of
             135      insurance to act in Utah as:
             136          (i) a producer;
             137          (ii) a limited line producer;
             138          (iii) a consultant;
             139          (iv) a managing general agent; or
             140          (v) a reinsurance intermediary.
             141          (b) A person may only accept commission compensation or other compensation as a
             142      person described in Subsections (1)(a)(i) through (v) that is directly or indirectly the result of
             143      an insurance transaction if that person is licensed under this chapter to act as described in
             144      Subsection (1)(a).
             145          (2) (a) Except as provided in Section 31A-23a-501 , a consultant may not pay or receive
             146      a commission or other compensation that is directly or indirectly the result of an insurance
             147      transaction.
             148          (b) A consultant may share a consultant fee or other compensation received for
             149      consulting services performed within Utah only:
             150          (i) with another consultant licensed under this chapter; and
             151          (ii) to the extent that the other consultant contributed to the services performed.



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             152
         (3) This section does not prohibit:
             153          (a) the payment of renewal commissions to former licensees under this chapter, former
             154      Title 31, Chapter 17, or their successors in interest under a deferred compensation or agency
             155      sales agreement;
             156          (b) compensation paid to or received by a person for referral of a potential customer
             157      that seeks to purchase or obtain an opinion or advice on an insurance product if:
             158          (i) the person is not licensed to sell insurance;
             159          (ii) the person does not sell or provide opinions or advice on the product; and
             160          (iii) the compensation does not depend on whether the referral results in a purchase or
             161      sale; or
             162          (c) the payment or assignment of a commission, service fee, brokerage, or other
             163      valuable consideration to an agency or a person who does not sell, solicit, or negotiate
             164      insurance in this state, unless the payment would constitute an inducement or commission
             165      rebate under Section 31A-23a-402 or 31A-23a-402.5 .
             166          (4) (a) In selling a policy of title insurance, sharing of commissions under Subsection
             167      (1) may not occur if it will result in:
             168          (i) an unlawful rebate;
             169          (ii) compensation in connection with controlled business; or
             170          (iii) payment of a forwarding fee or finder's fee.
             171          (b) A person may share compensation for the issuance of a title insurance policy only
             172      to the extent that the person contributed to the search and examination of the title or other
             173      services connected with the title insurance policy.
             174          (5) This section does not apply to:
             175          (a) a bail bond producer or bail enforcement agent as defined in Section 31A-35-102
             176      and as described in Subsection 31A-23a-106 (2)(c);
             177          (b) a travel retailer registered pursuant to Part 9, Travel Insurance Act; or
             178          (c) a nonlicensed individual employee or authorized representative of a licensed
             179      limited line producer who holds one or more of the following limited lines of authority as
             180      described in Subsection 31A-23a-106 (2)(c):
             181          [(a)] (i) car rental related insurance;
             182          [(b)] (ii) self-service storage insurance; [or]



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Senate Committee Amendments 2-26-2014 lp/po
             183
         [(c)] (iii) portable electronics insurance[.]; or
             184          (iv) travel insurance.
             185          Section 3. Section 31A-23a-901 is enacted to read:
             186     
Part 9. Travel Insurance Act

             187          31A-23a-901. Title.
             188          This part is known as the "Travel Insurance Act."
             189          Section 4. Section 31A-23a-902 is enacted to read:
             190          31A-23a-902. Definitions.
             191          As used in this part, unless the context requires otherwise:
             192          (1) "Limited lines travel insurance producer" means one of the following designated by
             193      an insurer as the travel insurance supervising entity as provided in Subsection 31A-23a-905 (4):
             194           S. [ (a) a licensed managing general underwriter;
             195          (b)
] (a) .S
a licensed managing general agent or third party administrator; or
             196           S. [ (c) ] (b) .S a licensed insurance producer, including a limited lines producer.
             197          (2) "Offer and disseminate" means:
             198          (a) providing general information, including a description of the coverage and price;
             199          (b) processing an application;
             200          (c) collecting a premium; and
             201          (d) performing activities that the state permits to be done by a person who is not
             202      licensed.
             203          (3) (a) "Travel insurance" means insurance coverage for personal risks incident to
             204      planned travel, including:
             205          (i) interruption or cancellation of a trip or event;
             206          (ii) loss of baggage or personal effects;
             207          (iii) damages to accommodations or rental vehicles; or
             208          (iv) sickness, accident, disability, or death during travel.
             209          (b) "Travel insurance" does not include a major medical plan that provides
             210      comprehensive medical protection for a traveler with a trip lasting six months or longer,
             211      including an individual working overseas or military personnel being deployed.
             212          (4) "Travel retailer" means a business entity that makes, arranges, or offers travel
             213      services and may offer and disseminate travel insurance as a service to its customers on behalf



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             214
     of and under the direction of a limited lines travel insurance producer.
             215          Section 5. Section 31A-23a-903 is enacted to read:
             216          31A-23a-903. Issuance of limited lines travel insurance producer license.
             217          Notwithstanding any other provision of this chapter:
             218          (1) The commissioner may issue to an individual or business entity that has filed with
             219      the commissioner an application in a form and manner prescribed by the commissioner a
             220      limited lines travel insurance producer license that authorizes the limited lines travel insurance
             221      producer to sell, solicit, or negotiate travel insurance through a licensed insurer.
             222          (2) A limited lines travel insurance producer, and those registered under the license of
             223      the limited lines travel producer, are exempt from:
             224          (a) the examination requirements under Section 31A-23a-108 ; and
             225          (b) the continuing education requirements under Section 31A-23a-202 .
             226          Section 6. Section 31A-23a-904 is enacted to read:
             227          31A-23a-904. Travel retailers.
             228          Notwithstanding any other provision of this chapter, a travel retailer may offer and
             229      disseminate travel insurance under a limited lines travel insurance producer business entity
             230      license only if the following conditions are met:
             231          (1) The limited lines travel insurance producer or travel retailer shall provide to a
             232      purchaser of travel insurance:
             233          (a) a description of the material terms or the actual material terms of the insurance
             234      coverage;
             235          (b) a description of the process for filing a claim;
             236          (c) a description of the review or cancellation process for the travel insurance policy;
             237      and
             238          (d) the identity and contact information of the insurer and limited lines travel insurance
             239      producer.
             240          (2) (a) At the time of licensure, the limited lines travel insurance producer shall
             241      establish and maintain a register on a form prescribed by the commissioner of each travel
             242      retailer that offers travel insurance on the limited lines travel insurance producer's behalf.
             243          (b) The limited lines travel insurance producer shall maintain and update the register
             244      annually and include:



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             245
         (i) the name, address, and contact information of the travel retailer;
             246          (ii) the name, address, and contact information of an officer or person who directs or
             247      controls the travel retailer's operations; and
             248          (iii) the travel retailer's federal tax identification number.
             249          (c) The limited lines travel insurance producer shall submit the register to the
             250      department upon reasonable request by the department.
             251          (d) The limited lines travel insurance producer shall certify that the travel retailer
             252      registered with the limited lines travel insurance producer has not violated 18 U.S.C. Sec.
             253      1033.
             254          (3) The limited lines travel insurance producer shall designate one of its employees
             255      who is a licensed individual travel insurance producer as the designated responsible producer
             256      who is responsible for the limited lines travel insurance producer's compliance with the travel
             257      insurance laws and rules of the state.
             258          (4) The designated responsible producer, president, secretary, treasurer, and any other
             259      officer or person who directs or controls the limited lines travel insurance producer's insurance
             260      operations shall comply with the fingerprinting requirements applicable to insurance producers
             261      in the resident state of the limited lines travel insurance producer.
             262          (5) The limited lines travel insurance producer shall pay all applicable insurance
             263      producer licensing fees imposed in accordance with Section 31A-3-103 .
             264          (6) The limited lines travel insurance producer shall require an employee or authorized
             265      representative of a travel retailer whose duties include offering and disseminating travel
             266      insurance to receive a program of instruction or training that may be subject to review by the
             267      commissioner. The training materials shall, at a minimum, contain instructions on the types of
             268      insurance offered, ethical sales practices, and required disclosures to prospective customers.
             269          Section 7. Section 31A-23a-905 is enacted to read:
             270          31A-23a-905. Offering or disseminating travel insurance.
             271          (1) A travel retailer offering or disseminating travel insurance shall make available to a
             272      prospective purchaser a brochure or other written material that:
             273          (a) provides the identity and contact information of the insurer and the limited lines
             274      travel insurance producer;
             275          (b) explains that the purchase of travel insurance is not required to purchase any other



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             276
     product or service from the travel retailer; and
             277          (c) explains that an unlicensed travel retailer is permitted to provide general
             278      information about the insurance offered by the travel retailer, including a description of the
             279      coverage and price, but is not qualified or authorized to answer technical questions about the
             280      terms and conditions of the insurance offered by the travel retailer or to evaluate the adequacy
             281      of the prospective purchaser's existing insurance coverage.
             282          (2) A travel retailer's employee or authorized representative who is not licensed as an
             283      insurance producer may not:
             284          (a) evaluate or interpret the technical terms, benefits, and conditions of the offered
             285      travel insurance coverage;
             286          (b) evaluate or provide advice concerning a prospective purchaser's existing insurance
             287      coverage; or
             288          (c) hold the person out as a licensed insurer, licensed producer, or insurance expert.
             289          (3) Notwithstanding any other provision of this chapter, a travel retailer whose
             290      insurance-related activities, and those of its employees and authorized representatives, are
             291      limited to offering and disseminating travel insurance on behalf of and under the direction of a
             292      limited lines travel insurance producer meeting the conditions stated in this part, is authorized
             293      to do so and receive related compensation for services, upon registration of the limited lines
             294      travel insurance producer as described in Subsection 31A-23a-904 (2).
             295          (4) As the insurer designee, the limited lines travel insurance producer is responsible
             296      for the acts of the travel retailer and shall use responsible means to ensure compliance by the
             297      travel retailer under this part.
             298          Section 8. Section 31A-23a-906 is enacted to read:
             299          31A-23a-906. Travel insurance.
             300          Travel insurance may be provided under an individual policy or under a group or master
             301      policy.
             302          Section 9. Section 31A-23a-907 is enacted to read:
             303          31A-23a-907. Market conduct and penalties.
             304          A limited lines travel insurance producer and any travel retailer offering and
             305      disseminating travel insurance under the limited lines travel insurance producer license are
             306      subject to Sections 31A-2-308 , 31A-23a-402 , and 31A-23a-402.5 .



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Legislative Review Note
    as of 2-20-14 3:33 PM


Office of Legislative Research and General Counsel


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