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H.B. 195





Sponsor: James A. Dunnigan

             6      LONG TITLE
             7      General Description:
             8          This bill modifies various provisions of the Insurance Code.
             9      Highlighted Provisions:
             10          This bill:
             11          .    addresses general powers and duties of the commissioner;
             12          .    requires insurers to pay taxes required by Title 59, Revenue and Taxation, to the
             13      State Tax Commission;
             14          .    corrects citations;
             15          .    increases from three to five years the amount of time that insurers must maintain
             16      certain records;
             17          .    addresses termination of insurance policies by insurers;
             18          .    addresses reporting requirements;
             19          .    addresses unfair marketing practices;
             20          .    extends the sunset date for comparison tables;
             21          .    repeals a provision related to transitioning prior licensees; and
             22          .    makes technical changes.
             23      Monies Appropriated in this Bill:
             24          None
             25      Other Special Clauses:
             26          None
             27      Utah Code Sections Affected:

             28      AMENDS:
             29          31A-2-201, as last amended by Chapter 108, Laws of Utah 2004
             30          31A-5-211, as last amended by Chapter 116, Laws of Utah 2001
             31          31A-8-201, as enacted by Chapter 204, Laws of Utah 1986
             32          31A-8-301, as last amended by Chapter 90, Laws of Utah 2004
             33          31A-21-201, as last amended by Chapter 252, Laws of Utah 2003
             34          31A-21-303, as last amended by Chapter 266, Laws of Utah 2004
             35          31A-22-633, as enacted by Chapter 1, Laws of Utah 2002
             36          31A-23a-402, as renumbered and amended by Chapter 298, Laws of Utah 2003
             37          63-55-231, as last amended by Chapter 254, Laws of Utah 2003
             38      ENACTS:
             39          31A-3-205, Utah Code Annotated 1953
             40      REPEALS:
             41          31A-8-302, as enacted by Chapter 204, Laws of Utah 1986
             43      Be it enacted by the Legislature of the state of Utah:
             44          Section 1. Section 31A-2-201 is amended to read:
             45           31A-2-201. General duties and powers.
             46          (1) The commissioner shall administer and enforce this title.
             47          (2) The commissioner has all powers specifically granted, and all further powers that
             48      are reasonable and necessary to enable [him] the commissioner to perform the duties imposed
             49      by this title.
             50          (3) (a) The commissioner may make rules to implement the provisions of this title
             51      according to the procedures and requirements of Title 63, Chapter 46a, Utah Administrative
             52      Rulemaking Act.
             53          (b) In addition to the notice requirements of Section 63-46a-4 , the commissioner shall
             54      provide notice under Section 31A-2-303 of hearings concerning insurance department rules.
             55          (4) (a) The commissioner shall issue prohibitory, mandatory, and other orders as
             56      necessary to secure compliance with this title. An order by the commissioner is not effective
             57      unless the order:
             58          (i) is in writing; and

             59          (ii) is signed by the commissioner or under the commissioner's authority.
             60          (b) On request of any person who would be affected by an order under Subsection
             61      (4)(a), the commissioner may issue a declaratory order to clarify the person's rights or duties.
             62          (5) (a) The commissioner may hold informal adjudicative proceedings and public
             63      meetings, for the purpose of:
             64          (i) investigation[,];
             65          (ii) ascertainment of public sentiment[,]; or
             66          (iii) informing the public.
             67          (b) [No] An effective rule or order may not result from informal hearings and meetings
             68      unless the requirement of a hearing under [Section 31A-2-301 ] this section is satisfied.
             69          (6) The commissioner shall inquire into violations of this title and may conduct any
             70      examinations and investigations of insurance matters, in addition to examinations and
             71      investigations expressly authorized, that [he] the commissioner considers proper to determine:
             72          (a) whether or not any person has violated any provision of this title; or
             73          (b) to secure information useful in the lawful administration of [any provision of] this
             74      title.
             75          (7) (a) Each year, the commissioner shall:
             76          (i) conduct an evaluation of the state's health insurance market;
             77          (ii) report the findings of the evaluation to the Health and Human Services Interim
             78      Committee before October 1; and
             79          (iii) publish the findings of the evaluation [of] on the department website.
             80          (b) The evaluation required by Subsection (7)(a) shall:
             81          (i) analyze the effectiveness of the insurance regulations and statutes in promoting a
             82      healthy, competitive health insurance market that meets the needs of Utahns by assessing such
             83      things as:
             84          (A) the availability and marketing of individual and group products[,];
             85          (B) rate charges[,];
             86          (C) coverage and demographic changes[,];
             87          (D) benefit trends[,];
             88          (E) market share changes[,]; and
             89          (F) accessibility;

             90          (ii) assess complaint ratios and trends within the health insurance market, which
             91      assessment shall integrate complaint data from the Office of Consumer Health Assistance
             92      within the department;
             93          (iii) contain recommendations for action to improve the overall effectiveness of the
             94      health insurance market, administrative rules, and statutes; and
             95          (iv) include claims loss ratio data for each insurance company doing business in the
             96      state.
             97          (c) When preparing the evaluation required by this [section] Subsection (7), the
             98      commissioner may seek the input of insurers, employers, insured persons, providers, and others
             99      with an interest in the health insurance market.
             100          Section 2. Section 31A-3-205 is enacted to read:
             101          31A-3-205. Taxation of insurance companies.
             102          An admitted insurer shall pay to the State Tax Commission taxes imposed on the
             103      admitted insurer by Title 59, Revenue and Taxation.
             104          Section 3. Section 31A-5-211 is amended to read:
             105           31A-5-211. Minimum capital or permanent surplus requirements.
             106          (1) (a) Except as provided in Subsections (4) and (5), insurers being organized or
             107      operating under this chapter shall maintain minimum capital or permanent surplus for a mutual,
             108      in amounts specified in Subsection (2).
             109          (b) The certificate of authority issued under Section 31A-5-212 does not permit an
             110      insurer to transact types of insurance for which the insurer does not have the required minimum
             111      capital or permanent surplus for a mutual, in at least the amounts specified under Subsection
             112      (2).
             113          (c) [The types of insurance under this section are defined in Section 31A-1-301 .]
             114      Minimum capital and permanent surplus requirements under this section are based upon all
             115      types of insurance transacted by the insurer in any and all areas which it operates, whether or
             116      not only a portion of those types of insurance is or is to be transacted in this state.
             117          (2) The minimum capital, or permanent surplus for a nonassessable mutual, is as
             118      follows for the indicated types of insurance:
             119          (a) life, annuity, accident and health, or any combination of these

             120          (b) subject to an aggregate maximum of $1,000,000 for more than one of the following

             121      types of coverages:
             122          (i) property insurance

             123          (ii) surety insurance

             124          (iii) bail bonds insurance only

             125          (iv) marine and transportation insurance

             126          (v) vehicle liability insurance, residential dwelling liability insurance,
             127              or both

             128          (vi) liability insurance

             129          (vii) workers' compensation insurance

             130          (c) title insurance

             131          (d) professional liability insurance, excluding medical malpractice

             132          (e) professional liability, including medical malpractice

             133          (f) all types of insurance, except life, annuity, or title

             134          (3) Prior to beginning operations, an insurer licensed under this chapter shall have total
             135      adjusted capital in excess of the company action level RBC as defined in Subsection
             136      31A-17-601 (8)(b).
             137          (4) (a) Subject to Subsections (4)(b) and (4)(c), an insurer holding a valid certificate of
             138      authority to transact insurance in this state prior to July 1, 1986, continues to be authorized to
             139      transact the same kinds of insurance as permitted by that certificate of authority, if the insurer
             140      maintains not less than the amount of minimum capital or permanent surplus required for that
             141      authority under the laws of this state in force immediately prior to July 1, 1986.
             142          (b) If, after July 1, 1986, an insurer ever has minimum capital or permanent surplus
             143      that meets or exceeds the requirements of Subsections (2) and (3), then Subsection (4)(a) is
             144      inapplicable to that insurer and it shall comply with Subsections (2) and (3).
             145          (c) Any insurer satisfying the minimum capital or permanent surplus requirement
             146      through application of Subsection (4)(a) shall comply with Subsections (2) and (3) by July 1,
             147      1990.
             148          (d) Beginning July 1, 1987, former county mutuals shall comply with the capital and
             149      surplus requirements of this section.
             150          (5) (a) (i) An assessable mutual may be organized under this chapter, but it may not
             151      issue life insurance or annuities.

             152          (ii) An assessable mutual need not have a permanent surplus if the assessment liability
             153      of its policyholders is unlimited and all insurance policies clearly state that.
             154          (iii) If assessments are limited to a specified amount or a specified multiple of annual
             155      advance premiums, the minimum permanent surplus is the amount that would be required
             156      under Subsections (2) and (3) if the corporation were not assessable, reduced by an amount that
             157      reasonably reflects the value of the policyholders' assessment liability in satisfying the financial
             158      needs of the corporation.
             159          (iv) The liability of members in an assessable mutual is joint and several up to the
             160      limits provided by:
             161          (A) the articles of incorporation of the assessable mutual; or
             162          (B) this title.
             163          (b) (i) Except as provided in Subsections (5)(c) and (d), [no] a certificate of authority
             164      may not be issued to an assessable mutual until it has at least 400 bona fide applications for
             165      insurance from not less than 400 separate applicants, on separate risks located in this state, in
             166      each of the classes of business upon which assessments may be separately levied. A full year's
             167      premium shall be paid with each application and the aggregate premium is at least $50,000 for
             168      each class.
             169          (ii) If at any time while the corporation is an assessable mutual, the business plan is
             170      amended to include an additional class of business on which assessments may be separately
             171      levied, identical requirements of Subsection (5)(b)(i) are applicable to each additional class.
             172          (c) Five or more employers may join in the formation of an assessable mutual to write
             173      only workers' compensation insurance if, instead of the requirements of Subsection (5)(b),
             174      policies are simultaneously put into effect that cover at least 1,500 employees, with no single
             175      employer having more than 1/5 of the employees insured by the assessable mutual. A full
             176      year's premium shall be paid by each employer, aggregating at least $200,000.
             177          (d) (i) The number and amount of required initial applications and premium payments
             178      may be reduced by substituting surplus for the applications or premium payments.
             179          (ii) The commissioner shall determine the reduction in required initial applications and
             180      premium payments that is appropriate for a given amount of surplus.
             181          (iii) The insurer shall continue to be assessable until conversion under Subsection
             182      [ 31A-5-508 ] 31A-5-507 (1) to a nonassessable mutual.

             183          (6) (a) The capital or permanent surplus requirements of Subsection (2) apply to
             184      persons seeking certificates of authority under this chapter to write reinsurance.
             185          (b) This Subsection (6) may not be construed as requiring reinsurers to obtain a
             186      certificate of authority. [However,]
             187          (c) Section 31A-17-404 imposes alternate safety prerequisites to reserve credit being
             188      granted for reinsurance ceded to a reinsurer without a certificate of authority.
             189          Section 4. Section 31A-8-201 is amended to read:
             190           31A-8-201. Scope of part.
             191          This part applies to all organizations doing business in this state[, including foreign
             192      organizations subject to the transition provision provided in Section 31A-8-302 ].
             193          Section 5. Section 31A-8-301 is amended to read:
             194           31A-8-301. Requirements for doing business in state.
             195          (1) [Except as provided in Section 31A-8-302 , only corporations] Only a corporation
             196      incorporated and licensed under Part 2, Domestic Organizations, may do business in this state
             197      as an organization.
             198          (2) To do business in this state as an organization, foreign corporations doing a similar
             199      business in other states shall incorporate a subsidiary and license if under Part 2, Domestic
             200      Organizations, for its Utah business. Except as to Chapter 16, Insurance Holding Companies,
             201      the laws applicable to domestic organizations apply only to the organization and not to its
             202      foreign parent corporation.
             203          Section 6. Section 31A-21-201 is amended to read:
             204           31A-21-201. Filing of forms.
             205          (1) (a) Except as exempted under Subsections 31A-21-101 (2) through (6), a form may
             206      not be used, sold, or offered for sale unless the form has been filed with the commissioner.
             207          (b) A form is considered filed with the commissioner when the commissioner receives:
             208          (i) the form;
             209          (ii) the applicable filing fee as prescribed under Section 31A-3-103 ; and
             210          (iii) the applicable transmittal forms as required by the commissioner.
             211          (2) In filing a form for use in this state the insurer is responsible for assuring that the
             212      form is in compliance with this title and rules adopted by the commissioner.
             213          (3) (a) The commissioner may prohibit the use of a form at any time upon a finding

             214      that:
             215          (i) the form is:
             216          (A) inequitable;
             217          (B) unfairly discriminatory;
             218          (C) misleading;
             219          (D) deceptive;
             220          (E) obscure;
             221          (F) unfair;
             222          (G) encourages misrepresentation; or
             223          (H) not in the public interest;
             224          (ii) the form provides benefits or contains other provisions that endanger the solidity of
             225      the insurer;
             226          (iii) in the case of the basic policy and the application for a basic policy, the basic
             227      policy or application for the basic policy fails to conspicuously, as defined by rule, provide:
             228          (A) the exact name of the insurer;
             229          (B) the state of domicile of the insurer filing the basic policy or application for the
             230      basic policy; and
             231          (C) for life insurance and annuity policies only, the address of the administrative office
             232      of the insurer filing the basic policy or application for the basic policy;
             233          (iv) the form violates a statute or a rule adopted by the commissioner; or
             234          (v) the form is otherwise contrary to law.
             235          (b) Subsection (3)(a)(iii) does not apply to riders and endorsements to a basic policy.
             236          (c) (i) Whenever the commissioner prohibits the use of a form under Subsection (3)(a),
             237      the commissioner may order that, on or before a date not less than 15 days after the order, the
             238      use of the form be discontinued.
             239          (ii) Once a form has been prohibited, the form may not be used unless appropriate
             240      changes are filed with and reviewed by the commissioner.
             241          (iii) Whenever the commissioner prohibits the use of a form under Subsection (3)(a),
             242      the commissioner may require the insurer to disclose contract deficiencies to existing
             243      policyholders.
             244          (d) If the commissioner prohibits use of a form under this Subsection (3), the

             245      prohibition shall:
             246          (i) be in writing;
             247          (ii) constitute an order; and
             248          (iii) state the reasons for the prohibition.
             249          (4) (a) If, after a hearing, the commissioner determines that it is in the public interest,
             250      the commissioner may require by rule or order that certain forms be subject to the
             251      commissioner's approval prior to their use.
             252          (b) The rule or order described in Subsection (4)(a) shall prescribe the filing
             253      procedures for the forms if the procedures are different than the procedures stated in this
             254      section.
             255          (c) The types of forms that may be addressed under Subsection (4)(a) include:
             256          (i) a form for a particular class of insurance;
             257          (ii) a form for a specific line of insurance;
             258          (iii) a specific type of form; or
             259          (iv) a form for a specific market segment.
             260          (5) (a) An insurer shall maintain a complete and accurate record of the following for
             261      the time period described in Subsection (5)(b):
             262          (i) any form:
             263          (A) filed under this section for use; and
             264          (B) that is in use; and
             265          (ii) any document filed under this section with a form described in Subsection (5)(a)(i).
             266          (b) The insurer shall maintain a record required under Subsection (5)(a) for the balance
             267      of the current year, plus [three] five years from:
             268          (i) the last day on which the form is used; or
             269          (ii) the last day any policy that is issued using the form is in effect.
             270          Section 7. Section 31A-21-303 is amended to read:
             271           31A-21-303. Termination of insurance policies by insurers.
             272          (1) (a) Except as otherwise provided in this section, in other statutes, or by rule under
             273      Subsection (1)(c), this section applies to all policies of insurance [other than]:
             274          (i) except for:
             275          (A) life[,] insurance;

             276          (B) accident and health insurance[,]; and
             277          (C) annuities[,]; and
             278          (ii) if the policies of insurance are issued on forms that are subject to filing [and
             279      approval] under Subsection 31A-21-201 (1).
             280          (b) A policy may provide terms more favorable to insureds than this section requires.
             281          (c) The commissioner may by rule totally or partially exempt from this section classes
             282      of insurance policies in which the insureds do not need protection against arbitrary or
             283      unannounced termination.
             284          (d) The rights provided by this section are in addition to and do not prejudice any other
             285      rights the insureds may have at common law or under other statutes.
             286          (2) (a) As used in this Subsection (2), "grounds" means:
             287          (i) material misrepresentation;
             288          (ii) substantial change in the risk assumed, unless the insurer should reasonably have
             289      foreseen the change or contemplated the risk when entering into the contract;
             290          (iii) substantial breaches of contractual duties, conditions, or warranties;
             291          (iv) attainment of the age specified as the terminal age for coverage, in which case the
             292      insurer may cancel by notice under Subsection (2)(c), accompanied by a tender of proportional
             293      return of premium; or
             294          (v) in the case of automobile insurance, revocation or suspension of the driver's license
             295      of:
             296          (A) the named insured; or
             297          (B) any other person who customarily drives the car.
             298          (b) (i) Except as provided in Subsection (2)(e) or unless the conditions of Subsection
             299      (2)(b)(ii) are met, an insurance policy may not be canceled by the insurer before the earlier of:
             300          (A) the expiration of the agreed term; or
             301          (B) one year from the effective date of the policy or renewal.
             302          (ii) Notwithstanding Subsection (2)(b)(i), an insurance policy may be canceled by the
             303      insurer for:
             304          (A) nonpayment of a premium when due; or
             305          (B) on grounds defined in Subsection (2)(a).
             306          (c) (i) The cancellation provided by Subsection (2)(b), except cancellation for

             307      nonpayment of premium, is effective no sooner than 30 days after the delivery or first-class
             308      mailing of a written notice to the policyholder.
             309          (ii) Cancellation for nonpayment of premium is effective no sooner than ten days after
             310      delivery or first class mailing of a written notice to the policyholder.
             311          (d) (i) Notice of cancellation for nonpayment of premium shall include a statement of
             312      the reason for cancellation.
             313          (ii) Subsection (6) applies to the notice required for grounds of cancellation other than
             314      nonpayment of premium.
             315          (e) (i) Subsections (2)(a) through (d) do not apply to any insurance contract that has not
             316      been previously renewed if the contract has been in effect less than 60 days when the written
             317      notice of cancellation is mailed or delivered.
             318          (ii) A cancellation under this Subsection (2)(e) may not be effective until at least ten
             319      days after the delivery to the insured of a written notice of cancellation.
             320          (iii) If the notice required by this Subsection (2)(e) is sent by first-class mail, postage
             321      prepaid, to the insured at the insured's last-known address, delivery is considered accomplished
             322      after the passing, since the mailing date, of the mailing time specified in the Utah Rules of
             323      Civil Procedure.
             324          (iv) A policy cancellation subject to this Subsection (2)(e) is not subject to the
             325      procedures described in Subsection (6).
             326          (3) A policy may be issued for a term longer than one year or for an indefinite term if
             327      the policy includes a clause providing for cancellation by the insurer by giving notice as
             328      provided in Subsection (4)(b)(i) 30 days prior to any anniversary date.
             329          (4) (a) Subject to Subsections (2), (3), and (4)(b), a policyholder has a right to have the
             330      policy renewed:
             331          (i) on the terms then being applied by the insurer to similar risks; and
             332          (ii) (A) for an additional period of time equivalent to the expiring term if the agreed
             333      term is one year or less; or
             334          (B) for one year if the agreed term is longer than one year.
             335          (b) Except as provided in Subsection (4)(c), the right to renewal under Subsection
             336      (4)(a) is extinguished if:
             337          (i) at least 30 days prior to the policy expiration or anniversary date a notice of

             338      intention not to renew the policy beyond the agreed expiration or anniversary date is delivered
             339      or sent by first-class mail by the insurer to the policyholder at the policyholder's last-known
             340      address;
             341          (ii) not more than 45 nor less than 14 days prior to the due date of the renewal
             342      premium, the insurer delivers or sends by first-class mail a notice to the policyholder at the
             343      policyholder's last-known address, clearly stating:
             344          (A) the renewal premium;
             345          (B) how the renewal premium may be paid; and
             346          (C) that failure to pay the renewal premium by the due date extinguishes the
             347      policyholder's right to renewal;
             348          (iii) the policyholder has:
             349          (A) accepted replacement coverage; or
             350          (B) requested or agreed to nonrenewal; or
             351          (iv) the policy is expressly designated as nonrenewable.
             352          (c) Unless the conditions of Subsection (4)(b)(iii) or (iv) apply, an insurer may not fail
             353      to renew an insurance policy as a result of a telephone call or other inquiry that:
             354          (i) references a policy coverage; and
             355          (ii) does not result in the insured requesting payment of a claim.
             356          (5) (a) (i) Subject to Subsection (5)(b), if the insurer offers or purports to renew the
             357      policy, but on less favorable terms or at higher rates, the new terms or rates take effect on the
             358      renewal date if the insurer delivered or sent by first-class mail to the policyholder notice of the
             359      new terms or rates at least 30 days prior to the expiration date of the prior policy.
             360          (ii) If the insurer did not give the prior notification described in Subsection (5)(a)(i) to
             361      the policyholder, the new terms or rates do not take effect until 30 days after the notice is
             362      delivered or sent by first-class mail, in which case the policyholder may elect to cancel the
             363      renewal policy at any time during the 30-day period.
             364          (iii) Return premiums or additional premium charges shall be calculated
             365      proportionately on the basis that the old rates apply.
             366          (b) Subsection (5)(a) does not apply if the only change in terms that is adverse to the
             367      policyholder is:
             368          (i) a rate increase generally applicable to the class of business to which the policy

             369      belongs;
             370          (ii) a rate increase resulting from a classification change based on the altered nature or
             371      extent of the risk insured against; or
             372          (iii) a policy form change made to make the form consistent with Utah law.
             373          (6) (a) If a notice of cancellation or nonrenewal under Subsection (2)(c) does not state
             374      with reasonable precision the facts on which the insurer's decision is based, the insurer shall
             375      send by first-class mail or deliver that information within ten working days after receipt of a
             376      written request by the policyholder.
             377          (b) A notice under Subsection (2)(c) is not effective unless it contains information
             378      about the policyholder's right to make the request.
             379          (7) If a risk-sharing plan under Section 31A-2-214 exists for the kind of coverage
             380      provided by the insurance being cancelled or nonrenewed, a notice of cancellation or
             381      nonrenewal required under Subsection (2)(c) or (4)(b)(i) may not be effective unless it contains
             382      instructions to the policyholder for applying for insurance through the available risk-sharing
             383      plan.
             384          (8) There is no liability on the part of, and no cause of action against, any insurer, its
             385      authorized representatives, agents, employees, or any other person furnishing to the insurer
             386      information relating to the reasons for cancellation or nonrenewal or for any statement made or
             387      information given by them in complying or enabling the insurer to comply with this section
             388      unless actual malice is proved by clear and convincing evidence.
             389          (9) This section does not alter any common law right of contract rescission for material
             390      misrepresentation.
             391          Section 8. Section 31A-22-633 is amended to read:
             392           31A-22-633. Exemptions from standards.
             393          Notwithstanding the provisions of Title 31A, Insurance Code, any accident and health
             394      insurer or health maintenance organization may offer a choice of coverage that is less or
             395      different than is otherwise required by applicable state law if:
             396          (1) the Department of Health offers a choice of coverage as part of a Medicaid waiver
             397      under Title 26, Chapter 18, Medical Assistance Act, which includes:
             398          (a) less or different coverage than the basic coverage;
             399          (b) less or different coverage than is otherwise required in an insurance policy or health

             400      maintenance organization contract under applicable state law; or
             401          (c) less or different coverage than required by Subsection 31A-22-605 (4)(b); and
             402          (2) the choice of coverage offered by the carrier:
             403          (a) is the same or similar coverage as the coverage offered by the Department of Health
             404      under Subsection (1);
             405          (b) is offered to the same or similar population as the coverage offered by the
             406      Department of Health under Subsection (1); and
             407          (c) contains an explanation for each insured of coverage exclusions and limitations;
             408          (3) the commissioner [as part of the requirements of Subsection 31A-2-201 (7),] and
             409      the executive director of the Department of Health shall report to the Health and Human
             410      Services Interim Committee prior to November 15 of each year concerning:
             411          (a) the number of lives covered under any policy offered under the provisions of this
             412      section or under the Medicaid waiver described in Subsection (1);
             413          (b) the claims experienced under the policies or Medicaid programs described in
             414      Subsection (3)(a);
             415          (c) any cost shifting to the private sector for care not covered under the programs or
             416      policies described in Subsection (3)(a); and
             417          (d) efforts or agreements between the Department of Health, the commissioner,
             418      insurers regulated under this chapter, and health care providers regarding combining publicly
             419      funded coverage with private, employer-based coverage to increase benefits and health care
             420      coverage.
             421          Section 9. Section 31A-23a-402 is amended to read:
             422           31A-23a-402. Unfair marketing practices -- Communication -- Inducement --
             423      Unfair Discrimination -- Coercion or intimidation -- Restriction on choice.
             424          (1) (a) (i) Any of the following may not make or cause to be made any communication
             425      that contains false or misleading information, relating to an insurance product or contract, any
             426      insurer, or [other] any licensee under this title, including information that is false or misleading
             427      because it is incomplete:
             428          (A) a person who is or should be licensed under this title;
             429          (B) an employee or producer of a person described in Subsection (1)(a)(i)(A);
             430          (C) a person whose primary interest is as a competitor of a person licensed under this

             431      title; and
             432          (D) a person on behalf of any of the persons listed in this Subsection (1)(a)(i).
             433          (ii) As used in this Subsection (1), "false or misleading information" includes:
             434          (A) assuring the nonobligatory payment of future dividends or refunds of unused
             435      premiums in any specific or approximate amounts, but reporting fully and accurately past
             436      experience is not false or misleading information; and
             437          (B) with intent to deceive a person examining it[,]:
             438          (I) filing a report[,];
             439          (II) making a false entry in a record[,]; or
             440          (III) wilfully refraining from making a proper entry in a record.
             441          (iii) A licensee under this title may not:
             442          (A) use any business name, slogan, emblem, or related device that is misleading or
             443      likely to cause the insurer or other licensee to be mistaken for another insurer or other licensee
             444      already in business; or
             445          (B) use any advertisement or other insurance promotional material that would cause a
             446      reasonable person to mistakenly believe that a state or federal government agency:
             447          (I) is responsible for the insurance sales activities of the person;
             448          (II) stands behind the credit of the person;
             449          (III) guarantees any returns on insurance products of or sold by the person; or
             450          (IV) is a source of payment of any insurance obligation of or sold by the person.
             451          (iv) A person who is not an insurer may not assume or use any name that deceptively
             452      implies or suggests that it is an insurer.
             453          (v) A person other than persons licensed as health maintenance organizations under
             454      Chapter 8 may not use the term "Health Maintenance Organization" or "HMO" in referring to
             455      itself.
             456          (b) [If a ] A licensee's violation creates a rebuttable presumption that the violation was
             457      also committed by the insurer if:
             458          (i) the licensee under this title distributes cards or documents, exhibits a sign, or
             459      publishes an advertisement that violates Subsection (1)(a), with reference to a particular
             460      insurer:
             461          (A) that the licensee represents[,]; or

             462          (B) for whom the licensee processes claims[,]; and [if]
             463          (ii) the cards, documents, signs, or advertisements are supplied or approved by that
             464      insurer[, the licensee's violation creates a rebuttable presumption that the violation was also
             465      committed by the insurer].
             466          (2) (a) (i) A licensee under this title, or an officer or employee of a licensee may not
             467      induce any person to enter into or continue an insurance contract or to terminate an existing
             468      insurance contract by offering benefits not specified in the policy to be issued or continued,
             469      including premium or commission rebates.
             470          (ii) An insurer may not make or knowingly allow any agreement of insurance that is
             471      not clearly expressed in the policy to be issued or renewed.
             472          (iii) This Subsection (2)(a) does not preclude:
             473          (A) insurers from reducing premiums because of expense savings;
             474          (B) the usual kinds of social courtesies not related to particular transactions; or
             475          (C) an insurer from receiving premiums under an installment payment plan.
             476          (b) A licensee under this title may not absorb the tax under Section 31A-3-301 .
             477          (c) (i) A title insurer or producer or any officer or employee of either may not pay,
             478      allow, give, or offer to pay, allow, or give, directly or indirectly, as an inducement to obtaining
             479      any title insurance business[,]:
             480          (A) any rebate, reduction, or abatement of any rate or charge made incident to the
             481      issuance of the insurance[,];
             482          (B) any special favor or advantage not generally available to others[,]; or
             483          (C) any money or other consideration or material inducement.
             484          (ii) "Charge made incident to the issuance of the insurance" includes escrow charges,
             485      and any other services that are prescribed by the commissioner.
             486          (iii) An insured or any other person connected, directly or indirectly, with the
             487      transaction, including a mortgage lender, real estate broker, builder, attorney, or any officer,
             488      employee, or agent of any of them, may not knowingly receive or accept, directly or indirectly,
             489      any benefit referred to in Subsection (2)(c)(i).
             490          (3) (a) An insurer may not unfairly discriminate among policyholders by charging
             491      different premiums or by offering different terms of coverage, except on the basis of
             492      classifications related to the nature and the degree of the risk covered or the expenses involved.

             493          (b) Rates are not unfairly discriminatory if they are averaged broadly among persons
             494      insured under a group, blanket, or franchise policy, and the terms of those policies are not
             495      unfairly discriminatory merely because they are more favorable than in similar individual
             496      policies.
             497          (4) [A] (a) This Subsection (4) applies to:
             498          (i) a person who is or should be licensed under this title[,];
             499          (ii) an employee of that licensee or person who should be licensed[,];
             500          (iii) a person whose primary interest is as a competitor of a person licensed under this
             501      title[,]; and
             502          (iv) one acting on behalf of any [of these persons,] person described in Subsection
             503      (4)(a)(i) through (iii).
             504          (b) A person described in Subsection (4)(a) may not commit or enter into any
             505      agreement to participate in any act of boycott, coercion, or intimidation that:
             506          [(a)] (i) tends to produce:
             507          [(i)] (A) an unreasonable restraint of the business of insurance; or
             508          [(ii)] (B) a monopoly in that business; or
             509          [(b)] (ii) results in an applicant purchasing or replacing an insurance contract.
             510          (5) (a) [A] (i) Subject to Subsection (5)(a)(ii), a person may not restrict in the choice
             511      of an insurer or licensee under this chapter, another person who is required to pay for insurance
             512      as a condition for the conclusion of a contract or other transaction or for the exercise of any
             513      right under a contract. [The]
             514          (ii) A person requiring [the] coverage may[, however,] reserve the right to disapprove
             515      the insurer or the coverage selected on reasonable grounds.
             516          (b) The form of corporate organization of an insurer authorized to do business in this
             517      state is not a reasonable ground for disapproval, and the commissioner may by rule specify
             518      additional grounds that are not reasonable. This Subsection (5) does not bar an insurer from
             519      declining an application for insurance.
             520          (6) A person may not make any charge other than insurance premiums and premium
             521      financing charges for the protection of property or of a security interest in property, as a
             522      condition for obtaining, renewing, or continuing the financing of a purchase of the property or
             523      the lending of money on the security of an interest in the property.

             524          (7) (a) A licensee under this title may not refuse or fail to return promptly all indicia of
             525      agency to the principal on demand.
             526          (b) A licensee whose license is suspended, limited, or revoked under Section
             527      31A-2-308 , 31A-23a-111 , or 31A-23a-112 may not refuse or fail to return the license to the
             528      commissioner on demand.
             529          (8) A person may not engage in any other unfair method of competition or any other
             530      unfair or deceptive act or practice in the business of insurance, as defined by the commissioner
             531      by rule, after a finding that they are misleading, deceptive, unfairly discriminatory, provide an
             532      unfair inducement, or unreasonably restrain competition.
             533          Section 10. Section 63-55-231 is amended to read:
             534           63-55-231. Repeal dates, Title 31A.
             535          (1) Section 31A-2-208.5 , Comparison tables, is repealed July 1, [2005] 2010.
             536          (2) Section 31A-2-217 , Coordination with other states, is repealed July 1, 2013.
             537          (3) Section 31A-3-104 , Electronic [Commerce Dedicated Fees] commerce dedicated
             538      fees, is repealed July 1, 2006.
             539          (4) Section 31A-22-315 , Motor [Vehicle Insurance Reporting] vehicle insurance
             540      reporting, is repealed July 1, 2010.
             541          (5) Section 31A-22-625 , Catastrophic [Coverage of Mental Health Conditions]
             542      coverage of mental health conditions, is repealed July 1, 2011.
             543          (6) Title 31A, Chapter 31, Insurance Fraud Act, is repealed July 1, 2007.
             544          Section 11. Repealer.
             545          This bill repeals:
             546          Section 31A-8-302, Transition period for prior licensees.

Legislative Review Note
    as of 1-7-05 9:26 AM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel

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