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First Substitute H.B. 333

Representative James A. Dunnigan proposes the following substitute bill:


             1     
UNFAIR INDUCEMENTS RELATED TO INSURANCE

             2     
PRODUCTS

             3     
2011 GENERAL SESSION

             4     
STATE OF UTAH

             5     
Chief Sponsor: James A. Dunnigan

             6     
Senate Sponsor: Curtis S. Bramble

             7     
             8      LONG TITLE
             9      General Description:
             10          This bill modifies the Insurance Code to address what constitutes unfair inducements
             11      related to insurance.
             12      Highlighted Provisions:
             13          This bill:
             14          .    defines terms;
             15          .    prohibits inducements by a licensee or an officer or employee of a licensee;
             16          .    lists activities that constitute or do not constitute a prohibited inducement; and
             17          .    makes technical and conforming amendments.
             18      Money Appropriated in this Bill:
             19          None
             20      Other Special Clauses:
             21          This bill provides an immediate effective date.
             22      Utah Code Sections Affected:
             23      AMENDS:
             24          31A-3-303, as last amended by Laws of Utah 2003, Chapters 252 and 298
             25          31A-15-103, as last amended by Laws of Utah 2008, Chapter 257


             26          31A-21-404, as last amended by Laws of Utah 2004, Chapter 90
             27          31A-23a-402, as last amended by Laws of Utah 2008, Chapter 382
             28          31A-23a-504, as last amended by Laws of Utah 2009, Chapter 349
             29      ENACTS:
             30          31A-23a-402.5, Utah Code Annotated 1953
             31      REPEALS:
             32          31A-23a-404, as renumbered and amended by Laws of Utah 2003, Chapter 298
             33     
             34      Be it enacted by the Legislature of the state of Utah:
             35          Section 1. Section 31A-3-303 is amended to read:
             36           31A-3-303. Payment of tax.
             37          (1) The insurer, all producers involved in the transaction, and the policyholder are
             38      jointly and severally liable for the payment of the taxes required under Section 31A-3-301 .
             39      The policyholder's liability for payment of the premium tax under Section 31A-3-301 ends
             40      when the policyholder pays the tax to the producer or insurer. The insurer and all producers
             41      involved in the transaction are jointly and severally liable for the payment of the additional tax
             42      required under Section 31A-3-302 . Except for the tax under Section 31A-3-302 , the taxes
             43      under this part shall be paid by the policyholder who shall be billed specifically for the tax
             44      when billed for the premium. Except for the tax imposed under Section 31A-3-302 , absorption
             45      of the tax by the producer or insurer is an unfair method of competition under [Section]
             46      Sections 31A-23a-402 and 31A-23a-402.5 .
             47          (2) The commissioner shall by rule prescribe accounting and reporting forms and
             48      procedures for insurers, producers, and policyholders to use in determining the amount of taxes
             49      owed under this part, and the manner and time of payment. If a tax is not paid within the time
             50      prescribed under the commissioner's rule, a penalty shall be imposed of 25% of the tax due,
             51      plus 1-1/2% per month from the time of default until full payment of the tax.
             52          (3) Upon making a record of its actions, and upon reasonable cause shown, the State
             53      Tax Commission may waive, reduce, or compromise any of the penalties or interest imposed
             54      under this part.
             55          (4) If a policy covers risks that are only partially located in this state, for computation
             56      of tax under this part the premium shall be reasonably allocated among the states on the basis


             57      of risk locations. However, all premiums with respect to surplus lines insurance received in
             58      this state by a surplus lines producer or charged on policies written or negotiated in or from this
             59      state are taxable in full under this part, subject to a credit for any tax actually paid in another
             60      state to the extent of a reasonable allocation on the basis of risk locations.
             61          (5) All premium taxes collected under this part by a producer or by an insurer are the
             62      property of this state.
             63          (6) If the property of any producer is seized under any process in a court in this state, or
             64      if his business is suspended by the action of creditors or put into the hands of an assignee,
             65      receiver, or trustee, all taxes and penalties due this state under this part are preferred claims and
             66      the state is to that extent a preferred creditor.
             67          Section 2. Section 31A-15-103 is amended to read:
             68           31A-15-103. Surplus lines insurance -- Unauthorized insurers.
             69          (1) Notwithstanding Section 31A-15-102 , a foreign insurer that has not obtained a
             70      certificate of authority to do business in this state under Section 31A-14-202 may negotiate for
             71      and make an insurance contract with a person in this state and on a risk located in this state,
             72      subject to the limitations and requirements of this section.
             73          (2) (a) For a contract made under this section, the insurer may, in this state:
             74          (i) inspect the risks to be insured;
             75          (ii) collect premiums;
             76          (iii) adjust losses; and
             77          (iv) do another act reasonably incidental to the contract.
             78          (b) An act described in Subsection (2)(a) may be done through:
             79          (i) an employee; or
             80          (ii) an independent contractor.
             81          (3) (a) Subsections (1) and (2) do not permit a person to solicit business in this state on
             82      behalf of an insurer that has no certificate of authority.
             83          (b) Insurance placed with a nonadmitted insurer shall be placed with a surplus lines
             84      producer licensed under Chapter 23a, Insurance Marketing - Licensing Producers, Consultants,
             85      and Reinsurance Intermediaries.
             86          (c) The commissioner may by rule prescribe how a surplus lines producer may:
             87          (i) pay or permit the payment, commission, or other remuneration on insurance placed


             88      by the surplus lines producer under authority of the surplus lines producer's license to one
             89      holding a license to act as an insurance producer; and
             90          (ii) advertise the availability of the surplus lines producer's services in procuring, on
             91      behalf of a person seeking insurance, a contract with a nonadmitted insurer.
             92          (4) For a contract made under this section, a nonadmitted insurer is subject to Sections
             93      31A-23a-402 , 31A-23a-402.5 , and 31A-23a-403 and the rules adopted under those sections.
             94          (5) A nonadmitted insurer may not issue workers' compensation insurance coverage to
             95      an employer located in this state, except for stop loss coverage issued to an employer securing
             96      workers' compensation under Subsection 34A-2-201 (3).
             97          (6) (a) The commissioner may by rule prohibit making a contract under Subsection (1)
             98      for a specified class of insurance if authorized insurers provide an established market for the
             99      class in this state that is adequate and reasonably competitive.
             100          (b) The commissioner may by rule place a restriction or a limitation on and create
             101      special procedures for making a contract under Subsection (1) for a specified class of insurance
             102      if:
             103          (i) there have been abuses of placements in the class; or
             104          (ii) the policyholders in the class, because of limited financial resources, business
             105      experience, or knowledge, cannot protect their own interests adequately.
             106          (c) The commissioner may prohibit an individual insurer from making a contract under
             107      Subsection (1) and all insurance producers from dealing with the insurer if:
             108          (i) the insurer willfully violates:
             109          (A) this section;
             110          (B) Section 31A-4-102 , 31A-23a-402 , 31A-23a-402.5 , or 31A-26-303 ; or
             111          (C) a rule adopted under a section listed in Subsection (6)(c)(i)(A) or (B);
             112          (ii) the insurer fails to pay the fees and taxes specified under Section 31A-3-301 ; or
             113          (iii) the commissioner has reason to believe that the insurer is:
             114          (A) in an unsound condition;
             115          (B) operated in a fraudulent, dishonest, or incompetent manner; or
             116          (C) in violation of the law of its domicile.
             117          (d) (i) The commissioner may issue one or more lists of unauthorized foreign insurers
             118      whose:


             119          (A) solidity the commissioner doubts; or
             120          (B) practices the commissioner considers objectionable.
             121          (ii) The commissioner shall issue one or more lists of unauthorized foreign insurers the
             122      commissioner considers to be reliable and solid.
             123          (iii) In addition to the lists described in Subsections (6)(d)(i) and (ii), the commissioner
             124      may issue other relevant evaluations of unauthorized insurers.
             125          (iv) An action may not lie against the commissioner or an employee of the department
             126      for a written or oral communication made in, or in connection with the issuance of, a list or
             127      evaluation described in this Subsection (6)(d).
             128          (e) A foreign unauthorized insurer shall be listed on the commissioner's "reliable" list
             129      only if the unauthorized insurer:
             130          (i) delivers a request to the commissioner to be on the list;
             131          (ii) establishes satisfactory evidence of good reputation and financial integrity;
             132          (iii) (A) delivers to the commissioner a copy of the unauthorized insurer's current
             133      annual statement certified by the insurer; and
             134          (B) continues each subsequent year to file its annual statements with the commissioner
             135      within 60 days of the day on which it is filed with the insurance regulatory authority where the
             136      insurer is domiciled;
             137          (iv) (A) (I) is in substantial compliance with the solvency standards in Chapter 17, Part
             138      6, Risk-Based Capital, or maintains capital and surplus of at least $15,000,000, whichever is
             139      greater; and
             140          (II) maintains in the United States an irrevocable trust fund in either a national bank or
             141      a member of the Federal Reserve System, or maintains a deposit meeting the statutory deposit
             142      requirements for insurers in the state where it is made, which trust fund or deposit:
             143          (Aa) shall be in an amount not less than $2,500,000 for the protection of all of the
             144      insurer's policyholders in the United States;
             145          (Bb) may consist of cash, securities, or investments of substantially the same character
             146      and quality as those which are "qualified assets" under Section 31A-17-201 ; and
             147          (Cc) may include as part of the trust arrangement a letter of credit that qualifies as
             148      acceptable security under Section 31A-17-404.1 ; or
             149          (B) in the case of any "Lloyd's" or other similar incorporated or unincorporated group


             150      of alien individual insurers, maintains a trust fund that:
             151          (I) shall be in an amount not less than $50,000,000 as security to its full amount for all
             152      policyholders and creditors in the United States of each member of the group;
             153          (II) may consist of cash, securities, or investments of substantially the same character
             154      and quality as those which are "qualified assets" under Section 31A-17-201 ; and
             155          (III) may include as part of this trust arrangement a letter of credit that qualifies as
             156      acceptable security under Section 31A-17-404.1 ; and
             157          (v) for an alien insurer not domiciled in the United States or a territory of the United
             158      States, is listed on the Quarterly Listing of Alien Insurers maintained by the National
             159      Association of Insurance Commissioners International Insurers Department.
             160          (7) (a) Subject to Subsection (7)(b), a surplus lines producer may not, either knowingly
             161      or without reasonable investigation of the financial condition and general reputation of the
             162      insurer, place insurance under this section with:
             163          (i) a financially unsound insurer;
             164          (ii) an insurer engaging in unfair practices; or
             165          (iii) an otherwise substandard insurer.
             166          (b) A surplus line producer may place insurance under this section with an insurer
             167      described in Subsection (7)(a) if the surplus line producer:
             168          (i) gives the applicant notice in writing of the known deficiencies of the insurer or the
             169      limitations on the surplus line producer's investigation; and
             170          (ii) explains the need to place the business with that insurer.
             171          (c) A copy of the notice described in Subsection (7)(b) shall be kept in the office of the
             172      surplus line producer for at least five years.
             173          (d) To be financially sound, an insurer shall satisfy standards that are comparable to
             174      those applied under the laws of this state to an authorized insurer.
             175          (e) An insurer on the "doubtful or objectionable" list under Subsection (6)(d) or an
             176      insurer not on the commissioner's "reliable" list under Subsection (6)(e) is presumed
             177      substandard.
             178          (8) (a) A policy issued under this section shall:
             179          (i) include a description of the subject of the insurance; and
             180          (ii) indicate:


             181          (A) the coverage, conditions, and term of the insurance;
             182          (B) the premium charged the policyholder;
             183          (C) the premium taxes to be collected from the policyholder; and
             184          (D) the name and address of the policyholder and insurer.
             185          (b) If the direct risk is assumed by more than one insurer, the policy shall state:
             186          (i) the names and addresses of all insurers; and
             187          (ii) the portion of the entire direct risk each assumes.
             188          (c) A policy issued under this section shall have attached or affixed to the policy the
             189      following statement: "The insurer issuing this policy does not hold a certificate of authority to
             190      do business in this state and thus is not fully subject to regulation by the Utah insurance
             191      commissioner. This policy receives no protection from any of the guaranty associations created
             192      under Title 31A, Chapter 28."
             193          (9) Upon placing a new or renewal coverage under this section, a surplus lines
             194      producer shall promptly deliver to the policyholder or the policyholder's agent evidence of the
             195      insurance consisting either of:
             196          (a) the policy as issued by the insurer; or
             197          (b) if the policy is not available upon placing the coverage, a certificate, cover note, or
             198      other confirmation of insurance complying with Subsection (8).
             199          (10) If the commissioner finds it necessary to protect the interests of insureds and the
             200      public in this state, the commissioner may by rule subject a policy issued under this section to
             201      as much of the regulation provided by this title as is required for a comparable policy written
             202      by an authorized foreign insurer.
             203          (11) (a) A surplus lines transaction in this state shall be examined to determine whether
             204      it complies with:
             205          (i) the surplus lines tax levied under Chapter 3, Department Funding, Fees, and Taxes;
             206          (ii) the solicitation limitations of Subsection (3);
             207          (iii) the requirement of Subsection (3) that placement be through a surplus lines
             208      producer;
             209          (iv) placement limitations imposed under Subsections (6)(a), (b), and (c); and
             210          (v) the policy form requirements of Subsections (8) and (10).
             211          (b) The examination described in Subsection (11)(a) shall take place as soon as


             212      practicable after the transaction. The surplus lines producer shall submit to the examiner
             213      information necessary to conduct the examination within a period specified by rule.
             214          (c) (i) The examination described in Subsection (11)(a) may be conducted by the
             215      commissioner or by an advisory organization created under Section 31A-15-111 and authorized
             216      by the commissioner to conduct these examinations. The commissioner is not required to
             217      authorize an additional advisory organization to conduct an examination under this Subsection
             218      (11)(c).
             219          (ii) The commissioner's authorization of one or more advisory organizations to act as
             220      examiners under this Subsection (11)(c) shall be:
             221          (A) by rule; and
             222          (B) evidenced by a contract, on a form provided by the commissioner, between the
             223      authorized advisory organization and the department.
             224          (d) (i) (A) A person conducting the examination described in Subsection (11)(a) shall
             225      collect a stamping fee of an amount not to exceed 1% of the policy premium payable in
             226      connection with the transaction.
             227          (B) A stamping fee collected by the commissioner shall be deposited in the General
             228      Fund.
             229          (C) The commissioner shall establish a stamping fee by rule.
             230          (ii) A stamping fee collected by an advisory organization is the property of the advisory
             231      organization to be used in paying the expenses of the advisory organization.
             232          (iii) Liability for paying a stamping fee is as required under Subsection 31A-3-303 (1)
             233      for taxes imposed under Section 31A-3-301 .
             234          (iv) The commissioner shall adopt a rule dealing with the payment of stamping fees. If
             235      a stamping fee is not paid when due, the commissioner or advisory organization may impose a
             236      penalty of 25% of the stamping fee due, plus 1-1/2% per month from the time of default until
             237      full payment of the stamping fee.
             238          (v) A stamping fee relative to a policy covering a risk located partially in this state
             239      shall be allocated in the same manner as under Subsection 31A-3-303 (4).
             240          (e) The commissioner, representatives of the department, advisory organizations,
             241      representatives and members of advisory organizations, authorized insurers, and surplus lines
             242      insurers are not liable for damages on account of statements, comments, or recommendations


             243      made in good faith in connection with their duties under this Subsection (11)(e) or under
             244      Section 31A-15-111 .
             245          (f) An examination conducted under this Subsection (11) and a document or materials
             246      related to the examination are confidential.
             247          Section 3. Section 31A-21-404 is amended to read:
             248           31A-21-404. Out-of-state insurers.
             249          Any insurer extending mass marketed life or accident and health insurance under a
             250      group or blanket policy issued outside of this state to residents of this state shall, with respect
             251      to the mass marketed life or accident and health insurance policy:
             252          (1) comply with:
             253          (a) Sections 31A-23a-402 , 31A-23a-402.5 , and 31A-23a-403 ; and
             254          (b) Chapter 26, Part 3, Claim Practices; and
             255          (2) upon the commissioner's request, deliver to the commissioner a copy of any mass
             256      marketed life or accident and health insurance policy, certificates issued under these policies,
             257      and advertising material used in this state in connection with the policy.
             258          Section 4. Section 31A-23a-402 is amended to read:
             259           31A-23a-402. Unfair marketing practices -- Communication -- Unfair
             260      discrimination -- Coercion or intimidation -- Restriction on choice.
             261          (1) (a) (i) Any of the following may not make or cause to be made any communication
             262      that contains false or misleading information, relating to an insurance product or contract, any
             263      insurer, or any licensee under this title, including information that is false or misleading
             264      because it is incomplete:
             265          (A) a person who is or should be licensed under this title;
             266          (B) an employee or producer of a person described in Subsection (1)(a)(i)(A);
             267          (C) a person whose primary interest is as a competitor of a person licensed under this
             268      title; and
             269          (D) a person on behalf of any of the persons listed in this Subsection (1)(a)(i).
             270          (ii) As used in this Subsection (1), "false or misleading information" includes:
             271          (A) assuring the nonobligatory payment of future dividends or refunds of unused
             272      premiums in any specific or approximate amounts, but reporting fully and accurately past
             273      experience is not false or misleading information; and


             274          (B) with intent to deceive a person examining it:
             275          (I) filing a report;
             276          (II) making a false entry in a record; or
             277          (III) wilfully refraining from making a proper entry in a record.
             278          (iii) A licensee under this title may not:
             279          (A) use any business name, slogan, emblem, or related device that is misleading or
             280      likely to cause the insurer or other licensee to be mistaken for another insurer or other licensee
             281      already in business; or
             282          (B) use any advertisement or other insurance promotional material that would cause a
             283      reasonable person to mistakenly believe that a state or federal government agency:
             284          (I) is responsible for the insurance sales activities of the person;
             285          (II) stands behind the credit of the person;
             286          (III) guarantees any returns on insurance products of or sold by the person; or
             287          (IV) is a source of payment of any insurance obligation of or sold by the person.
             288          (iv) A person who is not an insurer may not assume or use any name that deceptively
             289      implies or suggests that person is an insurer.
             290          (v) A person other than persons licensed as health maintenance organizations under
             291      Chapter 8 may not use the term "Health Maintenance Organization" or "HMO" in referring to
             292      itself.
             293          (b) A licensee's violation creates a rebuttable presumption that the violation was also
             294      committed by the insurer if:
             295          (i) the licensee under this title distributes cards or documents, exhibits a sign, or
             296      publishes an advertisement that violates Subsection (1)(a), with reference to a particular
             297      insurer:
             298          (A) that the licensee represents; or
             299          (B) for whom the licensee processes claims; and
             300          (ii) the cards, documents, signs, or advertisements are supplied or approved by that
             301      insurer.
             302          [(2) (a) (i) A licensee under this title, or an officer or employee of a licensee may not
             303      induce any person to enter into or continue an insurance contract or to terminate an existing
             304      insurance contract by offering benefits not specified in the policy to be issued or continued,


             305      including premium or commission rebates.]
             306          [(ii) An insurer may not make or knowingly allow any agreement of insurance that is
             307      not clearly expressed in the policy to be issued or renewed.]
             308          [(iii) This Subsection (2)(a) does not preclude:]
             309          [(A) an insurer from reducing premiums because of expense savings;]
             310          [(B) an insurer from providing to a policyholder or insured one or more incentives to
             311      participate in programs or activities designed to reduce claims or claim expenses;]
             312          [(C) the usual kinds of social courtesies not related to particular transactions; or]
             313          [(D) an insurer from receiving premiums under an installment payment plan.]
             314          [(iv) The commissioner may adopt rules in accordance with Title 63G, Chapter 3, Utah
             315      Administrative Rulemaking Act, to define what constitutes an incentive described in
             316      Subsection (2)(a)(iii)(B).]
             317          [(b) A licensee under this title may not absorb the tax under Section 31A-3-301 .]
             318          [(c) (i)] (2) (a) A title insurer or producer or any officer or employee of either may not
             319      pay, allow, give, or offer to pay, allow, or give, directly or indirectly, as an inducement to
             320      obtaining any title insurance business:
             321          [(A)] (i) any rebate, reduction, or abatement of any rate or charge made incident to the
             322      issuance of the title insurance;
             323          [(B)] (ii) any special favor or advantage not generally available to others; or
             324          [(C)] (iii) any money or other consideration, except if approved under Section
             325      31A-2-405 ; or
             326          [(D)] (iv) material inducement.
             327          [(ii)] (b) "Charge made incident to the issuance of the title insurance" includes escrow
             328      charges, and any other services that are prescribed in rule by the Title and Escrow Commission
             329      after consultation with the commissioner and subject to Section 31A-2-404 .
             330          [(iii)] (c) An insured or any other person connected, directly or indirectly, with the
             331      transaction, including a mortgage lender, real estate broker, builder, attorney, or any officer,
             332      employee, or agent of any of them, may not knowingly receive or accept, directly or indirectly,
             333      any benefit referred to in Subsection (2)[(c)(i)](a).
             334          (3) (a) An insurer may not unfairly discriminate among policyholders by charging
             335      different premiums or by offering different terms of coverage, except on the basis of


             336      classifications related to the nature and the degree of the risk covered or the expenses involved.
             337          (b) Rates are not unfairly discriminatory if they are averaged broadly among persons
             338      insured under a group, blanket, or franchise policy, and the terms of those policies are not
             339      unfairly discriminatory merely because they are more favorable than in similar individual
             340      policies.
             341          (4) (a) This Subsection (4) applies to:
             342          (i) a person who is or should be licensed under this title;
             343          (ii) an employee of that licensee or person who should be licensed;
             344          (iii) a person whose primary interest is as a competitor of a person licensed under this
             345      title; and
             346          (iv) one acting on behalf of any person described in Subsections (4)(a)(i) through (iii).
             347          (b) A person described in Subsection (4)(a) may not commit or enter into any
             348      agreement to participate in any act of boycott, coercion, or intimidation that:
             349          (i) tends to produce:
             350          (A) an unreasonable restraint of the business of insurance; or
             351          (B) a monopoly in that business; or
             352          (ii) results in an applicant purchasing or replacing an insurance contract.
             353          (5) (a) (i) Subject to Subsection (5)(a)(ii), a person may not restrict in the choice of an
             354      insurer or licensee under this chapter, another person who is required to pay for insurance as a
             355      condition for the conclusion of a contract or other transaction or for the exercise of any right
             356      under a contract.
             357          (ii) A person requiring coverage may reserve the right to disapprove the insurer or the
             358      coverage selected on reasonable grounds.
             359          (b) The form of corporate organization of an insurer authorized to do business in this
             360      state is not a reasonable ground for disapproval, and the commissioner may by rule specify
             361      additional grounds that are not reasonable. This Subsection (5) does not bar an insurer from
             362      declining an application for insurance.
             363          (6) A person may not make any charge other than insurance premiums and premium
             364      financing charges for the protection of property or of a security interest in property, as a
             365      condition for obtaining, renewing, or continuing the financing of a purchase of the property or
             366      the lending of money on the security of an interest in the property.


             367          (7) (a) A licensee under this title may not refuse or fail to return promptly all indicia of
             368      agency to the principal on demand.
             369          (b) A licensee whose license is suspended, limited, or revoked under Section
             370      31A-2-308 , 31A-23a-111 , or 31A-23a-112 may not refuse or fail to return the license to the
             371      commissioner on demand.
             372          (8) (a) A person may not engage in [any other] an unfair method of competition or any
             373      other unfair or deceptive act or practice in the business of insurance, as defined by the
             374      commissioner by rule, after a finding that [they] the method of competition, the act, or the
             375      practice:
             376          (i) [are] is misleading;
             377          (ii) [are] is deceptive;
             378          (iii) [are] is unfairly discriminatory;
             379          (iv) [provide] provides an unfair inducement; or
             380          (v) unreasonably [restrain] restrains competition.
             381          (b) Notwithstanding Subsection (8)(a), for purpose of the title insurance industry, the
             382      Title and Escrow Commission shall make rules, subject to Section 31A-2-404 , that define [any
             383      other] an unfair method of competition or [any other] unfair or deceptive act or practice after a
             384      finding that [they] the method of competition, the act, or the practice:
             385          (i) [are] is misleading;
             386          (ii) [are] is deceptive;
             387          (iii) [are] is unfairly discriminatory;
             388          (iv) [provide] provides an unfair inducement; or
             389          (v) unreasonably [restrain] restrains competition.
             390          Section 5. Section 31A-23a-402.5 is enacted to read:
             391          31A-23a-402.5. Inducements.
             392          (1) (a) Except as provided in Subsection (2), a licensee under this title, or an officer or
             393      employee of a licensee, may not induce a person to enter into, continue, or terminate an
             394      insurance contract by offering a benefit that is not:
             395          (i) specified in the insurance contract; or
             396          (ii) directly related to the insurance contract.
             397          (b) An insurer may not make or knowingly allow an agreement of insurance that is not


             398      clearly expressed in the insurance contract to be issued or renewed.
             399          (c) A licensee under this title may not absorb the tax under Section 31A-3-301 .
             400          (2) This section does not apply to a title insurer, a title producer, or an officer or
             401      employee of a title insurer or title producer.
             402          (3) Items not prohibited by Subsection (1) include an insurer:
             403          (a) reducing premiums because of expense savings;
             404          (b) providing to a policyholder or insured one or more incentives, as defined by the
             405      commissioner by rule made in accordance with Title 63G, Chapter 3, Utah Administrative
             406      Rulemaking Act, to participate in a program or activity designed to reduce claims or claim
             407      expenses; or
             408          (c) receiving premiums under an installment payment plan.
             409          (4) Items not prohibited by Subsection (1) include a licensee, or an officer or employee
             410      of a licensee, either directly or through a third party:
             411          (a) engaging in a usual kind of social courtesy if receipt of the social courtesy is not
             412      conditioned on the purchase of a particular insurance product;
             413          (b) extending credit on a premium to the insured:
             414          (i) without interest, for no more than 90 days from the effective date of the insurance
             415      contract;
             416          (ii) for interest that is not less than the legal rate under Section 15-1-1 , on the unpaid
             417      balance after the time period described in Subsection (4)(b)(i); and
             418          (iii) except that an installment or payroll deduction payment of premiums on an
             419      insurance contract issued under an insurer's mass marketing program is not considered an
             420      extension of credit for purposes of this Subsection (4)(b);
             421          (c) preparing or conducting a survey that:
             422          (i) is directly related to a health benefit plan purchased from the licensee; or
             423          (ii) used by the licensee to assess the benefit needs and preferences of employers or
             424      employees directly related to an insurance product sold by the licensee;
             425          (d) providing limited human resource services that are directly related to an insurance
             426      product sold by the licensee, including:
             427          (i) answering questions directly related to:
             428          (A) an employee benefit offering or administration, if the insurance product purchased


             429      from the licensee is accident and health insurance or health insurance; and
             430          (B) employment practices liability, if the insurance product purchased from the
             431      licensee is property or casualty insurance; and
             432          (ii) providing limited human resource compliance training and education directly
             433      pertaining to an insurance product purchased from the licensee;
             434          (e) providing the following types of information or guidance:
             435          (i) providing guidance directly related to compliance with federal and state laws for an
             436      insurance product purchased from the licensee;
             437          (ii) providing a workshop or seminar addressing an insurance issue that is directly
             438      related to an insurance product purchased from the licensee; or
             439          (iii) providing information regarding:
             440          (A) employee benefit issues;
             441          (B) directly related insurance regulatory and legislative updates; or
             442          (C) similar education about an insurance product sold by the licensee and how the
             443      insurance product interacts with tax law;
             444          (f) preparing or providing a form that is directly related to an insurance product
             445      purchased from, or offered by, the licensee;
             446          (g) preparing or providing documents directly related to a flexible spending account,
             447      but not providing ongoing administration of a flexible spending account;
             448          (h) providing enrollment and billing assistance, including:
             449          (i) providing benefit statements or new hire insurance benefits packages; and
             450          (ii) providing technology services such as an electronic enrollment platform or
             451      application system;
             452          (i) communicating coverages in writing and in consultation with the insured and
             453      employees;
             454          (j) providing employee communication materials and notifications directly related to an
             455      insurance product purchased from a licensee;
             456          (k) providing claims management and resolution to the extent permitted under the
             457      licensee's license;
             458          (l) providing underwriting or actuarial analysis or services;
             459          (m) negotiating with an insurer regarding the placement and pricing of an insurance


             460      product;
             461          (n) recommending placement and coverage options;
             462          (o) providing a health fair or providing assistance or advice on establishing or
             463      operating a wellness program, but not providing any payment for or direct operation of the
             464      wellness program;
             465          (p) providing COBRA and Utah mini COBRA administration, consultations, and other
             466      services directly related to an insurance product purchased from the licensee;
             467          (q) assisting with a summary plan description;
             468          (r) providing information necessary for the preparation of documents directly related to
             469      the Employee Retirement Income Security Act of 1974, 29 U.S.C. Sec. 1001, et seq., as
             470      amended;
             471          (s) providing services directly related to the Health Insurance Portability and
             472      Accountability Act of 1996, Pub. L. 104-191, 110 Stat. 1936, as amended, such as services
             473      directly related to health care access, portability, and renewability when offered in connection
             474      with accident and health insurance sold by a licensee;
             475          (t) sending proof of coverage to a third party with a legitimate interest in coverage;
             476          (u) providing information directly related to determining whether an insurance product
             477      sold by the licensee meets the requirements of a third party contract that requires or references
             478      insurance coverage;
             479          (v) facilitating risk management services directly related to the insurance product sold
             480      or offered for sale by the licensee, including:
             481          (i) risk management;
             482          (ii) claims and loss control services; and
             483          (iii) risk assessment consulting;
             484          (w) otherwise providing services that are legitimately part of servicing an insurance
             485      product purchased from a licensee; and
             486          (x) providing other directly related services approved by the department.
             487          (5) An inducement prohibited under Subsection (1) includes a licensee, or an officer or
             488      employee of a licensee:
             489          (a) (i) providing a premium or commission rebate;
             490          (ii) paying the salary of an employee of a person who purchases an insurance product


             491      from the licensee; or
             492          (iii) if the licensee is an insurer, or a third party administrator who contracts with an
             493      insurer, paying the salary for an onsite staff member to perform an act prohibited under
             494      Subsection (5)(b)(xi); or
             495          (b) engaging in one or more of the following unless a fee is paid in accordance with
             496      Subsection (7):
             497          (i) performing background checks of prospective employees;
             498          (ii) providing legal services;
             499          (iii) performing drug testing;
             500          (iv) preparing employer or employee handbooks, except that a licensee may:
             501          (A) provide information for a medical benefit section of an employee handbook;
             502          (B) provide information for the section of an employee handbook directly related to an
             503      employment practices liability insurance product purchased from the licensee; or
             504          (C) prepare or print an employee benefit enrollment guide;
             505          (v) providing job descriptions, postings, and applications for a person that purchases an
             506      employment practices liability insurance product from the licensee;
             507          (vi) providing payroll services;
             508          (vii) providing performance reviews or performance review training;
             509          (viii) providing union advice;
             510          (ix) providing accounting services;
             511          (x) providing data analysis information technology programs, except as provided in
             512      Subsection (4)(h)(ii);
             513          (xi) providing administration of health reimbursement accounts or health savings
             514      accounts; or
             515          (xii) if the licensee is an insurer, or a third party administrator who contracts with an
             516      insurer, the insurer issuing an insurance policy that lists in the insurance policy one or more of
             517      the following prohibited benefits:
             518          (A) performing background checks of prospective employees;
             519          (B) providing legal services;
             520          (C) performing drug testing;
             521          (D) preparing employer or employee handbooks;


             522          (E) providing job descriptions positing, and applications;
             523          (F) providing payroll services;
             524          (G) providing performance reviews or performance review training;
             525          (H) providing union advice;
             526          (I) providing accounting services;
             527          (J) providing discrimination testing; or
             528          (K) providing data analysis information technology programs.
             529          (6) A de minimis gift or meal not to exceed $25 for each individual receiving the gift
             530      or meal is presumed to be a social courtesy not conditioned on the purchase of a particular
             531      insurance product for purposes of Subsection (4)(a).
             532          (7) If as provided under Subsection (5)(b) a licensee is paid a fee to provide an item
             533      listed in Subsection (5)(b), the licensee shall comply with Subsection 31A-23a-501 (2) in
             534      charging the fee, except that the fee paid for the item shall equal or exceed the fair market
             535      value of the item.
             536          Section 6. Section 31A-23a-504 is amended to read:
             537           31A-23a-504. Sharing commissions.
             538          (1) (a) Except as provided in Subsection 31A-15-103 (3), a licensee under this chapter
             539      or an insurer may only pay consideration or reimburse out-of-pocket expenses to a person if the
             540      licensee knows that the person is licensed under this chapter as to the particular type of
             541      insurance to act in Utah as:
             542          (i) a producer;
             543          (ii) a limited line producer;
             544          (iii) a customer service representative;
             545          (iv) a consultant;
             546          (v) a managing general agent; or
             547          (vi) a reinsurance intermediary.
             548          (b) A person may only accept commission compensation or other compensation as a
             549      person described in Subsections (1)(a)(i) through (vi) that is directly or indirectly the result of
             550      an insurance transaction if that person is licensed under this chapter to act as described in
             551      Subsection (1)(a).
             552          (2) (a) Except as provided in Section 31A-23a-501 , a consultant may not pay or receive


             553      a commission or other compensation that is directly or indirectly the result of an insurance
             554      transaction.
             555          (b) A consultant may share a consultant fee or other compensation received for
             556      consulting services performed within Utah only:
             557          (i) with another consultant licensed under this chapter; and
             558          (ii) to the extent that the other consultant contributed to the services performed.
             559          (3) This section does not prohibit:
             560          (a) the payment of renewal commissions to former licensees under this chapter, former
             561      Title 31, Chapter 17, or their successors in interest under a deferred compensation or agency
             562      sales agreement;
             563          (b) compensation paid to or received by a person for referral of a potential customer
             564      that seeks to purchase or obtain an opinion or advice on an insurance product if:
             565          (i) the person is not licensed to sell insurance;
             566          (ii) the person does not sell or provide opinions or advice on the product; and
             567          (iii) the compensation does not depend on whether the referral results in a purchase or
             568      sale; or
             569          (c) the payment or assignment of a commission, service fee, brokerage, or other
             570      valuable consideration to an agency or a person who does not sell, solicit, or negotiate
             571      insurance in this state, unless the payment would constitute an inducement or commission
             572      rebate under Section 31A-23a-402 or 31A-23a-402.5 .
             573          (4) (a) In selling a policy of title insurance, sharing of commissions under Subsection
             574      (1) may not occur if it will result in:
             575          (i) an unlawful rebate;
             576          (ii) compensation in connection with controlled business; or
             577          (iii) payment of a forwarding fee or finder's fee.
             578          (b) A person may share compensation for the issuance of a title insurance policy only
             579      to the extent that the person contributed to the search and examination of the title or other
             580      services connected with the title insurance policy.
             581          (5) This section does not apply to a bail bond producer or bail enforcement agent as
             582      defined in Section 31A-35-102 .
             583          Section 7. Repealer.


             584          This bill repeals:
             585          Section 31A-23a-404, Extension of credit on premiums.
             586          Section 8. Effective date.
             587          If approved by two-thirds of all the members elected to each house, this bill takes effect
             588      upon approval by the governor, or the day following the constitutional time limit of Utah
             589      Constitution Article VII, Section 8, without the governor's signature, or in the case of a veto,
             590      the date of veto override.


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