PRINTER'S NO. 2444
No. 1882 Session of 2001
INTRODUCED BY MICOZZIE, SATHER, TANGRETTI, ZUG, BROWNE, BUXTON, CAPPELLI, CLARK, CORRIGAN, CREIGHTON, FRANKEL, HERMAN, MARKOSEK, TRICH, WATSON, WOJNAROSKI, FICHTER, SHANER AND L. I. COHEN, AUGUST 20, 2001
REFERRED TO COMMITTEE ON INSURANCE, AUGUST 20, 2001
AN ACT 1 Amending the act of May 17, 1921 (P.L.789, No.285), entitled, as 2 amended, "An act relating to insurance; establishing an 3 insurance department; and amending, revising, and 4 consolidating the law relating to the licensing, 5 qualification, regulation, examination, suspension, and 6 dissolution of insurance companies, Lloyds associations, 7 reciprocal and inter-insurance exchanges, and certain 8 societies and orders, the examination and regulation of fire 9 insurance rating bureaus, and the licensing and regulation of 10 insurance agents and brokers; the service of legal process 11 upon foreign insurance companies, associations or exchanges; 12 providing penalties, and repealing existing laws," providing 13 for licensing and regulation of insurance producers, managers 14 and exclusive general agents; conferring powers and imposing 15 duties on the Insurance Commissioner and Insurance 16 Department; and imposing penalties. 17 The General Assembly of the Commonwealth of Pennsylvania 18 hereby enacts as follows: 19 Section 1. Article VI of the act of May 17, 1921 (P.L.789, 20 No.285), known as The Insurance Department Act of 1921, is 21 repealed. 22 Section 2. The act is amended by adding an article to read: 23 ARTICLE VI 24 INSURANCE PRODUCERS
1 SUBARTICLE A 2 LICENSING 3 DIVISION 1 4 LICENSING OF INSURANCE PRODUCERS 5 Section 601. Definitions. 6 The following words and phrases when used in this article 7 shall have the meanings given to them in this section unless the 8 context clearly indicates otherwise: 9 "Administrative hearing office." The Administrative Hearing 10 Office of the Insurance Department. 11 "Applicant." A resident of this Commonwealth who has passed 12 or is exempt from taking the insurance producer licensing 13 examination required by section 604. 14 "Appointment." A written agreement between an insurance 15 producer and an insurance entity under which the insurance 16 producer may sell, solicit, negotiate, make or procure contracts 17 of insurance issued by the insurance entity for compensation. 18 "Business entity." A person which is not an individual. 19 "Candidate." An individual who has satisfactorily completed 20 or is exempt from the preexamination educational requirements of 21 section 604. 22 "Commissioner." The Insurance Commissioner of the 23 Commonwealth. 24 "Customer information." Individual identifying insurance- 25 related information regarding a person which has been derived 26 from a record of a financial institution related to its lending 27 activities. The information shall be limited to information 28 concerning the terms and conditions of insurance coverage, 29 insurance expirations, insurance claims or insurance history of 30 an individual. The term does not include customer names, 20010H1882B2444 - 2 -
1 addresses or telephone numbers. 2 "Department." The Insurance Department of the Commonwealth. 3 "Designated licensee." An individual who is licensed by the 4 Insurance Department as an insurance producer and who is 5 designated by a business entity to be responsible for the 6 business entity's compliance with the insurance laws and 7 regulations of this Commonwealth. 8 "Exclusive general agent." A licensee which has been granted 9 sole authority to act directly or indirectly as an insurance 10 producer for a domestic insurer with respect to a specific 11 portion of the insurer's business or within a specific territory 12 and which has the authority to bind coverage on behalf of the 13 insurer and directly or indirectly produces and underwrites in 14 any one year an amount of gross direct written premium equal to 15 or more than 25% of the surplus as regards policyholders as 16 reported in the last annual statement of the insurer. 17 "Financial institution." A Federal or State-chartered bank, 18 bank and trust company, savings bank, savings and loan 19 association, trust company or credit union. 20 "Home state." The District of Columbia and a state or 21 territory of the United States in which an insurance producer 22 maintains the producer's principal place of residence and is 23 licensed to act as an insurance producer. The term includes 24 other territories not of the United States as determined by the 25 commissioner. 26 "Insurance entity." A person doing business involving the 27 insuring of risks. The term includes insurers. 28 "Insurance producer." A person that sells, solicits, 29 negotiates, makes or procures contracts of insurance. 30 "Insurer." An insurance company, association, exchange, 20010H1882B2444 - 3 -
1 health maintenance organization, preferred provider 2 organization, professional health services plan corporation, 3 fraternal benefits society, beneficial association, Lloyd's 4 insurer or health plan corporation. 5 "Licensee." A person licensed by the department as an 6 insurance producer in accordance with Division 1 of Subarticle 7 A. 8 "Line of authority." The licensed ability to sell, solicit 9 or negotiate a particular class or kind of insurance. 10 "Manager." A person which negotiates and binds ceding 11 reinsurance contracts on behalf of a domestic insurer or manages 12 all or part of the insurance business of an insurer and does not 13 act as an agent for such insurer. 14 "NAIC." The National Association of Insurance Commissioners. 15 "Negotiate." To confer directly with or to offer advice 16 directly to a purchaser or prospective purchaser of a contract 17 of insurance concerning the substantive benefits, terms or 18 conditions of the contract. 19 "Nonresident insurance producer." An insurance producer that 20 has a principal place of residence outside this Commonwealth. 21 "Sell." To exchange a contract of insurance by any means, 22 for money or its equivalent, on behalf of an insurance company. 23 "Solicit." To attempt to sell insurance or ask or urge a 24 person to apply for a particular kind of insurance from a 25 particular company. 26 "Uniform application." The current version of the NAIC 27 Uniform Application for resident and nonresident producer 28 licensing. 29 "Uniform business entity application." The current version 30 of the NAIC Uniform Business Entity Application for resident and 20010H1882B2444 - 4 -
1 nonresident business entities. 2 Section 602. Powers and duties of department. 3 (a) Responsibilities.--The commissioner shall do all of the 4 following: 5 (1) Administer this division. 6 (2) License persons as insurance producers in accordance 7 with this division. 8 (3) Develop guidelines for preexamination courses of 9 study, insurance producer licensing examinations and 10 continuing education programs required by this division. 11 (4) Approve and administer preexamination courses of 12 study, insurance producer licensing examinations and 13 continuing education programs required by this division. A 14 preexamination education program approved by the department 15 shall include no less than two credit hours on ethics and two 16 credit hours related to the regulatory function and framework 17 of the department. 18 (b) Authorizations.--The commissioner may do all of the 19 following: 20 (1) Require any information reasonably necessary to 21 verify the application information or the worthiness of a 22 person applying for a license including criminal history 23 reports, fingerprints, credit reports or other documentation 24 from the National Crime Information Center (NCIC) and other 25 law enforcement agencies, Federal and State regulatory 26 agencies and the NAIC. 27 (2) Participate with the NAIC in a centralized insurance 28 producer license registry. 29 Section 603. License required. 30 (a) General rule.--Except as provided in subsection (b), a 20010H1882B2444 - 5 -
1 person shall not sell, solicit or negotiate a contract of 2 insurance in this Commonwealth unless the person is licensed as 3 an insurance producer for the line of authority under which the 4 contract is issued. 5 (b) Exceptions.--The following persons shall not be required 6 to be licensed as an insurance producer: 7 (1) An insurer. 8 (2) An employee of an insurer or a rating organization 9 employed by an insurer: 10 (i) who is not engaged in the sale, solicitation or 11 negotiation of insurance contracts; and 12 (ii) who: 13 (A) inspects, rates or classifies risks; or 14 (B) supervises the training of insurance 15 producers. 16 (3) An officer, director or employee of an insurer or of 17 an insurance producer if the officer, director or employee 18 does not receive a commission on policies written or sold to 19 insure risks residing, located or to be performed in this 20 Commonwealth and: 21 (i) the officer, director or employee's activities 22 are executive, administrative, managerial, clerical or a 23 combination of these and do not include the sale, 24 solicitation or negotiation of insurance; 25 (ii) the officer, director or employee's function 26 relates to underwriting, loss control, inspection or the 27 processing, adjusting, investigating or settling of a 28 claim on a contract of insurance; or 29 (iii) the officer, director or employee is acting in 30 the capacity of a special agent or agency supervisor 20010H1882B2444 - 6 -
1 assisting insurance producers where the person's 2 activities are limited to providing technical advice and 3 assistance to licensed insurance producers and do not 4 include the sale, solicitation or negotiation of 5 insurance. 6 (4) A person that does any of the following: 7 (i) Secures and furnishes written information for 8 the purpose of group life insurance, group property and 9 casualty insurance, group annuities, group or blanket 10 accident and health insurance. 11 (ii) Performs administrative services related to the 12 enrollment of individuals under employer group plans. 13 (iii) Issues certificates under plans or otherwise 14 assists in administering plans. 15 (iv) Performs administrative services related to 16 mass marketed property and casualty insurance if no 17 commission is paid to the person for the services. 18 (5) An employer or the trustees of an employee trust 19 plan and their officers, directors and employees if: 20 (i) the employer, trustees, officers, directors or 21 employees are engaged in the administration or operation 22 of an employee benefits program; 23 (ii) the employee benefits program includes 24 insurance issued by an insurer for the benefit of the 25 employer's employees or the employees of its subsidiaries 26 or affiliates; and 27 (iii) the employer, trustees, officers, directors or 28 employees are not compensated, directly or indirectly, by 29 the insurer issuing the policy of insurance. 30 (6) A person engaged in the advertising of insurance in 20010H1882B2444 - 7 -
1 this Commonwealth if: 2 (i) the person does not sell, solicit or negotiate 3 insurance for risks residing, located or to be performed 4 in this Commonwealth; and 5 (ii) the advertising is distributed to persons 6 residing both within and outside this Commonwealth 7 through the use of printed publications or other forms of 8 electronic mass media. 9 (7) A person who satisfies all of the following: 10 (i) Is not a resident of this Commonwealth. 11 (ii) Sells, solicits or negotiates a contract of 12 insurance for commercial property and casualty risks to 13 an insured with risks located in more than one state, 14 other than workers' compensation insurance or commercial 15 auto insurance. 16 (iii) Is licensed as an insurance producer to sell, 17 solicit or negotiate that line of authority in the state 18 where the insured maintains its principal place of 19 business. 20 (iv) The contract of insurance insures risks located 21 in the state where the insured maintains its principal 22 place of business. 23 (8) A salaried full-time employee who: 24 (i) counsels or advises the employee's employer on 25 the employer's insurance issues; and 26 (ii) does not sell or solicit insurance or receive a 27 commission. 28 Section 604. License prerequisites. 29 (a) General rule.--Prior to applying to the department for 30 an insurance producer license, an individual shall do both of 20010H1882B2444 - 8 -
1 the following: 2 (1) Satisfactorily complete the preexamination education 3 requirements of subsection (b). 4 (2) Pass an insurance producer licensing examination 5 required by subsection (c) for the lines of authority for 6 which a candidate desires a license. 7 (b) Preexamination education requirements.--Prior to making 8 an application for the insurance producer licensing examination, 9 an individual who desires to be licensed as an insurance 10 producer shall complete a minimum of 24 credit hours of approved 11 preexamination courses. Upon satisfactory completion of an 12 approved preexamination course of study, the individual shall be 13 issued a certificate. 14 (c) Insurance producer licensing examination.--Except as 15 provided in subsection (d), upon satisfactory completion of an 16 approved preexamination course of study a candidate may apply to 17 take an insurance producer licensing examination. A candidate 18 shall remit a completed application for examination indicating 19 the lines of authority for which the candidate desires 20 licensing, a copy of the candidate's approved preexamination 21 study certificate and the nonrefundable examination fee 22 established by the department prior to taking an insurance 23 producer licensing examination. If a licensee is seeking to add 24 lines of authority to the licensee's existing license, the 25 licensee shall remit a completed application for examination 26 indicating the additional lines of authority for which the 27 licensee desires licensing and the nonrefundable examination fee 28 established by the department prior to taking an insurance 29 producer licensing examination. An individual who fails an 30 insurance producer licensing examination twice in any 30-day 20010H1882B2444 - 9 -
1 period shall be prohibited from applying to retake the 2 examination for 60 days from the date of the most recent 3 examination. 4 (d) Exceptions.-- 5 (1) The requirements of subsections (a)(2) and (c) shall 6 not be required if: 7 (i) the individual's line of authority will be 8 restricted to domestic mutual fire insurance and the 9 individual's appointment will be with an insurer writing 10 only coverage other than insurance upon automobiles as 11 authorized by section 202(b)(1) through (3) of the act of 12 May 17, 1921 (P.L.682, No.284), known as The Insurance 13 Company Law of 1921; or 14 (ii) the individual's line of authority will be 15 restricted fraternal. 16 (2) The requirements of subsections (a)(1) and (b) shall 17 not be required if the individual is licensed as an insurance 18 producer in another state. 19 (3) The requirements of subsections (a), (b) and (c) 20 shall not be required if the person: 21 (i) is a business entity; 22 (ii) possesses the professional designation of 23 Chartered Life Underwriter (CLU) and is applying for Life 24 or Accident and Health line of authority; 25 (iii) possesses the professional designation of 26 Chartered Property and Casualty Underwriter (CPCU) and is 27 applying for Property, Casualty or Accident and Health 28 line of authority; 29 (iv) possesses the professional designation of 30 Certified Insurance Counselor (CIC) and is applying for 20010H1882B2444 - 10 -
1 Life, Accident and Health, or Property and Casualty line 2 of authority; 3 (v) possesses any other professional designation for 4 which the requirements are waived by the commissioner; or 5 (vi) is licensed in another state as an insurance 6 producer for the lines of authority for which the person 7 desires to be licensed under section 610. 8 Section 605. Application for resident insurance producer 9 license. 10 (a) Resident individual application.--An applicant may apply 11 to the department for a resident individual insurance producer 12 license. An applicant shall remit to the department a completed 13 uniform application indicating the lines of authority for which 14 the applicant desires licensing, documentation verifying that 15 the applicant passed or is exempt from the insurance producer 16 licensing examination on the lines of authority for which the 17 applicant desires a license and the license fee required by 18 subsection (e). 19 (b) Resident business entity application.--Upon designating 20 an individual licensed under section 606(a) to be responsible 21 for the business entity's compliance with the insurance laws and 22 regulations of this Commonwealth, a business entity may apply to 23 the department for a resident business entity insurance producer 24 license for the lines of authority indicated on the designated 25 licensee's license. The designated licensee of the business 26 entity shall remit to the department a completed uniform 27 business entity application indicating the lines of authority 28 for which the business entity desires licensing, a copy of the 29 designated licensee's license and the license fee required by 30 subsection (e). 20010H1882B2444 - 11 -
1 (c) Transfer of individual out-of-State license.--After 2 establishing residency, an individual who is licensed as an 3 insurance producer in another state may apply to the department 4 to transfer the license and become licensed in this Commonwealth 5 as a resident individual insurance producer for the same lines 6 of authority as the individual was licensed in the other state. 7 Within 90 days of establishing residency in this Commonwealth, 8 the individual shall remit to the department a completed uniform 9 application indicating the lines of authority for which the 10 individual desires licensing and for which the individual is 11 licensed in the other state, a copy of the individual's current 12 home state license or a certificate of good standing from the 13 insurance commissioner of the individual's home state and the 14 license fee required by subsection (e). 15 (d) Transfer of business entity out-of-State license.--Upon 16 registering with the Department of State and designating an 17 individual licensed under section 606(a) to be responsible for 18 the business entity's compliance with the insurance laws and 19 regulations of this Commonwealth, a business entity which is 20 licensed in another state may apply to the department for a 21 resident business entity insurance producer license for the 22 lines of authority indicated on the designated licensee's 23 license. The designated licensee of the business entity shall 24 remit to the department a completed uniform business entity 25 application indicating the lines of authority for which the 26 business entity desires licensing, a copy of the designated 27 licensee's license and the license fee required by subsection 28 (e). 29 (e) License fee.--A nonrefundable $55 fee shall accompany an 30 application for a resident insurance producer license until 20010H1882B2444 - 12 -
1 modified by the department by regulation. 2 Section 606. Licensing. 3 (a) Applicants.--The department shall review each 4 application and may conduct an investigation of each applicant 5 who applies for a license in accordance with section 605(a). The 6 department shall issue a resident individual insurance producer 7 license to the applicant when the department is satisfied that 8 all of the following criteria have been met: 9 (1) The applicant has reached 18 years of age. 10 (2) The applicant has not committed any act which is 11 prohibited under section 612 or Subarticle B. 12 (3) The applicant has satisfied any preexamination 13 education requirements of section 604. 14 (4) The applicant has passed the insurance producer 15 licensing examination required by section 604 for the lines 16 of authority for which the applicant has applied for 17 licensing. 18 (5) The applicant has paid all applicable fees 19 established pursuant to this act. 20 (6) The applicant possesses the general fitness, 21 competence and reliability sufficient to satisfy the 22 department that the applicant is worthy of licensure. 23 (7) Such other criteria as the department may establish. 24 (b) Business entity.--The department shall review each 25 application and may conduct an investigation of each business 26 entity seeking licensure and its designated licensee which 27 applies for a license in accordance with section 605(b) and (d). 28 The department shall issue a resident business entity insurance 29 producer license to the business entity when the department is 30 satisfied that all of the following criteria have been met: 20010H1882B2444 - 13 -
1 (1) The business entity has a designated licensee. 2 (2) The business entity's designated licensee is a 3 resident licensee in good standing with the department. 4 (3) The business entity is applying for licensure in the 5 lines of authority indicated on the designated licensee's 6 license. 7 (4) The business entity and the designated licensee have 8 not committed any act which is prohibited under section 612 9 or Subarticle B. 10 (5) The business entity is not owned, operated or 11 managed by persons lacking the general fitness, competence 12 and reliability sufficient to satisfy the department that the 13 business entity is worthy of licensure. 14 (6) The business entity has paid all applicable fees 15 established pursuant to this act. 16 (7) Such other criteria as the department may establish. 17 (c) Transfer of out-of-State license.--The department shall 18 review each application and may conduct an investigation of each 19 individual who applies for a license in accordance with section 20 605(c). The department shall issue a resident individual 21 insurance producer license to the individual when the department 22 is satisfied that all of the following criteria have been met: 23 (1) The individual holds a current insurance producer 24 license in another state or made application to the 25 department within 90 days of the cancellation of the 26 individual's license in the other state. 27 (2) The individual is applying for licensure in the same 28 lines of authority the individual was licensed in the other 29 state. 30 (3) The applicant has not committed any act which is 20010H1882B2444 - 14 -
1 prohibited under section 612 or Subarticle B. 2 (4) The applicant has paid all applicable fees 3 established pursuant to this act. 4 (5) The individual: 5 (i) possesses a certificate of good standing from 6 the insurance commissioner of the individual's home 7 state; 8 (ii) was in good standing in the other state at the 9 time of cancellation; or 10 (iii) is recorded as being licensed for the lines of 11 authority and is in good standing in the other state's 12 insurance producer records or records maintained by the 13 NAIC. 14 (6) Such other criteria as the department may establish. 15 Section 607. Issuance and term of license. 16 An insurance producer license issued by the department under 17 this article shall be all of the following: 18 (1) Issued only in the name of the applicant or business 19 entity. If a licensee is doing business under a name other 20 than the name appearing on the licensee's license, the 21 licensee is required to notify the commissioner in writing 22 prior to using the assumed name. 23 (2) Issued in paper or electronic form. 24 (3) Nontransferable. 25 (4) Issued in one or more of the following lines of 26 authority: 27 (i) Life. Insurance coverage on human lives, 28 including benefits of endowment and annuities, and may 29 include benefits in the event of death or dismemberment 30 by accident and benefits for disability income. 20010H1882B2444 - 15 -
1 (ii) Accident and health or sickness. Insurance 2 coverage for sickness, bodily injury or accidental death 3 and may include benefits for disability income. 4 (iii) Property. Insurance coverage for the direct 5 or consequential loss or damage to property of every 6 kind. 7 (iv) Casualty. Insurance coverage against legal 8 liability, including that for death, injury or disability 9 or damage to real or personal property. 10 (v) Variable life and variable annuity products. 11 Insurance coverage provided under variable life insurance 12 contracts and variable annuities. 13 (vi) Personal lines. Property and casualty 14 insurance coverage sold to individuals and families 15 primarily for noncommercial purposes. 16 (vii) Credit. Limited line credit insurance. 17 (viii) Limited line. Any other line of insurance as 18 determined by the commissioner. 19 (5) Issued for a period not to exceed two years. 20 Section 608. License renewals. 21 (a) General rule.--A licensee may request renewal of the 22 licensee's license. The licensee shall remit to the department a 23 completed renewal form, the fee required by subsection (f)(1) 24 and verification that the licensee has completed the continuing 25 education required by subsection (b). Except as provided in 26 section 613, upon receipt and review, the department shall renew 27 the license of the licensee. 28 (b) Continuing education.--A licensee shall successfully 29 complete 24 credit hours of approved continuing education for 30 each two-year license period as a condition for license renewal. 20010H1882B2444 - 16 -
1 A licensee may carry forward excess continuing education credit 2 hours up to a maximum of 24 credit hours from one licensing 3 period to the next licensing period. 4 (c) Continuing education exemptions.--The following 5 licensees shall be exempt from the requirements of subsection 6 (b): 7 (1) A licensee who was licensed as an agent or broker 8 for a line of authority prior to January 1, 1971, and who has 9 been continuously licensed as an agent, broker or producer 10 for the line of authority since that time. 11 (2) A licensee which is a corporation, limited liability 12 corporation, a partnership, a limited partnership, limited 13 liability partnership or other approved business entity. 14 (3) A licensee that has a line of authority limited to 15 limited line. 16 (4) A licensee that has a line of authority limited to 17 title insurance. 18 (5) A licensee that has a line of authority limited to 19 restricted fraternal. 20 (6) A licensee that has a line of authority limited to 21 limited line credit life if the insurer provided a course of 22 instruction to each individual whose duties will include 23 selling, soliciting or negotiating the insurance. 24 (7) A nonresident licensee that has satisfied the 25 continuing education requirements of the licensee's home 26 state if that state recognizes the satisfaction of its 27 continuing education requirements by a resident licensee 28 satisfying the requirements of subsection (b). If the 29 nonresident licensee fails to satisfy the home state's 30 continuing education requirements, the licensee shall be 20010H1882B2444 - 17 -
1 subject to continuing education requirements of subsection 2 (b). 3 (8) A licensee that obtained a license without 4 examination under section 609(c) of the act of December 14, 5 1992 (P.L.835, No.134), known as the Fraternal Benefit 6 Societies Code, and whose appointments are limited to 7 fraternal benefit societies. 8 (9) Such other licensees approved by the commissioner. 9 (d) Lapses.--A licensee who allows his or her license to 10 lapse by failing to renew the license, pay the fee required by 11 subsection (f)(1) or complete the continuing education required 12 by subsection (b) may, within one year of the license renewal 13 date, request the department to reinstate the license. Upon 14 submitting a renewal form, the fee required by subsection (f)(2) 15 and verification that the licensee has completed all continuing 16 education required by subsection (b) for the previously licensed 17 and lapsed periods, the department shall reinstate the license. 18 (e) Extenuating circumstances.--A licensee who is unable to 19 timely comply with the requirements of subsection (a) as a 20 result of military service or other extenuating circumstance may 21 request the department to waive the requirements of subsection 22 (d). The request shall include sufficient detail and supporting 23 documentation to determine the necessity of the waiver. If the 24 department determines that there is good cause for the 25 noncompliance with subsection (a), the department shall grant 26 the waiver and permit the licensee to proceed under subsection 27 (a). 28 (f) Renewal fees.--The following nonrefundable fees shall 29 accompany an application for renewal of a resident insurance 30 producer license unless modified by the department by 20010H1882B2444 - 18 -
1 regulation: 2 (1) Renewal fee - $55. 3 (2) Lapsed license renewal fee - $165. 4 Section 609. Temporary licensing. 5 If the department determines that the issuance of a temporary 6 insurance producer license is in the public interest, the 7 department may issue a temporary insurance producer license to 8 the following persons: 9 (1) The surviving spouse or court-appointed personal 10 representative of a resident individual licensee who dies or 11 becomes mentally or physically disabled. The temporary 12 license shall be used by the spouse or representative to 13 operate the insurance business owned by the licensee until: 14 (i) the business is sold or transferred; 15 (ii) the licensee recovers and returns to the 16 business; or 17 (iii) new personnel is trained and licensed to 18 operate the licensee's business. 19 (2) An owner, partner or employee of a business entity 20 licensee upon the death or disability of the designated 21 licensee. The temporary license shall be used by the owner, 22 partner or employee to operate the business entity until: 23 (i) the business is sold or transferred; or 24 (ii) new personnel is trained, licensed and 25 designated as the designated licensee. 26 (3) The designee of an individual licensee who enters 27 active service in the armed forces of the United States. 28 (4) Any other person in a circumstance where the 29 commissioner deems that the public interest will best be 30 served by the issuance of a temporary license. 20010H1882B2444 - 19 -
1 The temporary license shall be for a period not to exceed 180 2 days and is not transferable. The department may impose 3 requirements upon a temporary licensee, including requiring a 4 sponsor and limiting the lines of authority of a temporary 5 licensee, as deemed necessary to protect insureds and the 6 public. The department may immediately and without notice revoke 7 a temporary license if the interests of insureds or the public 8 are endangered. 9 Section 610. Nonresident licensing. 10 (a) Nonresident licensed individuals.--An individual who is 11 currently licensed in another state as an insurance producer may 12 apply to the department for a nonresident individual insurance 13 producer license for the same lines of authority as the 14 individual is licensed in the other state. The individual shall 15 remit to the department a completed uniform application or an 16 update of the individual's home state application indicating the 17 lines of authority for which the individual desires a license 18 and for which the individual is licensed in the other state, a 19 copy of the individual's current out-of-State license and the 20 license fee required by subsection (d). If the individual 21 desires a nonresident insurance producer license for a line of 22 authority for which the individual is not licensed in the other 23 state, the individual shall comply with the requirements of 24 section 604 prior to making application to the department. 25 Upon receipt and review of the application, the copy of the 26 license and the fee, the department shall issue a nonresident 27 individual insurance producer license to the individual for the 28 lines of authority requested if the individual is licensed for 29 the lines of authority in the other state or has satisfied the 30 requirements of section 604 and if the department determines 20010H1882B2444 - 20 -
1 that the individual is a licensee in good standing in the 2 individual's home state. In making its determination, the 3 department may verify the individual's licensing status through 4 the Producer Database maintained by the NAIC, its affiliates or 5 subsidiaries. The department may deny the application if the 6 individual's home state does not award nonresident insurance 7 producer licenses to resident licensees of this Commonwealth on 8 the same basis. 9 (b) Nonresident licensed business entity.--Upon designating 10 an individual licensed under subsection (a) or section 606(a) to 11 be responsible for the business entity's compliance with the 12 insurance laws and regulations of this Commonwealth, a business 13 entity which is currently licensed in another state as an 14 insurance producer may apply to the department for a nonresident 15 business entity insurance producer license for the same lines of 16 authority as the business entity is licensed in the other state. 17 The designated licensee of the business entity shall remit to 18 the department a completed uniform business entity application 19 or an update of the business entity's home state application 20 indicating the lines of authority for which the business entity 21 desires licensing and for which the business entity is licensed 22 in the other state, a copy of the business entity's current out- 23 of-State license and the license fee required by subsection (d). 24 Upon receipt and review of the application, the copy of the 25 license and the fee, the department shall issue a nonresident 26 business entity insurance producer license to the business 27 entity for the lines of authority requested if the business 28 entity is licensed in the lines of authority in the other state 29 and if the department determines that the business entity and 30 the designated licensee are licensees in good standing. In 20010H1882B2444 - 21 -
1 making its determination, the department may verify licensing 2 status through the Producer Database maintained by the NAIC, its 3 affiliates or subsidiaries. The department may deny the 4 application if the business entity's home state does not award 5 nonresident insurance producer licenses to resident licensees of 6 this Commonwealth on the same basis. 7 (c) Nonresident unlicensed individuals.--An individual who 8 is a resident of another state and who is currently not licensed 9 as an insurance producer may apply to the department for a 10 nonresident individual insurance producer license. The 11 individual shall remit to the department a completed uniform 12 application indicating the lines of authority for which the 13 individual desires licensing, documentation verifying that the 14 individual passed the insurance producer licensing examination 15 for the lines of authority for which the individual desires a 16 license and the license fee required by subsection (d). 17 Upon receipt of the application and the fee, the department 18 shall review the application and may conduct an investigation of 19 the individual. The department shall issue a nonresident 20 individual insurance producer license to the individual when it 21 is satisfied that all of the following criteria have been met: 22 (1) The individual has reached 18 years of age. 23 (2) The individual has not committed any act which is 24 prohibited under section 612 or Subarticle B. 25 (3) The individual has satisfied any preexamination 26 education requirements of section 604. 27 (4) The individual has passed the insurance producer 28 licensing examination required by section 604 for the lines 29 of authority for which the individual has applied for 30 licensing. 20010H1882B2444 - 22 -
1 (5) The individual has paid all applicable fees 2 established pursuant to this article. 3 (6) The individual possesses the general fitness, 4 competence and reliability sufficient to satisfy the 5 department that the individual is worthy of licensure. 6 (7) Such other criteria as the department may establish. 7 (d) Nonresident license fee.--A nonrefundable fee in the 8 amount of $110 shall accompany an application for a nonresident 9 insurance producer license unless the fee is modified by the 10 department by regulation. 11 Section 611. Required notification by a licensee. 12 A licensee that moves from one state to another state shall 13 file a change of address and provide certification from the 14 licensee's new resident state within 30 days of the filing of 15 the change of home residence. 16 Section 612. License violations. 17 (a) Violations.--A licensee shall not do any of the 18 following: 19 (1) Provide incorrect, misleading, incomplete or false 20 information to the department in a license application. 21 (2) Violate the insurance laws or regulations of this 22 Commonwealth or a subpoena or order of the commissioner or of 23 another state's insurance commissioner. 24 (3) Obtain or attempt to obtain a license through 25 misrepresentation or fraud. 26 (4) Improperly withhold, misappropriate or convert money 27 or property received in the course of doing business. 28 (5) Intentionally misrepresent the terms of an actual or 29 proposed insurance contract or application for insurance. 30 (6) Admit to or been found to have committed any unfair 20010H1882B2444 - 23 -
1 insurance practice or fraud. 2 (7) Use fraudulent, coercive or dishonest practices or 3 demonstrate incompetence, untrustworthiness or financial 4 irresponsibility in the conduct of doing business in this 5 Commonwealth or elsewhere. 6 (8) Have an insurance producer license or other 7 financial services license, or its equivalent, denied, 8 suspended or revoked by a governmental entity. 9 (9) Forge another person's name on an application for an 10 insurance or financial service document or on any document 11 related to an insurance or financial service transaction. 12 (10) Cheat on an examination for an insurance producer 13 license. 14 (11) Knowingly accept insurance business which was sold, 15 solicited or negotiated by a person who is not licensed. 16 (12) Fail to comply with an administrative or court 17 order imposing a child support obligation. 18 (13) Fail to pay State income tax or comply with any 19 administrative or court order directing the payment of State 20 income tax. 21 (14) Commit a felony or its equivalent. 22 (15) Commit a misdemeanor that involves the misuse or 23 theft of money or property belonging to another person. 24 (16) Commit a violation of Subarticle B. 25 (17) Commit fraud, forgery, dishonest acts or an act 26 involving a breach of fiduciary duty. 27 (18) Fail to provide a written response to the 28 department within 30 days of receipt of any written inquiry 29 from the department. 30 (19) Transfer or place a contract of insurance with an 20010H1882B2444 - 24 -
1 insurer other than the insurer expressly chosen by the 2 applicant for insurance or the insured without the consent of 3 the insured. 4 (20) Remit to the department a payment for a fee which 5 is not negotiable or a method of payment which is returned by 6 a financial institution as not negotiable. 7 (21) Fail to notify the department of a change of 8 address within 30 days. 9 (22) Demonstrate a lack of general fitness, competence 10 and reliability sufficient to satisfy the department that the 11 licensee is worthy of continued licensure. 12 (b) Notice of violations.--If the department finds a 13 violation of this division or the regulations under this 14 division, it shall give written notice to the person specifying 15 the violation or violations found. The person shall, within 15 16 days of receipt of the written notice, correct the violation or 17 violations. 18 (c) Administrative fines.--If the department determines that 19 a licensee has failed to comply with the provisions of this 20 division or the regulations promulgated under this division, it 21 may assess an administrative fine of no more than $100 per day 22 per violation. In setting the fine, the department shall 23 consider the severity of the violation and whether there is a 24 pattern of violations. 25 Section 613. Reasons for suspension, denial, nonrenewal or 26 revocation of a license. 27 The department may suspend, deny, refuse to renew or revoke 28 an insurance producer license of a person who commits a 29 violation under section 612(a). 30 Section 614. Appeals. 20010H1882B2444 - 25 -
1 The person aggrieved by a decision of the department that has 2 a direct interest in the decision may appeal the decision of the 3 department to the administrative hearings office. The appeal 4 shall be conducted in accordance with 2 Pa.C.S. Ch. 5 Subch. A 5 (relating to practice and procedure of Commonwealth agencies). 6 Section 615. Effect of departmental order. 7 A decision of the department from which no timely appeal is 8 taken to the administrative hearings office or an order of the 9 commissioner from which no timely appeal is taken to a court of 10 competent jurisdiction shall be a final order and shall be 11 enforceable by a court of competent jurisdiction. 12 Section 616. Injunctions. 13 (a) Violations.--If a person, regardless of whether the 14 person is a licensee, has violated any of the provisions of this 15 division or the regulations promulgated under this division, the 16 commissioner may maintain an action for an injunction or other 17 process restraining or prohibiting the person from engaging in 18 the activity. 19 (b) Unlicensed insurance producer.--If a license is required 20 by this division, the commissioner may maintain an action in a 21 court of competent jurisdiction for an injunction or other 22 process restraining or prohibiting a person from selling, 23 soliciting or negotiating insurance without a license. 24 Section 617. Reciprocity. 25 (a) Waiver.--The department may waive the requirements for a 26 person applying for a nonresident insurance producer license in 27 this Commonwealth that possesses a valid insurance producer 28 license from the person's home state if the person's home state 29 awards nonresident insurance producer licenses to residents of 30 this Commonwealth on the same basis. 20010H1882B2444 - 26 -
1 (b) Limited line.--Notwithstanding any other provision of 2 this division, after application to the department in accordance 3 with section 610, a person licensed as a limited line credit 4 insurance or other type of limited lines producer in the 5 person's home state shall receive a nonresident limited lines 6 producer license in accordance with subsection (a), granting the 7 same scope of authority as granted under the license issued by 8 the producer's home state. 9 Section 618. Regulations. 10 The department may promulgate regulations necessary for the 11 administration of this division. 12 DIVISION 2 13 LICENSING OF MANAGERS AND EXCLUSIVE 14 GENERAL AGENTS 15 Section 631. License required. 16 (a) General rule.--Except as provided in subsection (b), no 17 person shall engage in any activities requiring a manager or 18 exclusive general agent license without being licensed as a 19 manager or exclusive general agent by the department. 20 (b) Exceptions.--The following persons shall not be required 21 to be licensed as a manager or exclusive general agent: 22 (1) A licensee whose authority is limited primarily to 23 the production of insurance business with limited 24 underwriting authority. 25 (2) A manager or exclusive general agent operating under 26 a management contract or exclusive general agency agreement 27 entered into prior to December 22, 1965. 28 (3) A person subject to regulation as a managing general 29 agent under Article VIII. 30 (c) Penalty.--A person that violates subsection (a) commits 20010H1882B2444 - 27 -
1 a misdemeanor of the third degree, and, upon conviction, shall 2 be sentenced to pay a fine not exceeding $1,000 for each day of 3 operation without a license. 4 Section 632. Application and licensure. 5 (a) Application.--A person may apply to the department for a 6 manager or exclusive general agent license. The person shall 7 submit to the department a completed application, the fee 8 required by subsection (c) and any other information required by 9 the department. 10 (b) Licensure.--The department shall review the application 11 and may conduct an investigation of the person. The department 12 shall issue a license to the person when the department is 13 satisfied that all of the following criteria have been met: 14 (1) The person possesses a good business reputation. 15 (2) The person possesses the fitness, competence and 16 reliability sufficient to satisfy the department that the 17 individual is worthy of licensure as a manager or exclusive 18 general agent. 19 (3) The person has paid all applicable fees established 20 pursuant to this article. 21 (4) Such other criteria as the department may establish. 22 (c) License fee.--A nonrefundable $100 fee shall accompany 23 an application for a manager or exclusive general agent license 24 unless modified by the department by regulation. 25 (d) Term.--A license issued in accordance with this section 26 shall be for a period of not more than one year. 27 Section 633. Insurers to certify names of managers or exclusive 28 general agents. 29 (a) General rule.--Every domestic insurer operating under a 30 management contract or an exclusive general agency agreement 20010H1882B2444 - 28 -
1 shall certify to the department the name of the manager or 2 exclusive general agent within ten days from the effective date 3 of the contract or agreement and within ten days after the 4 renewal of the license of the manager or exclusive general 5 agent. 6 (b) Penalty.--An insurer that fails to file the 7 certification required by subsection (a) commits a misdemeanor 8 of the third degree and, upon conviction, shall be sentenced to 9 pay a fine not exceeding $1,000 for each day of noncompliance. 10 Section 634. Enforcement by department. 11 (a) Notice.--Upon evidence of conduct which would disqualify 12 a licensed manager or exclusive general agent from initial 13 issuance of a license, the department shall notify the manager 14 or exclusive general agent, specifying the nature of the alleged 15 conduct and fixing a time and place, at least ten days 16 thereafter, when a hearing on the matter shall be held. 17 (b) Hearing.--The department shall conduct the hearing fixed 18 in subsection (a) in accordance with 2 Pa.C.S. Ch. 5 Subch. A 19 (relating to practice and procedure of Commonwealth agencies). 20 (c) Penalties.--After the hearing or upon failure of the 21 manager or exclusive general agent to appear at the hearing, the 22 commissioner may impose any combination of the following actions 23 deemed appropriate: 24 (1) Suspension or revocation of the license, if any, of 25 the person. 26 (2) An order to cease and desist. 27 (3) Any other conditions as the commissioner deems 28 appropriate. 29 Section 635. Injunctions. 30 The department may initiate or maintain an action for an 20010H1882B2444 - 29 -
1 injunction or other process against any person to restrain and 2 prevent the person from engaging in any activity which is in 3 violation of this division. 4 Section 636. Appeals. 5 The person aggrieved by a decision of the commissioner that 6 has a direct interest in the decision may appeal the decision of 7 the commissioner in accordance with 2 Pa.C.S. Ch. 7 Subch. A 8 (relating to judicial review of Commonwealth agency action). 9 Section 637. Regulations. 10 The department may promulgate regulations necessary for the 11 administration of this division. 12 SUBARTICLE B 13 REGULATION OF INSURANCE PRODUCERS 14 DIVISION 1 15 PROHIBITED ACTIVITIES 16 Section 641. Unlicensed activity. 17 (a) Prohibition.--No person shall act as or perform the 18 duties of a licensee without being licensed in this Commonwealth 19 in accordance with Subarticle A. 20 (b) Penalty.--A person that violates subsection (a) commits 21 a felony of the third degree. 22 Section 642. Theft by insurance producers. 23 (a) Prohibition.--No insurance producer shall negotiate a 24 contract of insurance for an insurer and embezzle or convert to 25 his own use or, with intent to use or embezzle, take, secrete, 26 or otherwise dispose of, or withhold, appropriate, lend, invest 27 or otherwise use or apply money or substitutes for money 28 received by him as an insurance producer, contrary to the 29 instructions or without the consent of the insurer. 30 (b) Penalty.--A person that violates subsection (a) commits 20010H1882B2444 - 30 -
1 a theft punishable in accordance with 18 Pa.C.S. Ch. 39 2 (relating to theft and related offenses). 3 Section 643. Advertising as insurance producer of unauthorized 4 entity. 5 (a) Prohibition.--No person shall represent or advertise 6 himself to be licensee of a foreign or alien insurance entity 7 which has not complied with the laws of this Commonwealth. 8 (b) Penalty.--A person that violates subsection (a) commits 9 a misdemeanor of the third degree. 10 Section 644. Soliciting for nonexistent entity. 11 (a) Prohibition.--No person shall, directly or indirectly, 12 offer to sell, solicit, negotiate, make, procure or obtain 13 contracts, certificates, agreements, binders or applications for 14 insurance, surety or indemnity in this Commonwealth for or on 15 behalf of a spurious, fictitious, nonexistent, dissolved, 16 inactive, liquidated, liquidating or bankrupt insurance entity. 17 (b) Penalty.--A person that violates subsection (a) commits 18 a misdemeanor of the third degree. 19 Section 645. Rebates prohibited. 20 (a) Prohibition.--No insurance producer shall, directly or 21 indirectly, offer, promise, allow, give, set off or pay a rebate 22 of, or part of, a premium payable on the contract of insurance 23 or on the insurance producer's commission, earnings, profits, 24 dividends or other benefit founded, arising, accruing or to 25 accrue thereon, or any special advantage in date of policy or 26 age of issue, or any paid employment or contract for services of 27 any kind, or any other valuable consideration or inducement, to 28 or for insurance on a risk in this Commonwealth which is not 29 specified in the contract of insurance. 30 (b) Penalty.--A person that violates subsection (a) commits 20010H1882B2444 - 31 -
1 a misdemeanor of the third degree. 2 Section 646. Inducements prohibited. 3 (a) Prohibition.--No insurance producer shall, directly or 4 indirectly, offer, promise, give, option, sell or purchase any 5 stocks, bonds, securities or property, or any dividends or 6 profits accruing or to accrue thereon, or other thing of value 7 whatsoever, as an inducement to purchase a contract of 8 insurance. Nothing in this section shall be construed to prevent 9 the taking of a bona fide obligation, with legal interest, in 10 payment of any premium. 11 (b) Penalty.--A person that violates subsection (a) commits 12 a misdemeanor of the third degree. 13 Section 647. Misrepresentation of terms of policy and future 14 dividends by insurance producers. 15 (a) Prohibition.--No insurance producer shall, directly or 16 indirectly: 17 (1) Issue, circulate, or use, or cause or permit to be 18 issued, circulated or used a written or oral statement or 19 circular misrepresenting the terms of a contract of insurance 20 issued or to be issued by the insurer. 21 (2) Make an estimate with intent to deceive of the 22 future dividends payable under the contract of insurance. 23 (b) Penalty.--A person that violates subsection (a) commits 24 a misdemeanor of the third degree. 25 Section 648. Misrepresentations to an insured of another 26 company. 27 (a) Prohibition.--No licensee shall, directly or indirectly, 28 misrepresent or make an incomplete comparison of contracts of 29 insurance for the purpose of inducing an insured of another 30 insurer to lapse, forfeit or surrender his contract of insurance 20010H1882B2444 - 32 -
1 and to take out a contract of insurance insuring against similar 2 risks with the licensee or solicitor's insurer. 3 (b) Penalty.--A person that violates subsection (a) commits 4 a misdemeanor of the third degree. 5 Section 649. The sale of insurance by financial institutions. 6 No financial institution shall apply to be licensed or to be 7 admitted as an insurer except to underwrite title insurance. 8 Section 650. Application fee. 9 No insurance producer shall charge a fee for the completion 10 of an application for a contract of insurance. 11 Section 651. Regulation of insurance producers by financial 12 institutions. 13 No financial institution may impose any unreasonable 14 requirement on a insurance producer not associated with that 15 financial institution. 16 Section 652. Conditional financial transactions. 17 No financial institution or its directors, officers, 18 employees, agents or insurance producers may require the 19 purchase of insurance from the financial institution or its 20 affiliates or from a designated insurer or insurance producer as 21 a condition of a loan or deposit transaction. A financial 22 institution or its directors, officers, employees, agents or 23 insurance producers may not reject a required contract of 24 insurance solely because the contract was sold by a person that 25 is not associated with the financial institution. 26 Section 653. Customer privacy. 27 Except as provided in section 678, no financial institution 28 shall use or share customer information with a third party for 29 the purpose of selling or soliciting the purchase of a contract 30 of insurance or an annuity. 20010H1882B2444 - 33 -
1 DIVISION 2 2 REGULATED ACTIVITIES 3 Section 671. Appointments. 4 (a) Appointment required.--Except as provided in subsection 5 (b), a licensee may not contract insurance for or attempt to 6 place a contract of insurance with an insurer unless the 7 licensee has been appointed by the insurer. 8 (b) Procedure.--An insurer may appoint a licensee by filing 9 with the department a notice of appointment and remitting the 10 fee required by subsection (e) within 15 days of the date the 11 contract between the insurer and licensee is executed or within 12 15 days of the date the insurer receives the first application 13 for insurance from the licensee. The notice shall state for 14 which companies within the insurer's holding company system or 15 group the appointment is requested. Upon receipt of the notice, 16 the department shall verify if the licensee is eligible for 17 appointment. If the licensee is determined to be ineligible for 18 appointment, the department shall notify the insurer of the 19 determination. 20 (c) Term.--Unless terminated in accordance with section 680, 21 an appointment shall be for a period of two years. 22 (d) Renewal of appointments.--An appointment may be renewed 23 upon payment of the renewal appointment fee required by 24 subsection (f) and verification by the department that the 25 licensee is eligible for appointment. 26 (e) Appointment fee.--A nonrefundable $25 fee per company 27 appointment requested shall accompany a notification for 28 appointment until modified by the department by regulation. A 29 discount of 20% per each appointment shall be allowed for the 30 use of electronic media approved by the department to file a 20010H1882B2444 - 34 -
1 notification of appointment. 2 (f) Renewal appointment fee.--A nonrefundable $25 fee per 3 company appointment requested shall accompany a notification for 4 appointment until modified by the department by regulation. A 5 discount of 20% per each appointment shall be allowed for the 6 use of electronic media approved by the department to file a 7 notification of appointment. 8 (g) Reporting.--An insurer shall, upon request, certify to 9 the department the names of all licensees appointed by the 10 insurer. 11 Section 672. Payment of commissions. 12 (a) Limitation.--An insurance entity may pay a commission, 13 brokerage fee, service fee or other compensation to a licensee 14 appointed in accordance with section 671 for selling, soliciting 15 or negotiating a contract of insurance. A licensee may pay a 16 commission, brokerage fee, service fee or other compensation to 17 a licensee for selling, soliciting or negotiating a contract of 18 insurance. Except as provided in subsection (b), an insurance 19 entity or licensee may not pay a commission, brokerage fee, 20 service fee or other compensation to a person that is not a 21 licensee for activities related to the sale, solicitation or 22 negotiation of a contract of insurance. 23 (b) Exception.--An insurance entity or licensee may pay: 24 (1) a renewal or other deferred commission to a person 25 that is not a licensee for selling, soliciting or negotiating 26 a contract of insurance if the person was a licensee at the 27 time of the sale, solicitation or negotiation; or 28 (2) a fee to a person that is not a licensee for 29 referring persons to a licensee if all of the following 30 apply: 20010H1882B2444 - 35 -
1 (i) The fee is a one-time, nominal, fixed dollar 2 amount for each referral. 3 (ii) The payment of the fee is not contingent upon 4 the results of the referral. 5 (iii) The referral does not include a discussion of 6 specific terms or conditions of a contract of insurance. 7 An insurance entity or licensee shall not pay a commission or 8 fee to a person under this subsection if the person is a 9 licensee under suspension or a former licensee whose insurance 10 producer license was revoked. 11 Section 673. Receipt of commissions. 12 (a) Limitation.--A licensee may accept a commission, 13 brokerage fee, service fee or other compensation from an 14 insurance entity or licensee for selling, soliciting or 15 negotiating a contract of insurance. Except as provided in 16 subsection (b), a person may not accept a commission, brokerage 17 fee, service fee or other compensation from an insurance entity 18 or licensee if the person is not a licensee and the compensation 19 is for activities related to the sale, solicitation or 20 negotiation of a contract of insurance. 21 (b) Exception.--A person may accept: 22 (1) a renewal or other deferred commission for selling, 23 soliciting or negotiating a contract of insurance if the 24 person was a licensee at the time of the sale, solicitation 25 or negotiation; or 26 (2) a fee for referring persons to a licensee if all of 27 the following apply: 28 (i) The fee is a one-time, nominal, fixed dollar 29 amount for each referral. 30 (ii) The payment of the fee is not contingent upon 20010H1882B2444 - 36 -
1 the results of the referral. 2 (iii) The referral does not include a discussion of 3 specific terms or conditions of a contract of insurance. 4 A person may not accept a commission or fee under this 5 subsection if the person is a licensee under suspension or a 6 former licensee whose insurance producer license was revoked. 7 Section 674. Imposition of additional fees. 8 A licensee may charge a fee in addition to a commission to a 9 person for the sale, solicitation or negotiation of a contract 10 of insurance for commercial business. The fee charged by the 11 licensee shall be disclosed in writing to the person and is 12 subject to review by the department. 13 Section 675. Credit life, credit accident and health and credit 14 unemployment insurance. 15 (a) Sales restrictions.--A licensee shall sell, solicit and 16 negotiate a contract of insurance in accordance with the act of 17 September 2, 1961 (P.L.1232, No.540), known as the Model Act for 18 the Regulation of Credit Life Insurance and Credit Accident and 19 Health Insurance, for all of the following: 20 (1) Credit life insurance. 21 (2) Credit accident and health insurance. 22 (3) Credit unemployment insurance. 23 If the insurance is sold in connection with loans or other 24 credit transactions, the provisions of the Model Act for the 25 Regulation of Credit Life Insurance and Credit Accident and 26 Health Insurance relating to credit life and credit accident and 27 health insurance are applicable to credit unemployment 28 insurance. 29 (b) Additional restrictions.--In addition to the 30 requirements of subsection (a), the sale, solicitation or 20010H1882B2444 - 37 -
1 negotiation of credit unemployment insurance shall be subject to 2 all of the following: 3 (1) The total amount of benefits payable by credit 4 unemployment insurance in the event of unemployment shall not 5 exceed the aggregate of the periodic scheduled unpaid 6 installments of the indebtedness. 7 (2) The amount of each monthly payment shall not exceed 8 the original indebtedness divided by the number of 9 installments. 10 (3) The loss ratio for the insurance shall be set and 11 regulated by the commissioner in the same manner as the loss 12 ratio is set and regulated for credit life and credit 13 accident and health insurance. 14 (4) Involuntary unemployment insurance sold in 15 connection with open-end credit shall provide monthly 16 benefits at least equal to the insured's minimum monthly 17 payment calculated at the time of unemployment, subject to a 18 maximum monthly indemnity contained in the certificate of 19 insurance. 20 (5) Benefits are payable, at a minimum, upon the debtor 21 meeting the eligibility requirements for unemployment 22 compensation. 23 (6) The period during which benefits are payable in the 24 event of the insured's involuntary unemployment shall 25 continue at least until the earliest of the following: 26 (i) The insured's return to full-time work. 27 (ii) Satisfaction of the loan or other credit 28 transaction. 29 (iii) In the case of open-end credit, payment of 12 30 consecutive monthly installments. 20010H1882B2444 - 38 -
1 (7) The insurance shall not be required as a condition 2 of the extension of credit. 3 (8) If a creditor offers the insurance to any of its 4 debtors, it must offer it under the same terms and conditions 5 to all of its like debtors and under the same terms and 6 conditions as all of its offices or locations in this 7 Commonwealth. 8 Section 676. Required purchases of insurance. 9 (a) Disclosures.--If a financial institution requires a 10 person to obtain insurance in connection with a loan and the 11 insurance is available through the financial institution, a 12 licensee employed by or affiliated with the financial 13 institution shall inform the person at or prior to the time of 14 application that the purchase of the insurance from the 15 financial institution is not a condition of the loan and will 16 not affect current or future credit decisions. The licensee may 17 inform the person that insurance is available from the financial 18 institution. 19 (b) Acknowledgment.--If the person purchases the insurance 20 through the financial institution, the licensee shall obtain a 21 written statement or acknowledgment from the person prior to the 22 purchase of the insurance stating that the person has been 23 advised that the purchase of the insurance from the financial 24 institution is not a condition of receiving the loan. 25 Section 677. Sales on or from the premises of a financial 26 institution. 27 (a) Disclosures.--A licensee employed by or affiliated with 28 a financial institution that solicits the sale of annuities or 29 life insurance, except credit life insurance, on or from the 30 physical premises of the financial institution shall provide a 20010H1882B2444 - 39 -
1 person applying for a contract of insurance a written disclosure 2 at or prior to the time of application for the insurance or 3 annuity. The disclosure shall include a notice of all of the 4 following: 5 (1) The insurance or annuity is not a deposit. 6 (2) The insurance or annuity is not insured by the 7 Federal Deposit Insurance Corporation or any other agency or 8 instrumentality of the Federal Government. 9 (3) The insurance or annuity is not guaranteed by the 10 financial institution or an affiliated insured depository 11 institution. 12 (4) The insurance or annuity is subject to investment 13 risk, including potential loss of principal, when 14 appropriate. 15 (b) Setting and circumstance.--Sales of annuities or 16 insurance, except credit insurance, by a financial institution 17 or by a licensee employed by or affiliated with the financial 18 institution shall take place in a location which is distinct 19 from the area where deposits are taken and loan applications are 20 discussed and accepted. Signs or other means shall be used to 21 distinguish the insurance or annuities sales area from the 22 deposit taking and lending areas. The commissioner shall exempt 23 a financial institution from the requirements of this section if 24 the number of staff or size of the facility prevents compliance. 25 (c) Exceptions.--Compliance by a financial institution with 26 the disclosure and the setting and circumstances requirements 27 set forth in the "Interagency Statement on Retail Sales of 28 Nondeposit Investment Products" issued February 15, 1994, by the 29 Board of Governors of the Federal Reserve System, the Federal 30 Deposit Insurance Corporation, the Office of the Comptroller of 20010H1882B2444 - 40 -
1 the Currency and the Office of Thrift Supervision shall satisfy 2 the requirements of this section. 3 Section 678. Use of customer information. 4 (a) Notice.--Upon providing notice to a person in accordance 5 with this section, a financial institution may use or share 6 customer information in the sale or solicitation of contracts of 7 insurance or annuities. 8 (b) Procedure.--The financial institution shall send by 9 first class mail the following notice to the person set forth in 10 standard or larger type: 11 USE OF INSURANCE INFORMATION 12 RELATING TO YOUR LOAN 13 As a current loan customer, we may have insurance 14 coverage information that was obtained as part of your 15 loan process. Under Pennsylvania law, you have the right 16 to direct that we not use or share this information in 17 the marketing of insurance or annuities. To exercise this 18 right, you must sign and return this form within 30 days. 19 If you do not sign and return this form to us, we may use 20 or share this information in the marketing of insurance 21 or annuities. 22 ......................................... 23 (Signature) 24 The notice shall be addressed to the individual person and shall 25 include a postage prepaid response mechanism. 26 (c) Solicitation permitted.--The notice prescribed in 27 subsection (b) may be included with a solicitation for the 28 purchase of a contract of insurance or annuities. 29 (d) Second notice.--If the person has not responded to the 30 notice prescribed in subsection (b) within 30 days, the 20010H1882B2444 - 41 -
1 financial institution shall send a second notice. The second 2 notice shall meet the requirements set forth in subsection (b). 3 (e) Exception.--Notwithstanding subsections (b) and (d), for 4 the purpose of complying with subsection (a), a financial 5 institution may directly obtain written consent for the use of 6 customer information from a current or prospective debtor. The 7 following notice, set forth in standard or larger type, shall be 8 used for this purpose: 9 USE OF INSURANCE INFORMATION 10 RELATING TO YOUR LOAN 11 The borrower hereby consents to the use or sharing of any 12 insurance coverage information obtained as part of the 13 loan process in the marketing of insurance or annuities. 14 ......................................... 15 (Signature) 16 Section 679. Licensee reporting of misconduct. 17 (a) Misconduct reporting.--A licensee shall report to the 18 department any administrative action taken against the licensee 19 in another jurisdiction or by another governmental agency in 20 this Commonwealth within 30 days of the final disposition of the 21 matter. This report shall include a copy of the order, consent 22 order or other relevant legal documents. 23 (b) Criminal conduct reporting.--Within 30 days of being 24 charged with criminal conduct, a licensee shall report the 25 charges to the department. The licensee shall provide the 26 department with all of the following within 30 days of their 27 availability to the licensee: 28 (1) A copy of the criminal complaint, information or 29 indictment. 30 (2) A copy of the order resulting from a pretrial 20010H1882B2444 - 42 -
1 hearing, if any. 2 (3) A report of the final disposition of the charges. 3 Section 680. Termination of appointments. 4 (a) Termination.--An insurer which terminates an 5 appointment, employment, contract or insurance business 6 relationship with a licensee shall notify the department within 7 30 days following the effective date of the termination. If the 8 reason for the termination was a violation of this article or if 9 the insurer had knowledge that the licensee was found to have 10 engaged in any activity prohibited by division 1 by a court, 11 government body or self-regulatory organization, the insurer 12 shall inform the department in the notification. Upon the 13 written request of the department, the insurer shall provide 14 additional information, documents, records or other data 15 pertaining to the termination or activity of the producer. 16 (b) Ongoing notification requirement.--The insurer shall 17 promptly notify the department if, upon further review or 18 investigation, the insurer discovers additional information that 19 would have been reportable to the commissioner in accordance 20 with subsection (a) had the insurer known of the existence of 21 the information. 22 (c) Copy of notification to be provided to licensee.-- 23 (1) Within 15 days of making a notification required by 24 subsection (a) or (b), an insurer shall mail a copy of the 25 notification to the licensee's last known home address by 26 certified mail, return receipt requested, postage prepaid or 27 by overnight delivery using a nationally recognized carrier. 28 (2) Within 30 days of receiving notification pursuant to 29 paragraph (1), a licensee may file written comments 30 concerning the substance of the notification with the 20010H1882B2444 - 43 -
1 department. The licensee shall simultaneously mail a copy of 2 the comments to the insurer by certified mail, return receipt 3 requested, postage prepaid or by overnight delivery using a 4 nationally recognized carrier. 5 (d) Reports.--An insurer or licensee that fails to report as 6 required under the provisions of this section or that is found 7 to have falsely reported with malice by a court of competent 8 jurisdiction may, after notice and hearing, have its license or 9 certificate of authority suspended or revoked and may have civil 10 penalties imposed against the insurer or licensee in an amount 11 not to exceed $5,000 for each incident. 12 (e) Confidentiality.-- 13 (1) Any documents, materials or other information in the 14 control or possession of the department which is furnished by 15 an insurer, licensee or which is obtained by the department 16 in an investigation pursuant to this section shall be 17 confidential by law and privileged, shall not be subject to 18 the act of June 21, 1957, (P.L.390, No.212), referred to as 19 the Right-to-Know Law, shall not be subject to subpoena, and 20 shall not be subject to discovery or admissible in evidence 21 in any private civil action. However, the department is 22 authorized to use the documents, materials or other 23 information in the furtherance of any regulatory or legal 24 action brought as a part of the department's duties. 25 (2) Neither the department nor any person who received 26 documents, materials or other information while acting under 27 the authority of the department shall be permitted or 28 required to testify in any private civil action concerning 29 any confidential documents, materials, or information subject 30 to paragraph (1). 20010H1882B2444 - 44 -
1 (3) In order to assist in the performance of the 2 department's duties under this article, the department: 3 (i) may share documents, materials or other 4 information, including the confidential and privileged 5 documents, materials or information subject to paragraph 6 (1), with other Federal, State and international 7 regulatory agencies, with the NAIC, its affiliates or 8 subsidiaries, and with Federal, State and international 9 law enforcement authorities, if the recipient agrees to 10 maintain the confidentiality and privileged status of the 11 document, material or other information; and 12 (ii) may receive documents, materials or 13 information, including otherwise confidential and 14 privileged documents, materials or information, from the 15 NAIC, its affiliates or subsidiaries and from regulatory 16 and law enforcement officials of other foreign or 17 domestic jurisdictions, and shall maintain as 18 confidential or privileged any document, material or 19 information received with notice or the understanding 20 that it is confidential or privileged under the laws of 21 the jurisdiction that is the source of the document, 22 material or information. 23 (4) No waiver of any applicable privilege or claim of 24 confidentiality in the documents, materials or information 25 shall occur as a result of disclosure to the department under 26 this section or as a result of sharing as authorized in 27 paragraph (3). 28 (5) Nothing in this article shall prohibit the 29 department from releasing final, adjudicated actions 30 including for cause terminations that are open to public 20010H1882B2444 - 45 -
1 inspection pursuant to the Right-to-Know Law to a data base 2 or other clearinghouse service maintained by the NAIC, its 3 affiliates or subsidiaries. 4 (f) Preemption.--Nothing in this section shall supersede any 5 provision of the act of September 22, 1978, (P.L.763, No.143), 6 entitled "An act establishing certain procedures relating to the 7 termination of insurance agency contracts or accounts and 8 providing penalties." 9 DIVISION 3 10 ENFORCEMENT 11 Section 691. Enforcement by department. 12 (a) Notice.--Upon evidence of a violation of this 13 subarticle, the department shall notify the person allegedly in 14 violation. The notice shall specify the nature of the alleged 15 violation and fix a time and place, at least ten days 16 thereafter, when a hearing on the matter shall be held. 17 (b) Hearing.--The department shall conduct the hearing on 18 the violation in accordance with 2 Pa.C.S. Ch. 5 Subch. A 19 (relating to practice and procedure of Commonwealth agencies). 20 (c) Evidence.--No person shall be excused from testifying or 21 from producing any books, papers, contracts, agreements or 22 documents at any hearing held by the commissioner on the ground 23 that the testimony or evidence may tend to incriminate that 24 person. 25 (d) Penalties.--After the hearing or upon failure of the 26 person to appear at the hearing, the commissioner may, in 27 addition to any penalty which may be imposed by a court, impose 28 any combination of the following deemed appropriate: 29 (1) Suspension or revocation of the license, if any, of 30 the person. 20010H1882B2444 - 46 -
1 (2) A civil penalty not to exceed $10,000 for each 2 action in violation of this subarticle. 3 (3) An order to cease and desist. 4 (4) Any other conditions as the commissioner deems 5 appropriate. 6 Section 692. Injunctions. 7 (a) Injunctions.--The commissioner may maintain an action 8 for an injunction or other process against any person to 9 restrain and prevent the person from engaging in any activity 10 violating this subarticle. 11 (b) Additional injunctions.--An injunction may be brought to 12 restrain or prevent unlicensed activity as a reinsurance 13 intermediary in violation of Article VII or as a managing 14 general agent under Article VIII. 15 Section 693. Appeals. 16 The person aggrieved by a decision of the commissioner that 17 has a direct interest in the decision may appeal the decision of 18 the commissioner in accordance with 2 Pa.C.S. Ch. 7 Subch. A 19 (relating to judicial review of Commonwealth agency action). 20 DIVISION 4 21 MISCELLANEOUS 22 Section 695. Personal liability of an insurance producer for 23 unauthorized entity. 24 An insurance producer shall be personally liable on all 25 contracts of insurance or suretyship unlawfully made by or 26 through the producer, directly or indirectly, for or on behalf 27 of any insurance entity which is not authorized to do business 28 in this Commonwealth. 29 Section 696. Fiduciary capacity of an insurance producer. 30 An insurance producer shall be responsible in a fiduciary 20010H1882B2444 - 47 -
1 capacity for all funds received or collected as an insurance 2 producer and shall not, without the express consent of the 3 insurance entity on whose behalf the funds were received, mingle 4 the funds with the producer's own funds or with funds held by 5 the insurance producer in any other capacity. Nothing in this 6 article shall be deemed to require an insurance producer to 7 maintain a separate bank deposit for the funds of each insurance 8 entity, if and as long as the funds of each insurance entity are 9 reasonably ascertainable from the books of account and records 10 of the insurance producer. 11 Section 697. Surplus lines insurance producers. 12 Notwithstanding the provisions of this or any other act, a 13 person licensed as a surplus lines producer in the person's home 14 state may receive a nonresident surplus lines insurance producer 15 license without the need to maintain a resident office in this 16 Commonwealth or to post a bond as a condition of licensure. 17 Nothing in this section otherwise amends or supersedes any 18 provision of Article XVI of the act of May 17, 1921 (P.L.682, 19 No.284), known as The Insurance Company Law of 1921. 20 Section 698. Federal preemption. 21 Notwithstanding any law or regulation of this Commonwealth to 22 the contrary, in the event of Federal preemption of any of the 23 provisions of this act or any other law of this Commonwealth 24 regarding the sale of insurance or annuities by federally 25 chartered financial institutions, State-chartered financial 26 institutions shall not be subject to those provisions or laws 27 which were the subject of the Federal preemption. 28 Section 699. Regulations. 29 The department may promulgate regulations necessary for the 30 administration of this subarticle. 20010H1882B2444 - 48 -
1 SUBARTICLE C 2 CONFLICTING PROVISIONS 3 Section 699.1. Scope. 4 The provisions of this article shall supersede any other 5 conflicting provisions of this act. 6 Section 3. Existing references to persons licensed in 7 accordance with Article VI of the act prior to the effective 8 date of this amendatory act are deemed to be references to 9 persons licensed in accordance with this act and shall remain in 10 effect until replaced, revised or amended. 11 Section 4. Existing regulations applicable to the licensing 12 of agents and brokers not clearly inconsistent with the 13 provisions of this act shall remain in effect until replaced, 14 revised or amended. 15 Section 5. The act of May 17, 1921 (P.L 682, No. 284), known 16 as The Insurance Company Law of 1921, is repealed insofar as it 17 is inconsistent with this act. 18 Section 6. This act shall take effect as follows: 19 (1) This section shall take effect immediately. 20 (2) The remainder of this act shall take effect upon 21 publication of final form regulation in the Pennsylvania 22 Bulletin to implement this act or November 12, 2002, 23 whichever is sooner. G11L40JLW/20010H1882B2444 - 49 -