PRINTER'S NO. 509
No. 470 Session of 2005
INTRODUCED BY DeLUCA, BEBKO-JONES, BELFANTI, BIANCUCCI,
CALTAGIRONE, CURRY, DERMODY, EACHUS, FABRIZIO, FREEMAN,
GERGELY, GOODMAN, GRUCELA, HENNESSEY, JAMES, JOSEPHS,
LaGROTTA, LEACH, LEDERER, MANDERINO, McCALL, McGEEHAN, MELIO,
MUNDY, O'NEILL, PALLONE, PISTELLA, READSHAW, RUFFING, SHANER,
SOLOBAY, STABACK, TANGRETTI, THOMAS, VEON, WALKO, WASHINGTON
AND YOUNGBLOOD, FEBRUARY 14, 2005
REFERRED TO COMMITTEE ON INSURANCE, FEBRUARY 14, 2005
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 insurance producer compensation disclosure.
14 The General Assembly of the Commonwealth of Pennsylvania
15 hereby enacts as follows:
16 Section 1. The act of May 17, 1921 (P.L.789, No.285), known
17 as The Insurance Department Act of 1921, is amended by adding a
18 section to read:
19 Section 677.2-A. Compensation disclosure.
20 (a) General rule.--
21 (1) Where any insurance producer or any affiliate of
1 such producer receives any compensation from the customer for
2 the placement of insurance or represents the customer with
3 respect to that placement, neither that producer nor the
4 affiliate shall accept or receive any compensation from an
5 insurer or other third party for that placement of insurance
6 unless the producer has, prior to the customer's purchase of
7 insurance:
8 (i) Obtained the customer's documented
9 acknowledgment that such compensation will be received by
10 the producer or affiliate.
11 (ii) Disclosed the amount of compensation from the
12 insurer or other third party for that placement. If the
13 amount of compensation is not known at the time of
14 disclosure, the producer shall disclose the specific
15 method for calculating such compensation and, if
16 possible, a reasonable estimate of the amount.
17 (2) Subsection (a)(1) shall not apply to an insurance
18 producer who:
19 (i) does not receive compensation from the customer
20 for the placement of insurance;
21 (ii) in connection with that placement of insurance
22 represents an insurer that has appointed the producer;
23 and
24 (iii) discloses to the customer prior to the
25 purchase of insurance:
26 (A) that the insurance producer will receive
27 compensation from an insurer in connection with that
28 placement; or
29 (B) that, in connection with that placement of
30 insurance, the insurance producer represents the
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1 insurer and that the producer may provide services to
2 the customer for the insurer.
3 (b) Construction.--A person shall not be considered a
4 "customer" for purposes of this section if the person is merely:
5 (1) A participant or beneficiary of an employee benefit
6 plan.
7 (2) Covered by a group or blanket insurance policy or
8 group annuity contract sold, solicited or negotiated by the
9 insurance producer or affiliate.
10 (c) Nonapplicability.--This section shall not apply to:
11 (1) A person licensed as an insurance producer who acts
12 only as an intermediary between an insurer and the customer's
13 producer, for example a managing general agent, a sales
14 manager or wholesale broker.
15 (2) A reinsurance intermediary.
16 (d) Definitions.--As used in this section, the following
17 words and phrases shall have the meanings given to them in this
18 subsection:
19 "Affiliate." A person that controls, is controlled by, or is
20 under common control with the producer.
21 "Compensation from an insurer or other third party."
22 Payments, commissions, fees, awards, overrides, bonuses,
23 contingent commissions, loans, stock options, gifts, prizes or
24 any other form of valuable consideration, whether or not payable
25 pursuant to a written agreement.
26 "Compensation from the customer." The term does not include
27 any fee or similar expense as provided by this article or any
28 fee or amount collected by or paid to the producer that does not
29 exceed an amount established by the commissioner.
30 "Documented acknowledgment." The customer's written consent
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1 obtained prior to the customer's purchase of insurance. In the
2 case of a purchase over the telephone or by electronic means for
3 which written consent cannot reasonably be obtained, consent
4 documented by the producer shall be acceptable.
5 Section 2. This act shall take effect in 60 days.
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