HOUSE BILL REPORT

HB 318

BYRepresentatives Lux, P. King, Nutley, Prince and Chandler; by request of Insurance Commissioner

Revising provisions on insurance.

House Committe on Financial Institutions & Insurance

Majority Report: The second substitute bill be substituted therefor and the second substitute bill do pass. (12)

Signed by Representatives Lux, Chair; Zellinsky, Vice Chair; Anderson, Betrozoff, Chandler, Crane, Day, Dorn, Grimm, Nutley, Silver and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

JANUARY 19, 1988

BACKGROUND:

The Insurance Commissioner has established and operated a consumer complaint section within the Commissioner's Office for many years. This function of the Commissioner's Office is not specifically required by statute.

A person who is the subject of an order issued by the Commissioner is permitted to request a hearing on the order within ninety days of receiving notice of the order. The notice provisions of the statute do not address notice which is sent by mail.

When the Insurance Commissioner has issued an order suspending, revoking, or refusing to renew an agent's, broker's, solicitor's, or adjuster's license, the person denied the license may appeal the order and if the person posts a bond in the amount of $500, the order may be suspended pending the outcome of the appeal.

If an insurer loses their authority to do business in Washington, the insurer may no longer issue or renew policies in this state.

Insurers are required to report loss and expense experience for certain property and casualty insurance lines by the first day of March of each year.

Fees for taking an exam to obtain a license as an agent, broker, solicitor, or adjuster are $5 for processing the first examination for a license, $50 for a broker's license, and $10 for all other examinations except those conducted by an independent testing service whose fees are approved by the Commissioner.

If another state establishes a fine or penalty of a certain amount for violations of that state's laws upon insurers of this state, Washington may impose a fine or penalty of a similar amount, for similar violations of Washington laws, upon insurers of the other state. This statute is commonly referred to as a "retaliatory" provision designed to ensure equal treatment of insurers headquartered in Washington when they do business in other states.

A person may not obtain an agent or broker license if the person intends to use the license primarily to obtain insurance on his/her own risks as defined by statute. (The statutory definition was repealed in 1985.)

If an application for insurance has been rejected by the life or disability insurer of the agent submitting the application, the agent may submit the application with another insurer even if the agent is not an agent of the other insurer.

Persons who receive premiums or return premiums on behalf of an insurance company or insured are subject to criminal penalties for misappropriation of the premiums.

No agent or broker may compensate an unlicensed person to solicit or assist in the procurement of business unless the compensation is in the form of a salary paid irrespective of whether a policy is actually issued.

If the Commissioner finds that the public safety is in jeopardy, the Commissioner may temporarily suspend an agents license. However, the suspension is effective only until revocation proceedings are concluded. This notice must be given at least three days prior to the effective date of the suspension and must include a notice of revocation.

Agents and brokers are permitted to charge a fee for services provided beyond those customarily provided during an insurance sale.

Insurance agents are required to maintain a separate account for insurance premiums.

Automobile insurance companies must offer collision and comprehensive coverage in an amount necessary to cover the total loan liability of the insured on a motor vehicle even if the coverage exceeds the actual value of the vehicle. No lender may sell insurance for the protection of real property until the lender has made a commitment to lend money.

Health care service contractors are entitled to an automatic hearing on any order or other regulatory action taken by the Commissioner against the contractor.

SUMMARY:

SECOND SUBSTITUTE BILL: The Commissioner is required to provide assistance to consumers in resolving complaints and in providing information that involves insurers and other licensees.

The Commissioner may send notice of an order to the affected person by mail at the person's most recent address shown in the Commissioner's records. All persons licensed under the insurance code must notify the Commissioner of any change of address. Notice sent to the most recent address is deemed to be notice to the person.

The provision of the insurance code that permits a stay of suspension, revocation, or refusal to issue an agents license upon the posting of a $500 bond is repealed.

A policy that has been issued by an insurer who loses their authority to do business after issuing the policy may be renewed and continued in force despite the loss of authorization.

The deadline for filing loss and expense experience for certain property and casualty insurance lines is extended to the first day of May of each year.

The application fees charged for processing an initial examination to obtain an agent's license and for a broker's examination are deleted. A $10 fee will be assessed for all agent and broker exams administered by the Commissioner. In addition, a technical amendment is made to the section authorizing independent testing services to collect a fee for administering exams. Independent testing services may now also keep the fee for their services.

The "retaliatory" tax provision of the insurance code is amended to delete the reference to "fines and penalties" to avoid the problem posed when insurers from other states argue that the fines that Washington imposes for delinquent taxes must be included in the calculation of the greater tax imposed by Washington as a result of the higher taxes imposed upon Washington insurers by the other state. The result of this change would be to permit Washington to impose a fine or penalty for delinquent taxes in addition to the retaliatory tax imposed.

The provision prohibiting agents from obtaining a license if the principal purpose of the license is to place coverage for the agent's own risks is deleted.

An Agent who places insurance with another company after the agent's own company rejects an insurance application is deemed to be the agent of the other company as to the policy issued.

Persons who receive any funds on behalf of an insurer or insured is deemed to act in a fiduciary capacity and is subject to criminal penalties for misappropriation of funds.

Payment for services furnished by an unlicensed person who does not participate in the insurance transaction and whose compensation is not contingent upon an insurance sale is permitted.

The Commissioner may temporarily suspend an agent's license after notice of revocation if the public safety or welfare is threatened.

Agents and brokers who provide services beyond those customarily provided in conjunction with an insurance sale may reduce the fee charged for these additional services to the extent a full fee would result in the client's double payment for the same services.

Title insurance agents are exempted from statutory provisions requiring a separate account for insurance premiums.

Automobile insurers need only offer collision and comprehensive coverage to cover the insured's loan liability on private passenger automobiles and motor homes that are totally destroyed.

Lenders are prohibited from selling insurance to a borrower prior to making a commitment to lend money for personal property as well as real property.

Health care service contractors are not entitled to an automatic hearing but must request a hearing on any order or other regulatory action taken by the Commissioner against a contractor.

SECOND SUBSTITUTE COMPARED TO ORIGINAL: The Commissioner is required to provide assistance to consumers in resolving complaints and in providing information that involves insurers and other licensees.

The deadline for filing loss and expense experience for certain property and casualty insurance lines is extended to the first day of May of each year.

Persons who receive any funds on behalf of an insurer or insured is deemed to act in a fiduciary capacity and is subject to criminal penalties for misappropriation of funds.

Title insurance agents are exempted from statutory provisions requiring a separate account for insurance premiums.

Automobile insurers need only offer collision and comprehensive coverage to cover the insured's loan liability on private passenger automobiles and motor homes that are totally destroyed.

Health care service contractors are not entitled to an automatic hearing but must request a hearing on any order or other regulatory action taken by the Commissioner against a contractor.

Fiscal Note: Not Requested.

House Committee ‑ Testified For: Scott Jarvis, Insurance Commissioner's Office.

House Committee - Testified Against: None Presented.

House Committee - Testimony For: These provisions are technical changes to the insurance code and are necessary to clarify, update and improve the insurance code.

House Committee - Testimony Against: None Presented.