Washington State
House of Representatives
Office of Program Research
BILL
ANALYSIS

Insurance, Financial Services & Consumer Protection Committee

SSB 5715


This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Concerning persons selling, soliciting, or negotiating insurance.

Sponsors: Senate Committee on Financial Institutions & Insurance (originally sponsored by Senators Benton, Berkey, Hobbs, Prentice, Hatfield, Franklin and Shin; by request of Insurance Commissioner).

Brief Summary of Substitute Bill
  • Modifies licensing provisions for persons selling, soliciting, or negotiating insurance.
  • Creates one insurance producer license and insurance producer licensing process instead of a separate license for agents and brokers.

Hearing Date: 3/15/07

Staff: Sarah Beznoska (786-7109).

Background:

The Office of the Insurance Commissioner (OIC) licenses and regulates insurance agents and brokers. An insurance agent is appointed by an insurer to solicit applications for insurance on behalf of the insurer. If authorized so to do, an agent may enter into insurance contracts and collect premiums on insurance. An insurance broker is a person who, on behalf of an insured, for a fee, solicits, negotiates, or procures insurance for insureds. Laws applying to insurance agents and to insurance brokers are different in some respects. The differences include the requirement for agents to be appointed by insurance companies. The agent's license is valid until suspended or revoked or until the appointment ceases.

General licensing requirements for agents and brokers are set forth in statute. To obtain an agent's or broker's license, an applicant must:

The license application process includes a requirement that both agents and brokers submit fingerprints.

The OIC may issue a temporary license, for 90 days in a 12-month period, to surviving next of kin of a deceased licensee, if the survivor is otherwise qualified except for experience or the taking of the examination. The OIC may also issue a temporary license to a surviving member of a firm upon death of a licensee.

Reciprocity between licensees of Washington and those of other states applies subject to the same obligations, limitations and supervision as though the foreign licensee were a resident of this state.

The license application fee and the fee required every two years to renew a license is $50.

An agent licensed as a broker for property and casualty insurance may receive a commission payment from the insurer or a fee payment from the insured, or both. If both are received, the full amount of compensation must be disclosed in writing to the insured by the agent-broker.

A broker's scope of licensing is either all lines, casualty-property, or life and disability. A broker must maintain a bond in favor of the people of the state of Washington in the amount of $20,000. The broker's license is valid until suspended or revoked or until a period of time elapses, as determined by the OIC.

The National Association of Insurance Commissioners (NAIC) has developed a model called producer licensing. The model replaces the name of licensees as agents and brokers with the term, producers, and has other provisions that vary from Washington law.

Summary of Bill:

Statutes related to the licensing of agents and brokers are changed to refer to the licensing of producers. Insurance producer is defined as a person required to be licensed under the laws of the state to sell, solicit, or negotiate insurance. Insurance producer does not include title insurance agents.

Producer Licensing

An insurance producer may obtain a license in or more of the following lines of authority: life, disability, property, casualty, variable life and variable annuity, personal lines, limited lines, specialty lines, or any other line permitted under state law.

To obtain a resident insurance producer license, application must be made to the OIC on a uniform application. As under current law, applications must include a set of fingerprints.

General licensing requirements are similar to current law. To obtain a producer license, a person must meet the following requirements:

Exemptions to the examination requirement are included. Exemptions apply to:

The OIC may require documents to verify information in the application and may, from time to time, require production of information called for in a license application.

A business entity acting as an insurance producer must obtain an insurance producer license by using the uniform business entity application. The business entity must pay fees and must have a designated licensed insurance producer responsible for compliance.

All licenses are valid for the time period specified by the OIC. Renewal provisions are similar to current law. In addition, a licensed producer who is unable to comply with renewal procedures due to military service or some other extenuating circumstance such as long-term medical disability may request a waiver of renewal procedures.

As under current law, if doing business in a name other than the producer's or the title insurance agent's legal name, the name must be registered with the Department of the Licensing and the OIC must be given notice.

Fees are raised $5. The new fee is $55.

Insurance Producers Appointed as an Agent

An insurance producer or title insurance agent must be appointed as an agent before acting as an agent. The insurer must file a notice of appointment within 15 days from the date the agency contract is executed or when the first insurance application is submitted, whichever is later. The OIC must verify within 30 days that the insurance producer or title insurance agent is eligible for appointment. If ineligible, the OIC must notify the insurer within 10 days of the determination.

New provisions are added related to the termination of an appointment. In these situations, the insurer must notify the OIC within 30 days, including information related to whether the termination was based on a violation of the law. The insurer has a continuing obligation to notify the OIC if the insurer discovers additional information related to a violation of the law. The insurance producer or title insurance agent must receive a copy of the notice and has 30 days to file comments with the OIC.

Related immunity and confidentiality provisions are included with respect to providing information related to a termination. An insurer, authorized representatives of the insurer, an insurance producer, a title insurance agent, the OIC, or an organization of which the OIC is a member are all immune from civil liability as a result of statements or information they are required to provide. Information provided pursuant to the reporting requirements is confidential and not subject to public disclosure. However, the OIC may share and receive documents from other regulatory agencies and the NAIC if the other entities agree to maintain the confidentiality. In addition, the OIC may use the information in regulatory or legal action.

Non-resident Producer License

New requirements are added related to non-resident licenses. A non-resident may obtain a non-resident producer license if the following requirements are met:

The OIC must waive license application requirements for a non-resident of a state that has reciprocity with Washington and awards non-resident licenses to Washington residents on the same basis.

Continuing education requirements for a licensed non-resident producer may be met by meeting continuing education requirements in the producer's home state if the home state has similar provisions for producers from Washington.

The OIC is authorized to verify a producer's licensing status through the NAIC producer database.

Temporary Licenses

Temporary licenses may be issued for 180 days without requiring an examination in certain situations and the OIC may limit the authority of any temporary licensee in any way deemed necessary to protect insureds and the public. A temporary license may be issued:

The OIC may require a suitable sponsor to assume responsibility for the temporary licensee.

Revocations and Suspensions

Provisions related to suspending, revoking, or refusing to issue a license are changed to include some additional reasons for suspending, revoking or refusing to issue. Those reasons are:

A probation option is also created. The OIC may place a license in probation under reasonable terms. The OIC may require a licensee placed on probation to:

Bond Requirements

Bond requirements are changed. A producer that is not appointed as an agent is subject to a $2,500 bond requirement, or five percent of the premiums brokers in the previous calendar year, whichever is greater. This bond requirement is capped at $100,000 total aggregate liability.

Authorized insurance producers of a business entity may meet the bond requirement with a bond in the name of the business entity. Insurance producers may meet the requirement with a bond in the name of an association in existence for five years, with common members, and formed for a reason other than obtaining a bond.

Compensation Disclosure Requirements

An insurance producer may receive a commission from the insurer, a fee from the insured, or both. If the compensation received by an insurance producer who is dealing directly with the insured includes a fee, for each policy, the insurance producer must disclose, in writing, the following:

When the insurance producer may receive additional compensation in the form of future incentive compensation from the insurer, the insurance producer must provide notice that:

Written disclosure must be provided prior to the sale of a policy. Written disclosure must be signed by the insurance producer and the insured and must be retained for five years.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect on July 1, 2009.