SENATE BILL REPORT
2SHB 318
BYHouse Committee on Financial Institutions & Insurance (originally sponsored by Representatives Lux, P. King, Nutley, Prince and Chandler; by request of Insurance Commissioner)
Revising provisions on insurance.
House Committe on Financial Institutions & Insurance
Senate Committee on Financial Institutions & Insurance
Senate Hearing Date(s):February 18, 1988
Majority Report: Do pass as amended.
Signed by Senators von Reichbauer, Chairman; West, Vice Chairman; Johnson, Kreidler, Rasmussen, Sellar.
Senate Staff:Benson Porter (786-7470)
February 18, 1988
AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE, FEBRUARY 18, 1988
BACKGROUND:
The Office of the Insurance Commissioner has established and operated a consumer complaint section within the Commissioner's Office for many years. This function of the 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.
Provisions do not exist concerning renewal or continuance of an insurance contract lawfully executed in a reciprocating state by an insurer no longer authorized to enter a contract.
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. Independent testing services may keep the fee for their services.
If another state establishes a fine or penalty for violations of its laws on insurers of this state, Washington may impose a fine or penalty of a similar amount for similar violations of Washington laws. 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. 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. This can create a situation where the inclusion of these fines and penalties into the calculation causes no net penalty against the insurer.
A person may not obtain an agent or broker license if the person intends to use the license primarily to write "controlled business": insurance procured by or through a person on his/her own risks as defined by statute. The controlled business statute 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.
Any licensed agent, broker, solicitor or advisor who receives premiums or return premiums on behalf of an insurance company or insured are subject to criminal penalties for misappropriation of the premiums.
No agent, solicitor or broker may compensate any person other than an agent, solicitor, or broker to solicit or assist in the procurement of business unless the compensation is in the form of a salary paid whether a policy is actually issued. An agent, solicitor, or broker may compensate regular employees when such compensation is not contingent upon the volume of business transacted.
If the commissioner finds that the public safety is in jeopardy, he/she may temporarily suspend an agent's 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.
Insurance agents, solicitors or brokers are required to maintain a separate account for insurance premiums and return premiums.
Automobile insurance companies must offer at the insured's request, 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.
Agents and brokers are permitted to charge a fee for services provided beyond those customarily provided during an insurance sale.
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:
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. Any person receiving notice by mail may request a hearing on the order within 90 days of receiving the order.
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 lawfully by an insurer who loses his/her 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 and retain an approved fee for administering exams.
The "retaliatory" tax provision of the insurance code is amended to delete the reference to "fines and penalties." 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.
Any agent, broker, solicitor, or adjustor who receives any funds on behalf of an insurer, insured or agent shall act in a fiduciary capacity and shall promptly account for and pay out the funds to the entitled person. Criminal penalties are set forth for misappropriation of funds held in a fiduciary capacity.
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 where proceedings for revocation are pending and the public safety or welfare is threatened requiring emergency action.
Title insurance agents are exempted from statutory provisions requiring a separate account for insurance premiums and return 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.
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.
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.
SUMMARY OF PROPOSED SENATE AMENDMENTS:
Upon thirty days written notice to the Insurance Commissioner, the commissioner may approve the transfer of an insurance company to or from Washington if the transfer is consistent with law and no reasonable objection to the transfer exists.
Licenses, forms, rates, and other corporate authorizations remain in effect upon transfer of an insurance company.
The exception for title insurance companies from statutory provisions requiring a separate account for insurance premiums and return premiums is applied to insurance brokers whose average daily balance for premiums received on behalf of insureds in the state of Washington equals or exceeds $1,000,000.
Automobile insurers are to offer collision and comprehensive coverage to cover the insured's loan liability on private passenger automobiles and motor homes that are totally destroyed.
Appropriation: none
Revenue: none
Fiscal Note: none requested
Senate Committee - Testified: David Rodgers, Chief Deputy Insurance Commissioner (for); Basil Badley; Bob Mickey, Auto Body Craftsman Association; Mike Ryherd, WSMA; Mike Lee, Toyota Motor Sales, USA; William Vachter, United Auto Workers; Wayne R. Steuchs, Auto Body Shop Owner; Todd Miller, Eastside Auto Rebuild; Jean Connor, Blue Cross; Mel Somes, Washington Physicians Service