HOUSE BILL REPORT

HB 2088

BYRepresentatives Zellinsky, Winsley and Dellwo

Permitting persons in an insurer's holding company system to accept commissions.

House Committe on Financial Institutions & Insurance

Majority Report:  The substitute bill be substituted therefor and the substitute bill do pass.  (13)

      Signed by Representatives Dellwo, Chair; Zellinsky, Vice Chair; Chandler, Ranking Republican Member; Anderson, Baugher, Beck, Dorn, Inslee, P. King, Nutley, Schmidt, K. Wilson and Winsley.

House Staff:John Conniff (786-7119)

AS REPORTED BY COMMITTEE ON FINANCIAL INSTITUTIONS & INSURANCE

FEBRUARY 22, 1989

BACKGROUND:

The insurance code prohibits persons having any authority over the investment of a domestic insurance company's funds from accepting any fee, brokerage, or commission for the handling of those funds.  Some insurance companies are part of a holding company that owns the insurer and other subsidiary companies that may provide banking or investment services.  The prohibition on accepting a fee or commission for investment services may preclude an employee or officer of a company owned by a holding company that also owns an insurance company from collecting a fee for investment services provided to the insurance company.

SUMMARY:

SUBSTITUTE BILL:  Any person in an insurance company's holding company system may accept a reasonable fee, brokerage, or commission for investment advisory, banking, or brokerage services provided for or on behalf of the insurer owned by the holding company.

The Insurance Commissioner may approve the payment of fees, commissions, or other compensation to persons having authority over insurance company funds where the compensation is fully disclosed to the insurance company's officers and directors and is reasonable in relation to the service performed.

SUBSTITUTE BILL COMPARED TO ORIGINAL:  The substitute achieves the same purpose as the original bill through the amendment of a different section of the insurance code.

Fiscal Note:      Not Requested.

House Committee ‑ Testified For:    Basil Badley, Northern Life Insurance Company; and John Woodall, Office of the Insurance Commissioner.

House Committee - Testified Against:      None Presented.

House Committee - Testimony For:    The insurance code must be amended to reflect modern corporate structures of insurance companies.  Many insurance companies are part of a holding company that also owns other non-insurance subsidiaries that are prevented from accepting compensation for services rendered to the insurance subsidiary merely because a parent company owns both the insurance company and the company providing services.

House Committee - Testimony Against:      None Presented.