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SENATE BILL NO. 1453
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S1453.......................................by COMMERCE AND HUMAN RESOURCES
INSURANCE SALES - Adds to existing law to enact the Insurance Sales
Consumer Protection Act to regulate the sale and solicitation of insurance
products by financial institutions.
02/13 Senate intro - 1st rdg - to printing
02/16 Rpt prt - to Com/HuRes
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-fourth Legislature Second Regular Session - 1998
IN THE SENATE
SENATE BILL NO. 1453
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO THE INSURANCE SALES CONSUMER PROTECTION ACT; AMENDING TITLE 41,
3 IDAHO CODE, BY THE ADDITION OF A NEW CHAPTER 57, TITLE 41, IDAHO CODE, TO
4 PROVIDE A SHORT TITLE, TO PROVIDE DEFINITIONS, TO PROVIDE A LICENSE
5 REQUIREMENT, TO PROVIDE WHO CAN SOLICIT FOR THE PURCHASE OR SALE OF INSUR-
6 ANCE BY A FINANCIAL INSTITUTION, TO PROVIDE FOR REFERRALS BY UNLICENSED
7 PERSONS, TO PROVIDE ANTI-TYING PROVISIONS, TO PROVIDE FOR DISCLOSURES, TO
8 PROVIDE FOR TIMING OF SOLICITATION, TO PROVIDE FOR SEPARATE TRANSACTIONS
9 RELATING TO INSURANCE IN CONNECTION WITH A LOAN, TO PROHIBIT DISCRIMINA-
10 TION AGAINST NONAFFILIATED AGENTS, TO PROVIDE FOR PRIVACY OF NONPUBLIC
11 CUSTOMER INFORMATION, TO PROVIDE FOR THE PHYSICAL LOCATION OF INSURANCE
12 ACTIVITIES, AND TO PROVIDE FOR INSURANCE RECORDS AND INSPECTION BY THE
13 DEPARTMENT OF INSURANCE.
14 Be It Enacted by the Legislature of the State of Idaho:
15 SECTION 1. That Title 41, Idaho Code, be, and the same is hereby amended
16 by the addition thereto of a NEW CHAPTER , to be known and desig-
17 nated as Chapter 57, Title 41, Idaho Code, and to read as follows:
18 CHAPTER 57
19 INSURANCE SALES CONSUMER PROTECTION ACT
20 41-5701. SHORT TITLE. This act may be cited as the "Insurance Sales Con-
21 sumer Protection Act."
22 41-5702. DEFINITIONS. For the purposes of this act:
23 (1) "Financial institution" means a bank holding company, as defined in
24 the bank holding company act of 1956, as amended, 12 U.S.C. Section 1841, a
25 bank, savings bank, savings and loan association, trust company, or any depos-
26 itory institution as defined by the federal deposit insurance act, as amended,
27 12 U.S.C. Section 1813(c)(1), any subsidiary of any of the above, and any
28 other person authorized to take deposits and make loans in the state of Idaho.
29 The term "financial institution" does not include an insurance company.
30 (2) "Insurance" includes all products defined or regulated as insurance
31 by the state of Idaho except: (a) credit life, credit disability, and credit
32 involuntary unemployment insurance; (b) insurance placed by a financial insti-
33 tution in connection with collateral pledged as security for a loan when the
34 debtor breaches the contractual obligation to provide that insurance; and (c)
35 private mortgage insurance.
36 (3) "Insurance company" means a company having a certificate of authority
37 to transact the business of insurance in the state of Idaho.
38 (4) "Person" means any natural person, partnership, corporation, associa-
39 tion, business trust, unincorporated organization or other form of business
1 41-5703. LICENSE REQUIRED. Solicitation for the purchase or sale of any
2 insurance product by any person, including a financial institution, or
3 employee or agent thereof, shall be conducted only by persons who have com-
4 plied with all applicable Idaho licensing and appointment laws and rules and
5 who have been issued an agent's or broker's license pursuant to chapter 10,
6 title 41, Idaho Code.
7 41-5704. SALES FORCE. Solicitation for the purchase or sale of insurance
8 by a financial institution shall be conducted only by persons whose responsi-
9 bilities do not include loan transactions or other transactions involving the
10 extension of credit; provided however, for a financial institution location
11 having three (3) or less persons with lending authority, solicitation for the
12 sale of insurance may be conducted by a person with responsibilities for loan
13 transactions or other transactions involving the extension of credit so long
14 as the person primarily responsible for making the specific loan or extension
15 of credit is not the same person engaged in the solicitation for the purchase
16 or sale of insurance for that same transaction.
17 41-5705. REFERRALS BY UNLICENSED PERSONS. A person who is not licensed to
18 sell insurance may refer a customer who seeks to purchase, or seeks an opinion
19 or advice on, any insurance product to a person, or provide the phone number
20 of a person, who sells or provides opinions or advice on such product. The
21 person making the referral is prohibited from receiving a fee or commission
22 for such referral. An unlicensed person is prohibited from soliciting
24 41-5706. ANTI-TYING PROVISIONS. (1) No person shall require or imply that
25 the purchase of an insurance product from a financial institution by a cus-
26 tomer or prospective customer of the institution is required as a condition
27 of, or is in any way related to, the lending of money or extension of credit,
28 the establishment or maintenance of a trust account, the establishment or
29 maintenance of a checking, savings, or deposit account, or the provision of
30 services related to any such activities.
31 (2) No financial institution may offer an insurance product in combina-
32 tion with banking products unless the insurance products and banking products
33 are available separately from the institution.
34 41-5707. DISCLOSURES. (1) Any person insured by the federal deposit
35 insurance corporation (FDIC), and any person soliciting the purchase of or
36 selling insurance on the premises of a person insured by the FDIC, shall prom-
37 inently disclose in writing, in clear and concise language, to customers,
38 including in any advertisement or promotional material, and orally during any
39 customer contact, that insurance offered, recommended, sponsored, or sold:
40 (a) Is not a deposit; and
41 (b) Is not insured by the FDIC; and
42 (c) Is not guaranteed by any insured depository institution; and
43 (d) Where appropriate, involves investment risk, including potential loss
44 of principal.
45 (2) Any person engaged in the making of loans or other extensions of
46 credit and the sale of insurance shall prominently disclose in writing, in
47 clear and concise language, to customers that the insurance product may be
48 purchased from an agent or broker of the customer's choice, and the customer's
49 choice of another insurance provider will not affect the customer's credit
50 relationship with the person. For purposes of this subsection, loans and
51 extensions of credit shall not include financing in connection with the insur-
1 ance product offered or sold.
2 (3) Any person required under subsection (1) or (2) of this section to
3 make disclosures to a customer shall obtain a written acknowledgement of
4 receipt by the customer of such disclosures, including the date of receipt and
5 the customer's name, address and account number, prior to any application for
6 insurance sold by the person. Such acknowledgement shall be in a separate
8 41-5708. TIMING OF SOLICITATION. No person may knowingly, directly or
9 indirectly, solicit the purchase of any insurance from a customer who has
10 applied for a loan or extension of credit from the person, or any subsidiary
11 or affiliate thereof, before such time as the customer has received a written
12 commitment with respect to such loan or extension of credit or, in the event
13 that no written commitment has or will be issued in connection with the loan
14 or extension of credit, before such time as the customer receives notification
15 of approval of the loan or extension of credit and the lending institution
16 creates a written record of the loan or extension of credit approval.
17 41-5709. INSURANCE IN CONNECTION WITH A LOAN. (1) If insurance is
18 required as a condition of obtaining a loan, the credit and insurance transac-
19 tions shall be completed independently and through separate documents.
20 (2) A loan for premiums on required insurance shall not be included in
21 the primary credit without the written consent of the customer.
22 41-5710. NO DISCRIMINATION AGAINST NONAFFILIATED AGENTS. No financial
23 institution may:
24 (1) Offer a banking product or service, or fix or vary the conditions of
25 such offer, on a condition or requirement that the customer obtain insurance
26 from the financial institution, or any particular agent or broker;
27 (2) In connection with a loan or extension of credit that requires a bor-
28 rower to obtain insurance, reject an insurance policy because such policy has
29 been issued or underwritten by any person who is not associated with such
31 (3) Impose any requirement on any insurance agent or broker who is not
32 associated with the financial institution that is not imposed on any insurance
33 agent or broker who is associated with such institution; or
34 (4) Unless otherwise authorized by any applicable federal or state law,
35 require any debtor, insurer, broker or agent to pay a separate charge in con-
36 nection with the handling of insurance that is required under a contract.
37 41-5711. CUSTOMER PRIVACY. (1) As used in this section, unless the con-
38 text requires otherwise:
39 (a) "Customer" means a person with an investment, security, deposit,
40 trust or credit relationship with a financial institution; and
41 (b) "Nonpublic customer information" means information regarding a person
42 that has been derived from a record of a financial institution and other
43 records, including, but not limited to, financial statements and records,
44 applications for loans or other extensions of credit, tax records, banking
45 records and other records related to assets and liabilities of the person.
46 "Nonpublic customer information" does not include customer names,
47 addresses and telephone numbers; and, in all events, "nonpublic customer
48 information" shall include information concerning insurance premiums, the
49 terms and conditions of insurance coverage, insurance expirations, insur-
50 ance claims, and the insurance history of an individual.
51 (2) No person shall use any nonpublic customer information for the pur-
1 pose of selling or soliciting the purchase of insurance or provide nonpublic
2 customer information to a third party for the purpose of another's sale or
3 solicitation of the purchase of insurance, unless it is clearly and conspicu-
4 ously disclosed to the customer that the information may be so used and the
5 customer has personally given his written consent to the release of the infor-
6 mation and its use for this purpose, executed prior to the solicitation or
7 sale of insurance.
8 (3) Consent under subsection (2) of this section must be obtained in a
9 separate document, distinct from any other transaction, and shall not be
10 required as a condition for performance of other services for the customer.
11 41-5712. PHYSICAL LOCATION OF INSURANCE ACTIVITIES. (1) The place of
12 solicitation or sale of insurance by any financial institution or on the prem-
13 ises of any financial institution shall be:
14 (a) Physically separated and substantially distinct from the banking
15 activities of the institution; and
16 (b) Clearly and conspicuously signed so as to be readily distinguishable
17 by the public as separate and distinct from the banking activities of the
19 (2) Signs and other informational material concerning the availability of
20 insurance products from the financial institution or on the premises of a
21 financial institution shall not be displayed in an area where applications for
22 loans or other extensions of credit are being taken or closed.
23 (3) The director of the department of insurance may grant a waiver of
24 subsections (1) and (2) of this section upon a written request by a person
25 demonstrating that it is not physically possible to comply, provided such per-
26 son takes other substantial steps that will eliminate the likelihood of cus-
27 tomer confusion and coercion.
28 41-5713. INSURANCE RECORDS. Books and records relating to the insurance
29 transactions of any person licensed to sell insurance, including all files
30 relating to and reflecting customer complaints, shall be kept separate and
31 apart from all records relating to other business transactions of such person,
32 and shall be made available to the department of insurance for inspection upon
33 reasonable notice. A separate record of insurance transactions with any cus-
34 tomer also receiving banking services shall be kept and shall be available for
35 inspection upon reasonable notice.
STATEMENT OF PURPOSE
The purpose of this Act is to clarify current statutes regard the marketing of insurance
products, particularly those products marketed inside financial inistitutions. The Act clarifies the use of
agents and the methods and timing of solicitations. It clarifies certain federal requirements into state
law. The Act also protects consumers from the improper use of their financial records, bank account
status, and tax records, without consent, in order to solicit insurance products.
None with the exception of the promulgation of rules.
CONTACT: Senator Dean L. Cameron