SB 1996-Petka (Bradley)
This legislation clarifies several issues regarding fees charged by producers or a business entity (agency) that arose from the rewrite of the Illinois' Producer Licensing Act last year (HB 2994).
SB 1996 - Petka (R-42, Plainfield)/Bradley (D-20, Chicago) rewrites ILCS 5/500-80(e) in a clear and concise manner describing exactly what is required when a producer or business entity (agency) charges a fee or compensation separate from premiums (commissions).
In essence, the statute provides that producers and business entities must:
- Always provide written disclosure to the consumer or contracting party prior to delivery of the corresponding policy. The disclosure must be kept by the producer or business entity for 7 years (current regulation).
- If the combined compensation or fee exceeds 10% of a directly attributable premium amount of a corresponding contract or policy, the disclosure must also include the signature of the consumer or contracting party acknowledging the compensation or fee (10% or less, no signature required)
- The fee is subject to a prorated return upon cancellation of the policy unless the written disclosure states that the fee was fully earned at inception and the policy file contains documentation that the producer performed a service to the applicable coverage or policy.
- It is the intent of the sponsors and the parties involved, including the Department of Insurance, the PIIAI, IAIFA and ISAHU that a Managing General Agent (MGA) or General Agent (GA) or a wholesale broker would not be responsible for the recordkeeping requirement of the law. If a MGA, GA or wholesale broker charges a fee, they would be required to send a disclosure to the retail producer or business entity. However, the retail producer or business entity would be responsible for providing the disclosure to the consumer, obtaining the signature if necessary, and keeping the disclosure for seven years.