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92nd General Assembly

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Public Act 92-0587

SB1996 Enrolled                                LRB9215940JSpc

    AN ACT concerning insurance.

    Be it enacted by the People of  the  State  of  Illinois,
represented in the General Assembly:

    Section  5.  The  Illinois  Insurance  Code is amended by
changing Section 500-80 as follows:

    (215 ILCS 5/500-80)
    Sec. 500-80.  Commissions.
    (a)  An insurer or  insurance  producer  may  not  pay  a
commission,   service   fee,  brokerage,  or  other  valuable
consideration  to  a  person  for  selling,  soliciting,   or
negotiating  insurance  in  this  State  if  that  person  is
required  to  be  licensed  under  this Article and is not so
licensed at the time of selling, soliciting,  or  negotiating
the insurance.
    (b)  A  person  may not accept a commission, service fee,
brokerage,  or  other  valuable  consideration  for  selling,
soliciting, or negotiating insurance in this  State  if  that
person  is  required to be licensed under this Article and is
not so licensed.
    (c)  Renewal or other deferred commissions may be paid to
a person for selling, soliciting, or negotiating insurance in
this State if the person was required to  be  licensed  under
this  Article  at  the  time  of  the  sale, solicitation, or
negotiation and was so licensed at that time.
    (d)  An insurer or insurance producer may pay  or  assign
commissions,  service  fees,  brokerages,  or  other valuable
consideration to an insurance agency or to persons who do not
sell, solicit, or negotiate insurance in this  State,  unless
the payment would violate Section 151 of this Code.
    (e)  When   an  insurance  producer  or  business  entity
charges any fee or  compensation  separate  from  commissions
deductible  from,  or  directly  attributable to, premiums on
insurance policies or contracts, it must comply with  all  of
the following:
         (1)  It  must  provide  written  disclosure  to  the
    consumer  or contracting party that clearly specifies the
    amount or extent of the compensation or fee prior to  the
    delivery  of  the  corresponding  policy.   A copy of the
    written disclosure must be maintained by the producer  or
    business entity that collects the compensation or fee for
    a period of 7 years.
         (2)  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.
         (3)  If an insurance policy or contract is cancelled
    for  any  reason  within  90 days following the inception
    date, the producer or business entity shall refund to the
    consumer a prorated portion of the  fee  or  compensation
    within  30  days  after  the  producer or business entity
    receives  proper  documentation  that  the  corresponding
    insurance policy or contract has been  cancelled.  At  no
    time  shall  a  producer  or  business  entity charge the
    consumer a fee or compensation for  cancellation  of  any
    insurance policy or contract.
         (4)  If  the policy file contains documentation that
    the producer performed a  service  corresponding  to  the
    applicable  coverage or policy and the written disclosure
    stated that the fees were fully earned, then  those  fees
    shall  be  fully  earned at inception of the disclosure's
    execution.  Except  as  to  commissions  deductible  from
    premiums  on  insurance   policies   or   contracts   for
    insurance,  an insurance producer or business entity does
    not have any right to compensation  from  an  insured  or
    prospective  insured for or on account of the transaction
    of insurance business unless the right to compensation is
    stated on a  separate  written  memorandum  that  clearly
    specifies  the  amount  or  extent of the service fee and
    that is provided to the applicant or insured  before  the
    performance of the service or the issuance of the policy,
    whichever  is  first.   A  copy of the memorandum must be
    maintained by any producer who collects or  receives  the
    service  fee  or  any portion of the service fee.  If the
    compensation or service fee exceeds 10%  of  the  premium
    amount  or  potential  premium  amount of the contract or
    policy, the memorandum shall include the signature of the
    insured  or   prospective   insured   acknowledging   the
    compensation or service fee.
    (f)  Any  compensation  or  service  fee  received  on  a
contract  or  policy that is later canceled, within the first
half of the contract or policy period, for any reason must be
returned to the insured by the insurance producer or business
entity at a prorated amount.  The prorated  amount  shall  be
based  on  the  length  of the term of the policy or contract
compared to the time that contract or  policy  was  in  force
such  that  the  amount  returned reflects the portion of the
term of the contract or policy during which the contract  was
not  in force.  There shall be no compensation or service fee
assessed or received on a contract or policy by the insurance
producer or business entity for processing such cancellation.
(Source: P.A. 92-386, eff. 1-1-02.)

    Section 99.  Effective date.  This Act takes effect  upon
becoming law.
    Passed in the General Assembly April 23, 2002.
    Approved June 26, 2002.
    Effective June 26, 2002.

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