HB0512 96TH GENERAL ASSEMBLY

LRB096 03566 RPM 13591 b

96TH GENERAL ASSEMBLY
State of Illinois
2009 and 2010
HB0512

Introduced 2/4/2009, by Rep. Roger L. Eddy

SYNOPSIS AS INTRODUCED:

215 ILCS 5/107a.05
215 ILCS 5/107a.06
215 ILCS 5/107a.09

Amends the Illinois Insurance Code. In the provisions concerning definitions and interchangeable terms, provides that trustees of a group workers' compensation pool owe the same fiduciary duty to the pool and its members and be held to the same duty of care in the management and administration of the pool as directors of a stock corporation. In the provisions concerning pool administration, sets forth additional disclosure requirements for administrators. Provides that service companies for group workers' compensation pools are subject to supervision and examination in the same manner as the administrators for group workers compensation insurance pools.

A BILL FOR

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 Sections 107a.05, 107a.06, and 107a.09 as follows:

(215 ILCS 5/107a.05)

Sec. 107a.05. Definitions and interchangeable terms.

(a) Unless otherwise provided, the following definitions shall apply:

"Authorized insurer" means an insurer licensed in this State to transact business as described in Clauses (c) and (d) of Class 2 of Section 4 of this Code.

"Calendar Quarter" means the 3-month periods ending March 31, June 30, September 30, and December 31.

"Director" means the Director of Insurance.

"Engaged actively in the business" means a bona fide business concern having conducted commerce, trade, or industry in this State for a specified period of time. Any and all records relating to this requirement shall be open to inspection by the Director or his designee during normal business hours.

"Gross annual payroll" means payroll for the preceding fiscal year.

"Independent actuarial opinion" means an opinion expressed by a member of the American Academy of Actuaries or Casualty Actuarial Society.

"Independent CPA" means an independent certified public accountant or independent certified public accounting firm in good standing and licensed to practice by the Department of Professional Regulation.

"Pool" means a qualified group workers' compensation pool as authorized by this Article.

"Qualified group workers' compensation pool" means a group workers' compensation pool that has received a certificate of authority pursuant to this Article.

(b) For purposes of incorporating the provisions of this Code designated in paragraphs (1) and (2) of subsection (a) of Section 107a.04 into this Article, the following terms shall be interchangeable:

"Contribution" shall be considered premium.

"Pooling agreement" shall be considered a policy of insurance.

"Trustees of a group workers' compensation pool" shall be considered as though they were directors of a domestic mutual insurance company and shall owe the same fiduciary duty to the pool and its members and be held to the same duty of care in the management and administration of the pool as directors of a stock corporation.

"Members of a group workers compensation pool" or "pool members" shall be considered as though they were shareholders of a domestic mutual insurance company.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.06)

Sec. 107a.06. Pool administration.

(a) An application for Certificate of Authority to establish a pool must include the documentation and information regarding its administrator, pooling agreement, plan of operation, and membership required by this Section.

(b) Administrators must disclose all of the following:

(1) Biography of the risk manager on forms prescribed by the Director.

(2) If a corporation, biographies of all officers and directors.

(3) The size of staff and other information, such as the kinds of staff positions, location of administrative offices and the nature of any electronic data processing equipment, if any, available for servicing the pool, to demonstrate that the administrator has the resources to administer the program disclosed pursuant to subsection (d).

(4) The most recent financial statement of the administrator. If a publicly held company, a copy of the last 10-K filed with the Securities and Exchange Commission.

(5) The compensation contract of the administrator.

(6) The bylaws of the pool and articles of incorporation, if any.

(7) Any agreement that subcontracts any of the administrator's duties or responsibilities.

(c) A pooling agreement must contain all of the following:

(1) A description of the services to be provided by the administrator.

(2) The manner in which costs are to be apportioned by the administrator.

(3) The initial premium deposit.

(4) The assessment provision.

(5) The termination provisions and minimum term of membership, which minimum term of membership shall not be less than one year.

(6) The duration of liability for additional assessments following termination of membership, which shall be for a period of not less than 3 years.

(7) The prerequisites for membership.

(8) A provision stating that a claim shall be paid by the pool, regardless of the size of the claim, and that the pool shall be reimbursed by the employer for any amounts required to be paid by the employer under the agreement.

(9) A provision stating that the terms of termination after the first year of pool membership shall be dictated by the pooling agreement.

(10) If a pooling agreement requires a member to submit written notice in order for the member to withdraw from a qualified pool, then the period in which the member must provide the written notice cannot be greater than 90 days.

(11) A provision stating that the administrator acts as a fiduciary of pool members with regard to performing the administration duties and responsibilities, notwithstanding any contractual agreements to the contrary.

(12) A provision stating that any service providers performing any of the administrator's duties or responsibilities under subcontract act as agents and fiduciaries of pool members with regard to the provision of any such services, notwithstanding any other agreements of such service provider to the contrary.

(13) A provision stating that the Trustees of the Pool act as trustees for the benefit of pool members and fiduciaries with regard to the provision of any such services.

(d) Plans of operation must disclose all of the following:

(1) A listing of initial members.

(2) The aggregate loss history of initial members for each of the last 3 years.

(3) The amount of the net retention of the pool and a list of reinsurers.

(4) The names of all entities that will provide services for the pool and copies of proposed contracts in connection those services.

(5) The safety and loss control programs to be provided or required.

(e) The application must contain information about initial members specified on forms prescribed by the Director.

(f) The application must contain the combined loss experience for the group for the last 3 years and any other financial data required by the Director.

(g) A pool administrator's original books and records relating to the operations of the pool shall at all times be located within the State of Illinois.

(h) Any change of the pooling agreement, bylaws, plan of operation, reinsurance agreements, or membership shall be delivered to the Director within 30 days after the amendment or change.

(i) A pool trustee must be an employee, officer, director, or owner of a pool member.

(Source: P.A. 91-757, eff. 1-1-01.)

(215 ILCS 5/107a.09)

Sec. 107a.09. Service companies for group workers' compensation pools.

(a) No association, corporation, partnership, sole proprietorship, trust, or other business entity shall provide services in the design, establishment, or administration of a group workers' compensation pool unless it is licensed to do so by the Department. An applicant for a license shall state in writing the type of activities it seeks authorization to engage in and the type of services it seeks authorization to provide. The license shall be granted only when the Director is satisfied that the entity possesses the necessary organization, background, character, expertise, and financial integrity to supply the services sought to be offered. The Department may issue a license subject to restrictions or limitations, including restrictions or limitations on the type of services that may be supplied or the activities in which the entity may engage. A license issued under this Section shall be valid for 2 years.

(b) To assure that administrators are financially solvent, that pools are administered in a fair and capable fashion, and that administrators are able to process claims and pay benefits in a prompt, fair, and equitable manner, entities licensed to engage in those activities under this Section are subject to supervision and examination by the Department. Entities licensed to engage in the activities set forth in subsection (a) of this Section are subject to supervision and examination in the same manner as the administrators for group workers compensation insurance pools.

(c) The Department may adopt rules for the purposes of this Article. The rules shall (i) establish reporting requirements for administrators for group workers' compensation pools, including experience reporting requirements consistent with those established under this Code for insurers; (ii) establish bonding requirements or other provisions assuring the financial integrity of entities administering group self-insurance; and (iii) establish other reasonable requirements to further the purposes of this Article.

(Source: P.A. 91-757, eff. 1-1-01.)