State of Illinois
92nd General Assembly

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[ Engrossed ][ Enrolled ][ Senate Amendment 001 ]



 1        AN ACT concerning insurance.

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

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

 6        (215 ILCS 5/500-80)
 7        Sec. 500-80.  Commissions.
 8        (a)  An  insurer  or  insurance  producer  may  not pay a
 9    commission,  service  fee,  brokerage,  or   other   valuable
10    consideration   to  a  person  for  selling,  soliciting,  or
11    negotiating  insurance  in  this  State  if  that  person  is
12    required to be licensed under this  Article  and  is  not  so
13    licensed  at  the time of selling, soliciting, or negotiating
14    the insurance.
15        (b)  A person may not accept a commission,  service  fee,
16    brokerage,  or  other  valuable  consideration  for  selling,
17    soliciting,  or  negotiating  insurance in this State if that
18    person is required to be licensed under this Article  and  is
19    not so licensed.
20        (c)  Renewal or other deferred commissions may be paid to
21    a person for selling, soliciting, or negotiating insurance in
22    this  State  if  the person was required to be licensed under
23    this Article at  the  time  of  the  sale,  solicitation,  or
24    negotiation and was so licensed at that time.
25        (d)  An  insurer  or insurance producer may pay or assign
26    commissions, service  fees,  brokerages,  or  other  valuable
27    consideration to an insurance agency or to persons who do not
28    sell,  solicit,  or negotiate insurance in this State, unless
29    the payment would violate Section 151 of this Code.
30        (e)  When  an  insurance  producer  or  business   entity
31    charges  a  fee  or  compensation  separate  from commissions
                            -2-                LRB9215940JSpc
 1    deductible from, or directly  attributable  to,  premiums  on
 2    insurance  policies  or contracts, it must comply with all of
 3    the following:
 4             (1)  It  must  provide  written  disclosure  to  the
 5        consumer or contracting party that clearly specifies  the
 6        amount  or extent of the compensation or fee prior to the
 7        delivery of the corresponding  policy.   A  copy  of  the
 8        written  disclosure must be maintained by the producer or
 9        business entity that collects the compensation or fee for
10        a period of 3 years.
11             (2)  If the combined compensation or fee exceeds 10%
12        of  a  directly  attributable   premium   amount   of   a
13        corresponding  contract  or  policy,  the disclosure must
14        also include the signature of the consumer or contracting
15        party acknowledging the compensation or fee.
16             (3)  The compensation or fee shall  be  returned  to
17        the  consumer  or  contracting party within 30 days after
18        the properly  documented  receipt  of  a  notice  to  the
19        producer   or  business  entity  that  the  corresponding
20        contract or policy has been cancelled.  The amount to  be
21        returned shall be calculated on a pro-rated basis for the
22        remaining  time  the  policy will not be in force, not to
23        exceed 90 days.  Compensation or fees returned shall  not
24        include  or  offset  for  any  processing or cancellation
25        charges attributable to effecting the return.
26             (4)  If the consumer or contracting  party's  policy
27        file contains documentation that the producer performed a
28        service  corresponding  to  the  applicable  coverage  or
29        policy  and  the  written disclosure stated that the fees
30        were fully earned, then those fees shall be fully  earned
31        at  inception  of  the  disclosure statement's execution.
32        Except as to  commissions  deductible  from  premiums  on
33        insurance   policies   or  contracts  for  insurance,  an
34        insurance producer or business entity does not  have  any
                            -3-                LRB9215940JSpc
 1        right  to  compensation  from  an  insured or prospective
 2        insured for or on account of the transaction of insurance
 3        business unless the right to compensation is stated on  a
 4        separate  written  memorandum  that clearly specifies the
 5        amount or extent of the service fee and that is  provided
 6        to the applicant or insured before the performance of the
 7        service  or  the  issuance  of  the  policy, whichever is
 8        first.  A copy of the memorandum must  be  maintained  by
 9        any  producer who collects or receives the service fee or
10        any portion of the service fee.  If the  compensation  or
11        service   fee  exceeds  10%  of  the  premium  amount  or
12        potential premium amount of the contract or  policy,  the
13        memorandum  shall include the signature of the insured or
14        prospective insured  acknowledging  the  compensation  or
15        service fee.
16        (f)  Any  compensation  or  service  fee  received  on  a
17    contract  or  policy that is later canceled, within the first
18    half of the contract or policy period, for any reason must be
19    returned to the insured by the insurance producer or business
20    entity at a prorated amount.  The prorated  amount  shall  be
21    based  on  the  length  of the term of the policy or contract
22    compared to the time that contract or  policy  was  in  force
23    such  that  the  amount  returned reflects the portion of the
24    term of the contract or policy during which the contract  was
25    not  in force.  There shall be no compensation or service fee
26    assessed or received on a contract or policy by the insurance
27    producer or business entity for processing such cancellation.
28    (Source: P.A. 92-386, eff. 1-1-02.)

29        Section 99.  Effective date.  This Act takes effect  upon
30    becoming law.

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