State of Illinois
92nd General Assembly

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[ Introduced ][ Engrossed ][ Senate Amendment 001 ]


SB1996 Enrolled                                LRB9215940JSpc

 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  any  fee  or  compensation separate from commissions
SB1996 Enrolled             -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 7 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)  If an insurance policy or contract is cancelled
17        for any reason within 90  days  following  the  inception
18        date, the producer or business entity shall refund to the
19        consumer  a  prorated  portion of the fee or compensation
20        within 30 days after  the  producer  or  business  entity
21        receives  proper  documentation  that  the  corresponding
22        insurance  policy  or  contract has been cancelled. At no
23        time shall a  producer  or  business  entity  charge  the
24        consumer  a  fee  or compensation for cancellation of any
25        insurance policy or contract.
26             (4)  If the policy file contains documentation  that
27        the  producer  performed  a  service corresponding to the
28        applicable coverage or policy and the written  disclosure
29        stated  that  the fees were fully earned, then those fees
30        shall be fully earned at inception  of  the  disclosure's
31        execution.  Except  as  to  commissions  deductible  from
32        premiums   on   insurance   policies   or  contracts  for
33        insurance, an insurance producer or business entity  does
34        not  have  any  right  to compensation from an insured or
SB1996 Enrolled             -3-                LRB9215940JSpc
 1        prospective insured for or on account of the  transaction
 2        of insurance business unless the right to compensation is
 3        stated  on  a  separate  written  memorandum that clearly
 4        specifies the amount or extent of  the  service  fee  and
 5        that  is  provided to the applicant or insured before the
 6        performance of the service or the issuance of the policy,
 7        whichever is first.  A copy of  the  memorandum  must  be
 8        maintained  by  any producer who collects or receives the
 9        service fee or any portion of the service  fee.   If  the
10        compensation  or  service  fee exceeds 10% of the premium
11        amount or potential premium amount  of  the  contract  or
12        policy, the memorandum shall include the signature of the
13        insured   or   prospective   insured   acknowledging  the
14        compensation or service fee.
15        (f)  Any  compensation  or  service  fee  received  on  a
16    contract or policy that is later canceled, within  the  first
17    half of the contract or policy period, for any reason must be
18    returned to the insured by the insurance producer or business
19    entity  at  a  prorated amount.  The prorated amount shall be
20    based on the length of the term of  the  policy  or  contract
21    compared  to  the  time  that contract or policy was in force
22    such that the amount returned reflects  the  portion  of  the
23    term  of the contract or policy during which the contract was
24    not in force.  There shall be no compensation or service  fee
25    assessed or received on a contract or policy by the insurance
26    producer or business entity for processing such cancellation.
27    (Source: P.A. 92-386, eff. 1-1-02.)

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

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