Session of 1998
HOUSE BILL No. 2741
By Committee on Insurance
1-29
9
AN ACT concerning insurance; relating to the
licensure and regulation
10 of producers thereof;
amending K.S.A. 40-214, 40-246c, 40-246d,
11 40-246e, 40-282,
40-299, 40-2,106, 40-2,107, 40-2,131, 40-2,132, 40-
12 2,133, 40-741,
40-1612, 40-1613, 40-2209l, 40-2209m, 40-2406, 40-
13 2508, 40-2612,
40-3608, 40-3618, 40-37a01, 40-37a02, 40-37a04,
14 40-37a05, 40-37a06,
40-4103, 40-4117, 40-4119 and 44-592 and K.S.A.
15 1997 Supp. 40-246b,
40-2,118, 40-2,125, 40-2,135, 40-2c21, 40-1909,
16 40-19a10, 40-19c09 and
40-2404 and repealing the existing sections;
17 also repealing K.S.A.
40-240g, 40-241a, 40-241b, 40-241c, 40-241e, 40-
18 241f, 40-241g,
40-241h, 40-241j, 40-241k, 40-244, 40-245, 40-246a, 40-
19 246f, 40-3701,
40-3702, 40-3703, 40-3704, 40-3705, 40-3707, 40-3708,
20 40-3709, 40-3710,
40-3711, 40-3712, 40-3713, 40-3714 and 40-4109
21 and K.S.A. 1997 Supp.
40-239, 40-240, 40-240f, 40-241, 40-241i, 40-
22 242, 40-246, 40-247
and 40-3706.
23
24 Be it enacted by the Legislature of the
State of Kansas:
25 Section 1. K.S.A.
40-214 is hereby amended to read as follows: 40-
26 214. It shall be unlawful for any person,
company, corporation or fraternal
27 benefit society to transact the business of
insurance, indemnity or sure-
28 tyship, or do any act toward transacting
such business, unless such person,
29 company, corporation or fraternal benefit
society shall have been duly
30 authorized under the laws of this state to
transact such business and shall
31 have received proper written authority from
the commissioner of insur-
32 ance in conformity with the provisions of
the laws of this state relative to
33 insurance, indemnity and suretyship, and
further, it shall be unlawful for
34 any insurance company to effect contracts
of insurance in this state on
35 the life or person of residents of this
state or on property located in this
36 state except through persons duly licensed
and certified in accordance
37 with the insurance laws of this state
and subject to the provisions of K.S.A.
38 40-245 and amendments
thereto. Neither the enrollment of individuals
39 under a group policy nor the inclusion of
insurance in a credit transaction
40 under an arrangement for its purchase by
the creditor in compliance with
41 the applicable provisions of the uniform
consumer credit code shall con-
42 stitute the effecting of a contract of
insurance.
43 It shall be unlawful for any
insurance company organized under the
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2
1 laws of this state to do business in
any other state or territory of the United
2 States without being first legally
admitted and authorized to do business
3 under the laws of such state or
territory, and the insurance commissioner
4 may revoke the license of any
insurance company organized under the
5 laws of this state and doing business
in another state or territory without
6 being first authorized so to do, and
may require said company to pay the
7 taxes upon the business so unlawfully
written to the state or territory in
8 which the business was written as
provided by the laws of said state or
9 territory. A company shall be
considered admitted and authorized for the
10 purposes of this section when it has been
legally authorized to operate in
11 such other state or territory as a
nonadmitted insurer.
12 Sec. 2. K.S.A. 1997
Supp. 40-246b is hereby amended to read as
13 follows: 40-246b. The commissioner of
insurance may issue to any duly
14 licensed ;(Rx)sident agent
producer of this state, who has been licensed as
15 a fire or casualty, or both,
;(Rx)sident agent producer in this or any
other
16 state or combination thereof, for three
consecutive years immediately
17 prior to application for the type of
license herein prescribed, upon proper
18 application, an excess
coverage a surplus lines license to negotiate
the
19 types of contracts of fire insurance
enumerated in K.S.A. 40-901, and
20 amendments thereto, and the type of
casualty insurance contracts enu-
21 merated in K.S.A. 40-1102, and amendments
thereto, or reinsurance, or
22 to place risks, or to effect insurance or
reinsurance for persons or cor-
23 porations other than such
agent producer, with insurers not
authorized
24 to do business in this state. An
agent, as defined in K.S.A. 40-241e, and
25 amendments thereto, A
producer may place the kind or kinds of business
26 specified in this act for which such
agent producer is licensed pursuant
27 to K.S.A. 40-240 and 40-241, and
amendments thereto this act, with an
28 insurer not authorized to do business in
this state by placing such business
29 with a person licensed pursuant to the
provisions of this act and may
30 share in the applicable commissions on such
business. Before any such
31 license shall be issued, the applicant
shall submit proper application on a
32 form prescribed by the commissioner, which
application shall be accom-
33 panied by a fee of $50
the fee as provided in section 26. Such license shall
34 be renewable each year on May
1, upon the payment of a $50 fee the
fee
35 as provided in section 26
and certification of appropriate errors and
36 omissions coverage as required by
K.S.A. 40-246f, and amendments
37 thereto. Excess lines agents
licensed by the department on the effective
38 date of this act shall be exempt
from the experience requirement.
39 The agent
producer so licensed shall on or before March 1 of
each
40 year, file with the
insurance department of this state, every calendar quar-
41 ter, a sworn affidavit or statement
to the effect that, after diligent effort,
42 such agent producer
has been unable to secure the amount of insurance
43 required to protect the property, person,
or firm described in such agent's
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3
1 producer's affidavit or
statement from loss or damage in regularly admit-
2 ted companies during the preceding
year quarter. Mere rate differential
3 shall not be grounds for placing a
particular risk in a nonadmitted carrier
4 when an admitted carrier would accept
such risk at a different rate. The
5 licensed excess coverage
agent surplus lines producer must, prior to
plac-
6 ing insurance with an insurer not
authorized to do business in this state,
7 obtain the written consent of the
prospective named insured and provide
8 such insured the following
information in a form promulgated by the
9 commissioner:
10 (a) A statement that the
coverage will be obtained from an insurer
11 not authorized to do business in this
state;
12 (b) a statement that the
insurer's name appears on the list of com-
13 panies maintained by the commissioner
pursuant to K.S.A. 40-246e, and
14 amendments thereto;
15 (c) a notice that the
insurer's financial condition, policy forms, rates
16 and trade practices are not subject to the
review or jurisdiction of the
17 commissioner;
18 (d) a statement that the
protection of the guaranty associations is not
19 afforded to policyholders of the insurer;
and
20 (e) a statement or
notice with respect to any other information
21 deemed necessary by the commissioner
pertinent to insuring with an
22 insurer not authorized to do business in
this state.
23 In the event the insured
desires that coverage be bound with an insurer
24 not admitted to this state and it is not
possible to obtain the written
25 consent of the insured prior to binding the
coverage, the excess lines
26 agent surplus lines
producer may bind the coverage after advising the
27 insured of the information set out above
and shall obtain written confir-
28 mation that the insured desires that
coverage be placed with an insurer
29 not admitted to this state within 30 days
after binding coverage.
30 When business comes to a
licensed excess lines agent surplus
lines
31 producer for placement with an
insurer not authorized to do business in
32 this state from an agent
a producer not licensed as an excess lines
agent
33 a surplus lines producer, it shall
be the responsibility of the licensed
34 excess lines agent
surplus lines producer to ascertain that the insured has
35 been provided the preceding information and
has consented to being
36 insured with an insurer not authorized to
do business in this state. Each
37 excess lines agent
surplus lines producer shall keep a separate record book
38 in such agent's
producer's office showing the transactions of fire and
ca-
39 sualty insurance and reinsurance placed in
companies not authorized to
40 do business in this state, the amount of
gross premiums charged thereon,
41 the insurer in which placed, the date, term
and number of the policy, the
42 location and nature of the risk, the name
of the assured and such other
43 information as the commissioner may require
and such record shall be
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4
1 available at all times for inspection
by the commissioner of insurance or
2 the commissioner's authorized
representatives. The commissioner may
3 revoke or suspend any license
issued pursuant to the provisions of this
4 act in the same manner and
for the same reasons prescribed by K.S.A.
5 40-242, and amendments
thereto.
6 Any policy issued under
the provisions of this statute shall have
7 stamped or endorsed in a prominent
manner thereon, the following: This
8 policy is issued by an insurer not
authorized to do business in Kansas and,
9 as such, the form, financial
condition and rates are not subject to review
10 by the commissioner of insurance and the
insured is not protected by any
11 guaranty fund.
12 If business is placed with a
nonadmitted company that is subsequently
13 determined to be insolvent, the
excess lines agent surplus lines
producer
14 placing such business with such company is
relieved of any responsibility
15 to the insured as it relates to such
insolvency, if the excess lines agent
16 surplus lines producer has
satisfactorily complied with all requirements
17 of this section pertaining to notification
of the insured, has properly ob-
18 tained the written consent of the insured
and has used due diligence in
19 selecting the insurer. It shall be presumed
that due diligence was used in
20 selecting the insurer if such insurer was
on the list compiled pursuant to
21 K.S.A. 40-246e, and amendments thereto, at
the time coverage first be-
22 came effective.
23 Sec. 3. K.S.A.
40-246c is hereby amended to read as follows: 40-
24 246c. Each licensed agent
surplus lines producer shall file with the com-
25 missioner on or before March 1 of
each year every quarter a statement
26 on a form prescribed by the commissioner,
accounting for the gross pre-
27 miums upon all policies written on risks
situated in this state up to January
28 1 in each year for the
year for the quarter next preceding and the
licensee
29 shall transmit to the commissioner, with
such affidavit or statement, a
30 sum equal to 6% 4%
of the gross premiums upon all policies procured
31 by such agent
producer on risks situated in this state written under
the
32 provisions of this act. Any individual
placing a policy with an insurer not
33 authorized to do business in this state on
a risk domiciled in a state other
34 than this state, but also covering a risk
or location in Kansas, shall file
35 with the commissioner a statement in the
form prescribed by the com-
36 missioner, describing the risk and shall
pay to the commissioner a sum
37 equal to 6% 4% of
the portion of the premium applicable to the risk
38 located in Kansas within 120 days after
writing the risk. The individual
39 responsible for filing the statement shall
be the agent producer who signs
40 the policy or the agent
producer of record with the company. The com-
41 missioner of insurance shall collect double
the amount of tax herein pro-
42 vided from any licensee or other
responsible individual as herein de-
43 scribed who shall fail, refuse or neglect
to transmit the required affidavit
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5
1 or statement or shall fail to pay the
tax imposed by this section, to the
2 commissioner within the period
specified.
3
Sec. 4. K.S.A. 40-246d is hereby amended to read as
follows: 40-
4 246d. The commissioner may, in the
manner prescribed by law, revoke
5 or suspend the license of any
agent producer issued pursuant to
sections
6 40-241 and 40-246 of the
Kansas Statutes Annotated this act when such
7 agent
producer shall engage in any transaction permitted only to
licensees
8 under the provisions of K.S.A.
40-246b, without first obtaining the license
9 as required by K.S.A. 40-246b and
amendments thereto.
10 Sec. 5. K.S.A.
40-246e is hereby amended to read as follows: 40-
11 246e. The commissioner shall maintain a
list of insurers not authorized
12 to do business in this state for review by
any interested person. Only those
13 insurers who have filed a certified copy of
their most recent annual state-
14 ment with the commissioner in the form
prescribed by K.S.A. 40-225 and
15 amendments thereto or, if domiciled outside
the United States, have filed
16 their most recent annual statement with the
national association of in-
17 surance commissioners may appear on the
list. No excess lines agent
18 producer shall place insurance on a
Kansas domiciled risk with an insurer
19 whose name does not appear on this list. No
company shall appear on
20 the list whose capital or surplus as shown
on the annual statement does
21 not equal or exceed $1,500,000. Individual
unincorporated insurers not
22 listed by the national association of
insurance commissioners may appear
23 on the list if they are authorized to
transact an insurance business in at
24 least one state of the United States,
possess assets which are held in trust
25 for the benefit of American policyholders
in the sum of not less than
26 $50,000,000 and pay the filing fee required
by this section. Insurance
27 exchanges who issue contracts on behalf of
their members and pay the
28 filing fee required by this section may
appear on the list if their individual
29 members have a capital or surplus equal to
or in excess of $1,500,000 and
30 the aggregate capital or surplus of all
members of the exchange is at least
31 $15,000,000. A nonrefundable filing fee of
$200 shall be required of any
32 insurer submitting its annual statement for
review by the commissioner
33 for inclusion on such list. The
commissioner shall remove an insurer's
34 name from the listing only when: (a) The
insurer requests such removal;
35 or (b) the insurer fails to file its latest
annual statement and required
36 filing fee prior to May 1 of each year as
required by this section; or (c)
37 the commissioner is notified by the
insurance supervisory authority of any
38 state of the United States that such
insurer has had its authority to transact
39 business restricted; or has been declared
insolvent or placed in receiv-
40 ership, conservatorship, rehabilitation or
any similar status wherein the
41 business of the insurer is formally
supervised by an insurance supervisory
42 authority; or (d) the commissioner is
notified by the N.A.I.C. national
43 association of insurance
commissioners that any insurer domiciled outside
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6
1 the United States has been declared
insolvent or placed in receivership,
2 conservatorship, rehabilitation or
any similar status wherein the business
3 of the insurer is formally supervised
by an insurance supervisory authority
4 pursuant to an order by any court of
competent jurisdiction; or (e) the
5 insurer has failed to effectuate
reasonably prompt, fair and equitable pay-
6 ment of just losses and claims in
this state; or (f) the insurer encourages,
7 promotes or rewards an agent to
violate the provisions of K.S.A. 40-246b
8 and amendments thereto. There shall
be no liability on the part of and
9 no cause of action of any nature
shall arise against the commissioner, the
10 commissioner's employees, or the state of
Kansas as a result of any in-
11 surer's name appearing or not appearing on
the list required by this sec-
12 tion if such list is constructed and
maintained in good faith and without
13 malice.
14 The commissioner may
establish an export list. An ``export list'' means
15 a list of the types or lines of
insurance the commissioner determines are
16 not readily available in Kansas from
admitted insurers. Licensed surplus
17 line producers are not required to first
survey the admitted market in
18 lines or types of insurance on the
export list before placing insurance with
19 a surplus lines insurer.
20 Sec. 6. K.S.A.
40-282 is hereby amended to read as follows: 40-282.
21 (a) Any insurance agent
producer, as defined in K.S.A. 40-239 and
amend-
22 ments thereto new
section 40, may extend credit to policyholders in con-
23 nection with the issuance or servicing of
policies procured or negotiated
24 by such agent but any such credit so
extended shall satisfy one of the
25 following conditions, unless otherwise
authorized by law:
26 (1) If credit is
extended to policyholders for a period of not more
27 than 30 days from the date the premium is
due, and such credit is not
28 evidenced by a written instrument, there
shall be no interest charged for
29 such credit; or
30 (2) if credit is
extended to policyholders for a period of more than 30
31 days from the date the premium is due, and
such credit is not evidenced
32 by a written instrument, interest may be
charged for credit extended after
33 30 days at a rate not exceeding 11/2% per
month on the unpaid balance;
34 or
35 (3) if the extension of
credit to a policyholder is evidenced by a writ-
36 ten instrument setting forth the terms, and
signed by the policyholder,
37 any interest charged for such credit shall
be clearly stated in the instru-
38 ment but it shall not exceed the legal rate
of interest authorized in K.S.A.
39 16-207 and amendments thereto.
40 (b) Any insurance
agent producer extending credit to
policyholders
41 as provided in subsection (a)(1) or (2) of
this section may request the
42 company to cancel such insurance according
to the terms of the policies
43 for nonpayment of the policyholders'
accounts, except as provided in
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7
1 K.S.A. 40-277 and amendments thereto,
and except for policies paid by
2 an escrow agent, or paid direct by an
insured to an insurance company,
3 or where the insured specified that
payment apply to a specific policy and
4 all premiums due on that policy have
been paid, or where the unearned
5 premium is collateral for a loan
under K.S.A. 40-2601 et seq., and amend-
6 ments thereto.
7 The insurance
agent producer shall notify the
policyholder of the re-
8 quested cancellation in writing at
the time the request is made to the
9 insurance company.
10 Such insurance
agent producer shall have a lien on any
return premium
11 for all policies of the same policyholder
to the extent of amounts owed
12 by the policyholder.
13 Sec. 7. K.S.A.
40-299 is hereby amended to read as follows: 40-299.
14 Whenever any dealer, or any agent, officer
or employee of such dealer,
15 who also is an insurance
agent producer, as defined by
K.S.A. 40-239 new
16 section 41, shall provide only for
automobile physical damage insurance
17 in connection with the sale and financing
of an automobile, such dealer,
18 agent, officer or employee also must obtain
a written acknowledgment by
19 the purchaser of the automobile that the
insurance coverage so provided
20 for such automobile does not include
automobile liability insurance suf-
21 ficient to fulfill the requirements of the
Kansas automobile injury repa-
22 rations act. Such acknowledgment shall be
made in the manner and form
23 prescribed by the commissioner of
insurance, and a copy thereof shall be
24 furnished the purchaser. The insurance
agent's producer's license of any
25 such dealer, agent, officer or employee who
fails to obtain the acknow-
26 ledgment required herein shall be subject
to suspension or revocation by
27 the commissioner pursuant to the provisions
of K.S.A. 40-242 new section
28 39.
29 Sec. 8. K.S.A. 1997
Supp. 40-2,118 is hereby amended to read as
30 follows: 40-2,118. (a) For purposes of this
act a ``fraudulent insurance act''
31 means an act committed by any person who,
knowingly and with intent
32 to defraud, presents, causes to be
presented or prepares with knowledge
33 or belief that it will be presented to or
by an insurer, purported insurer,
34 broker or any agent or
producer thereof, any written statement as part
35 of, or in support of, an application for
the issuance of, or the rating of an
36 insurance policy for personal or commercial
insurance, or a claim for
37 payment or other benefit pursuant to an
insurance policy for commercial
38 or personal insurance which such person
knows to contain materially false
39 information concerning any fact material
thereto; or conceals, for the
40 purpose of misleading, information
concerning any fact material thereto.
41 (b) Except as otherwise
specifically provided in K.S.A. 21-3718 and
42 amendments thereto and K.S.A. 44-5,125 and
amendments thereto, a
43 fraudulent insurance act shall constitute a
severity level 6, nonperson
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8
1 felony if the amount involved is
$25,000 or more; a severity level 7, non-
2 person felony if the amount is at
least $5,000 but less than $25,000; a
3 severity level 8, nonperson felony if
the amount is at least $1,000 but less
4 than $5,000; a severity level 9,
nonperson felony if the amount is at least
5 $500 but less than $1,000; and a
class C nonperson misdemeanor if the
6 amount is less than $500.
7 (c) In addition to
any other penalty, a person who violates this statute
8 shall be ordered to make restitution
to the insurer or any other person
9 or entity for any financial loss
sustained as a result of such violation. An
10 insurer shall not be required to provide
coverage or pay any claim in-
11 volving a fraudulent insurance act.
12 (d) This act shall apply
to all insurance applications, ratings, claims
13 and other benefits made pursuant to any
insurance policy.
14 Sec. 9. K.S.A.
40-2,106 is hereby amended to read as follows: 40-
15 2,106. For the purposes of this act:
(1) (a) ``Independent insurance
agent
16 producer'' means any licensed
agent producer representing an
insurance
17 company on an independent contractor basis
and not as an employee.
18 This term shall include only those agents
not obligated by contract to
19 place insurance accounts with any insurance
company or group of com-
20 panies.
21 (2)
(b) ``Insurance company'' means any property or
casualty insur-
22 ance company admitted to the state of
Kansas, except the term shall not
23 include any company which requires
membership in the company, as
24 contained in the articles of incorporation
or bylaws of such company, as
25 a prerequisite to insuring that member.
26 (3)
(c) ``Commissioner'' means the commissioner of
insurance.
27 (d) ``Exclusive
insurance producer'' means any licensed producer ob-
28 ligated by contract to produce insurance
business exclusively for one in-
29 surance company or group of
companies.
30 Sec. 10. K.S.A.
40-2,107 is hereby amended to read as follows: 40-
31 2,107. (a) Insurance companies may contract
with independent insurance
32 agents producers or
exclusive insurance producers as to binding authority,
33 policy services, adjusting services,
commissions and other subjects of in-
34 terest between agent
producer and company. Such contracts which have
35 been effective for more than one year shall
not be terminated or amended
36 by the company except by mutual agreement
or unless 180 days' prior
37 notice has been tendered to the
agent producers, except that this shall
38 not apply to terminations for fraud,
material misrepresentation or failure
39 to pay such agent's
producer's account less the agent's
producer's com-
40 mission and any disputed items within 10
days after written demand by
41 the company. During such notice period all
contractual conditions exist-
42 ing prior to such notice shall
continue.
43 (b) Any independent
insurance agent producer or exclusive
insurance
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9
1 producer whose contract with
an insurance company has been terminated
2 under the provisions of subsection
(a) shall have until the policy renewal
3 date, but not more than one year, to
place the business written under
4 such terminated contract with another
insurance company.
5 (c) After an
agency contractual relationship has been in effect for a
6 period of three years, an
insurance company writing property and casu-
7 alty loss insurance in this state
may not terminate the agency contractual
8 relationship with any producer
unless the company has attempted to re-
9 habilitate the producer as
provided in subsection (i). The insurer shall
10 provide written notice of intent to
rehabilitate.
11 (d) If the producer
and company are not able to reach a mutually
12 acceptable plan of rehabilitation, the
company may terminate the agency
13 contractual relationship after providing
written notice of termination to
14 the producer at least 90 days in
advance.
15 (e) The notice of
termination must include the reasons for termination
16 and a copy of the notice of intent to
rehabilitate.
17 (f) An insurance
company may not terminate an agency contract
18 based upon any of the following:
19 (1) An adverse loss
experience for a single year;
20 (2) the geographic
location of the producer's auto and homeowners
21 insurance business; or
22 (3) the performance
of obligations required of an insurer or producer
23 under Kansas statutes.
24 (g) The company shall
at the request of the producer renew any in-
25 surance contract written by the producer
for the company for not more
26 than one year for property and casualty
loss insurance during a period
27 of nine months after the effective date
of the termination, but in the event
28 any risk does not meet current
underwriting standards of the company,
29 the company may decline its renewal,
provided that the company shall
30 give the producer not less than 60 days
notice of its intention not to renew
31 the contract of insurance.
32 (h) No new insurance
or bond contract shall be written by the pro-
33 ducer for the company after the
effective date of the termination without
34 the written approval of the company. The
producer may increase liability
35 on renewal for not more than one year
for the insured after the effective
36 date of the termination if the increased
liability meets the current under-
37 writing standards of the
company.
38 (i) Before notice of
termination of the agency contract, the company
39 shall negotiate in good faith in an
effort to reach mutual agreement with
40 the producer on a written plan for
rehabilitation. The rehabilitation plan
41 must be in writing and must contain the
following elements:
42 (1) Identification by
the company of the problem areas which need
43 rehabilitation;
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10
1 (2) what the
producer must do to avoid termination;
2 (3) how the
company intends to assist the producer to avoid termi-
3 nation;
4 (4) the
mutually agreed upon corrective action to be undertaken by
5 the producer and the specific
target dates for accomplishment;
6 (5) periodic
meeting dates at which the status of rehabilitation will
7 be reviewed; and
8 (6) the term of
the written plan which must extend for at least one
9 year.
10 (j) All agency
contracts in existence on July 1, 1998, are subject to the
11 rehabilitation requirement under
subsection (i). The rehabilitation plan
12 need not be incorporated into the agency
contract.
13 (k) Nothing contained
in this section prohibits the earlier termination
14 of an amendment or addendum subsequent
to the inception date of the
15 original agency agreement provided the
subsequent amendment or ad-
16 dendum provides for termination on
shorter notice and the producer
17 agrees in writing to the earlier
termination.
18 (l) During the term
of the contract the company shall not refuse to
19 renew such business from the producer as
would be in accordance with
20 the company's current underwriting
standards.
21 (m) The provisions of
this section do not apply to the termination of
22 a producer's contract for insolvency,
abandonment, gross and willful mis-
23 conduct or failure to pay over to the
company money due to the company
24 after receipt by the producer of a
written demand therefor, or after rev-
25 ocation of the producer's license by the
commissioner.
26 (n) All future and
presently existing agency contractual relationships
27 between a producer and a company writing
property and casualty loss
28 insurance in this state are subject to
the provisions of this section.
29 (o) If it is found,
after notice and an opportunity to be heard as de-
30 termined by the commissioner, that an
insurance company has violated
31 this section, the insurance company
shall be subject to a civil action by
32 the producer for actual damages suffered
because of the premature ter-
33 mination of the contract by the company.
The commissioner shall employ
34 the department's investigative and
enforcement authority if the commis-
35 sioner has a reason to believe that an
insurer has violated this section. An
36 insurer found in violation of this
section is subject to a civil penalty im-
37 posed by the commissioner not to exceed
$10,000 per violation.
38 (p) In the event that
a company's compliance with this section is dem-
39 onstrated to the satisfaction of the
commissioner to represent a hazard or
40 potential hazard to the financial
integrity of the company, the commis-
41 sioner may, after a hearing, issue an
order relieving the company from
42 its obligation to provide the renewal
policies otherwise required by this
43 section.
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11
1 (q) Upon
termination of an agency, a company is prohibited from
2 soliciting business in the notice
of nonrenewal required by K.S.A. 40-276a,
3 40-277, 40-2,112, 40-2,121, and
40-2,122 and amendments thereto.
4 (r) For
purposes of this section, a cancellation or termination of
a
5 producer's contract is considered
to have occurred if the company cancels
6 a line of insurance business or a
volume of insurance business that equals
7 or exceeds 75% of the insurance
business placed by that producer with
8 the company.
9
Sec. 11. K.S.A. 1997 Supp. 40-2,125 is hereby amended to
read as
10 follows: 40-2,125. (a) If the commissioner
determines after notice and
11 opportunity for a hearing that any person
has engaged or is engaging in
12 any act or practice constituting a
violation of any provision of Kansas
13 insurance statutes or any rule and
regulation or order thereunder, the
14 commissioner may in the exercise of
discretion, order any one or more
15 of the following:
16 (1) Payment of a
monetary penalty of not more than $1,000 for each
17 and every act or violation, unless the
person knew or reasonably should
18 have known such person was in violation of
the Kansas insurance statutes
19 or any rule and regulation or order
thereunder, in which case the penalty
20 shall be not more than $2,000 for each and
every act or violation;
21 (2) suspension or
revocation of the person's license or certificate if
22 such person knew or reasonably should have
known that such person was
23 in violation of the Kansas insurance
statutes or any rule and regulation or
24 order thereunder; or
25 (3) that such person
cease and desist from the unlawful act or practice
26 and take such affirmative action as in the
judgment of the commissioner
27 will carry out the purposes of the violated
or potentially violated provision.
28 (b) If any person fails
to file any report or other information with the
29 commissioner as required by statute or
fails to respond to any proper
30 inquiry of the commissioner, the
commissioner, after notice and oppor-
31 tunity for hearing, may impose a penalty of
up to $500 for each violation
32 or act, along with an additional penalty of
up to $100 for each week
33 thereafter that such report or other
information is not provided to the
34 commissioner.
35 (c) If the commissioner
makes written findings of fact that there is a
36 situation involving an immediate danger to
the public health, safety or
37 welfare or the public interest will be
irreparably harmed by delay in is-
38 suing an order under subsection (a)(3), the
commissioner may issue an
39 emergency temporary cease and desist order.
Such order, even when not
40 an order within the meaning of K.S.A.
77-502 and amendments thereto,
41 shall be subject to the same procedures as
an emergency order issued
42 under K.S.A. 77-536 and amendments thereto.
Upon the entry of such
43 an order, the commissioner shall promptly
notify the person subject to
HB 2741
12
1 the order that: (1) It has been
entered, (2) the reasons therefor and (3)
2 that upon written request within 15
days after service of the order the
3 matter will be set for a hearing
which shall be conducted in accordance
4 with the provisions of the Kansas
administrative procedure act. If no hear-
5 ing is requested and none is ordered
by the commissioner, the order will
6 remain in effect until it is modified
or vacated by the commissioner. If a
7 hearing is requested or ordered, the
commissioner, after notice of and
8 opportunity for hearing to the person
subject to the order, shall by written
9 findings of fact and conclusions of
law vacate, modify or make permanent
10 the order.
11 (d) For purposes of this
section:
12 (1) ``Person'' means any
individual, corporation, association, partner-
13 ship, reciprocal exchange, inter-insurer,
Lloyd's insurer, fraternal benefit
14 society and any other legal entity engaged
in the business of insurance,
15 or any person purchasing an interest in a
life insurance policy which is
16 licensed pursuant to K.S.A. 40-2,141 and
amendments thereto, rating
17 organization, third party administrator,
nonprofit dental service corpo-
18 ration, nonprofit medical and hospital
service corporation, automobile
19 club, premium financing company, health
maintenance organization, in-
20 surance holding company, mortgage guaranty
insurance company, risk
21 retention or purchasing group, prepaid
legal and dental service plan, cap-
22 tive insurance company, automobile
self-insurer or reinsurance inter-
23 mediary. The term ``person'' shall not
include insurance agents producers
24 licensed pursuant to K.S.A. 40-241
or 40-246, and amendments thereto,
25 insurance brokers licensed pursuant
to K.S.A. 40-3701 et seq.,
and
26 amendments thereto, new
section 44 or employees of licensed agents
or
27 brokers insurance
producers.
28 (2) ``Commissioner''
means the commissioner of insurance of this
29 state.
30 Sec. 12. K.S.A.
40-2,131 is hereby amended to read as follows: 40-
31 2,131. (a) No person, firm, association or
corporation shall act in the
32 capacity of an MGA with respect to risks
located in this state for an insurer
33 licensed in this state unless such person
is a licensed agent or broker in
34 this state.
35 (b) No person, firm,
association or corporation shall act in the capac-
36 ity of an MGA representing an insurer
domiciled in this state with respect
37 to risks located outside this state unless
such person is licensed as an
38 agent or broker a
producer in this state pursuant to the provisions of
39 K.S.A. 40-240 or 40-3701
et seq., and amendments
thereto this act.
40 (c) The commissioner may
require a bond in an amount acceptable
41 to the commissioner for the protection of
the insurer.
42 (d) The commissioner may
require the MGA to maintain an errors
43 and omissions policy.
HB 2741
13
1
Sec. 13. K.S.A. 40-2,132 is hereby amended to read as
follows: 40-
2 2,132. No person, firm, association
or corporation acting in the capacity
3 of an MGA shall place business with
an insurer unless there is in force a
4 written contract between the parties
which sets forth the responsibilities
5 of each party, specifies the division
of responsibilities where both parties
6 have responsibility for a particular
function, and contains the following
7 minimum provisions:
8 (a) The insurer
may terminate the contract for cause upon written
9 notice to the MGA. The insurer may
suspend the underwriting authority
10 of the MGA during the pendency of any
dispute regarding the cause for
11 termination.
12 (b) The MGA will render
accounts to the insurer detailing all trans-
13 actions and remit all funds due under the
contract to the insurer on not
14 less than a monthly basis.
15 (c) All funds collected
for the account of an insurer will be held by
16 the MGA in a fiduciary capacity in a bank
which is a member of the
17 federal reserve system. This account shall
be used for all payments on
18 behalf of the insurer. The MGA may retain
no more than three months
19 estimated claim payments and allocated loss
adjustment expenses.
20 (d) Separate records of
business written by the MGA will be main-
21 tained. The insurer shall have access and
right to copy all accounts and
22 records related to its business in a form
usable by the insurer, and the
23 commissioner shall have access to all
books, bank accounts and records
24 of the MGA in a form usable to the
commissioner. Such records shall be
25 retained until the insurer and business to
which they pertain has been
26 the subject of an examination pursuant to
the provisions of K.S.A. 40-222
27 and amendments thereto.
28 (e) The contract may not
be assigned in whole or part by the MGA.
29 (f) Appropriate
underwriting guidelines including:
30 (1) The maximum annual
premium volume;
31 (2) the basis of the
rates to be charged;
32 (3) the types of risks
which may be written;
33 (4) maximum limits of
liability;
34 (5) applicable
exclusions;
35 (6) territorial
limitations;
36 (7) policy cancellation
provisions; and
37 (8) the maximum policy
period.
38 The insurer shall have the
right to cancel or non-renew any policy of
39 insurance subject to the applicable laws
and regulations relating to the
40 cancellation and non-renewal of insurance
policies.
41 (g) If the contract
permits the MGA to settle claims on behalf of the
42 insurer:
43 (1) All claims must be
reported to the company in a timely manner.
HB 2741
14
1 (2) A copy of the
claim file will be sent to the insurer at its request
2 or as soon as it becomes known that
the claim:
3 (A) Has the
potential to exceed an amount determined by the com-
4 missioner or exceeds the limit set by
the company, whichever is less;
5 (B) involves a
coverage dispute;
6 (C) may exceed the
MGA's claims settlement authority;
7 (D) is open for
more than six months; or
8 (E) is closed by
payment of an amount set by the commissioner or
9 an amount set by the company,
whichever is less.
10 (3) All claim files will
be the joint property of the insurer and MGA.
11 However, upon an order of liquidation of
the insurer such files shall
12 become the sole property of the insurer or
its estate, but the MGA shall
13 have reasonable access to and the right to
copy the files on a timely basis.
14 (4) Any settlement
authority granted to the MGA may be terminated
15 for cause upon the insurer's written notice
to the MGA or upon the
16 termination of the contract. The insurer
may suspend the settlement au-
17 thority during the pendency of any dispute
regarding the cause for ter-
18 mination.
19 (h) Where electronic
claims files are in existence, the contract shall
20 address the timely transmission of the
data.
21 (i) If the contract
provides for a sharing of interim profits by the MGA
22 and the MGA has the authority to determine
the amount of the interim
23 profits by establishing loss reserves or
controlling claim payments or by
24 any other manner, interim profits will not
be paid to the MGA until one
25 year after they are earned for property
insurance business and five years
26 after they are earned on casualty business
and not until the profits have
27 been verified pursuant to K.S.A.
40-2,133.
28 (j) The MGA shall
not:
29 (1) Bind reinsurance or
retrocessions on behalf of the insurer, except
30 that the MGA may bind facultative
reinsurance contracts pursuant to
31 obligatory facultative agreements if the
contract with the insurer contains
32 reinsurance underwriting guidelines
including, for both reinsurance as-
33 sumed and ceded, a list of reinsurers with
which such automatic agree-
34 ments are in effect, the coverages and
amounts or percentages that may
35 be reinsured and commission schedules;
36 (2) commit the insurer
to participate in insurance or reinsurance syn-
37 dicates;
38 (3) appoint any
agent or broker producer without assuring
that the
39 agent or broker
producer is lawfully licensed to transact the type of
in-
40 surance for which such agent or
broker producer is appointed;
41 (4) without prior
approval of the insurer, pay or commit the insurer
42 to pay a claim over a specified amount, net
of reinsurance, which shall
43 not exceed 1% of the insurer's
policyholder's surplus as of December 31
HB 2741
15
1 of the last completed calendar
year;
2 (5) collect any
payment from a reinsurer or commit the insurer to
3 any claim settlement with a reinsurer
without prior approval of the in-
4 surer. If prior approval is given, a
report shall be promptly forwarded to
5 the insurer;
6 (6) permit its
subagent or broker producer to serve on its
board of
7 directors;
8 (7) jointly employ
an individual who is employed with the insurer; or
9 (8) appoint a
sub-MGA.
10 Sec. 14. K.S.A.
40-2,133 is hereby amended to read as follows: 40-
11 2,133. (a) No insurer may utilize or
continue to utilize the services of an
12 MGA on and after the effective date of this
act unless such utilization is
13 in compliance with this act.
14 (b) The insurer shall
have on file an independent financial examina-
15 tion in a form acceptable to the
commissioner of each MGA with which
16 it has done business.
17 (c) If an MGA
establishes loss reserves, the insurer shall annually
18 obtain the opinion of an actuary attesting
to the adequacy of loss reserves
19 established for losses incurred and
outstanding on business produced by
20 the MGA. Such requirement shall be in
addition to any other required
21 loss reserve certification.
22 (d) The insurer shall
periodically, but not less frequently than semi-
23 annually, conduct an on-site review of the
underwriting and claims proc-
24 essing operations of the MGA.
25 (e) Binding authority
for all reinsurance contracts or participation in
26 insurance or reinsurance syndicates shall
rest with an officer of the insurer
27 who shall not be affiliated with the
MGA.
28 (f) Within 30 days of
entering into or termination of a contract with
29 an MGA, the insurer shall provide written
notification of such appoint-
30 ment or termination to the commissioner.
Notices of appointment of an
31 MGA shall include (1) a statement of duties
which the applicant is ex-
32 pected to perform on behalf of the insurer,
(2) the lines of insurance for
33 which the applicant is to be authorized to
act, (3) a notification fee in the
34 amount of $100, (4) and any other
information the commissioner may
35 request.
36 (g) An insurer shall
each quarter review its books and records to de-
37 termine if any agent or
broker producer has become, by operation of
38 subsection (d) of K.S.A. 40-2,130 and
amendments thereto, an MGA as
39 defined in that subsection. If the insurer
determines that an agent or
40 broker a producer
has become an MGA pursuant to the above, the insurer
41 shall promptly notify the agent or
broker producer and the commissioner
42 of such determination, and the insurer and
agent or broker producer shall
43 fully comply with the provisions of this
act within 30 days.
HB 2741
16
1 (h) An insurer
shall not appoint to its board of directors an officer,
2 director, employee or controlling
shareholder of its MGAs. This subsec-
3 tion shall not apply to relationships
governed by the applicable provisions
4 of article 33 of chapter 40 of the
Kansas Statutes Annotated.
5
Sec. 15. K.S.A. 1997 Supp. 40-2,135 is hereby amended to
read as
6 follows: 40-2,135. (a) If the
commissioner finds after a hearing conducted
7 in accordance with the Kansas
administrative procedure act that any per-
8 son has violated any provision of
this act, the commissioner may order
9 each of the following, any
combination thereof or all of the following:
10 (1) For each separate
violation, a penalty in an amount of $5,000;
11 (2) revocation or
suspension of the agent's or broker's
producer's li-
12 cense;
13 (3) the MGA to reimburse
the insurer, the rehabilitator or liquidator
14 of the insurer for any losses incurred by
the insurer caused by a violation
15 of this act committed by the MGA.
16 (b) Nothing contained in
this act is intended to or shall in any manner
17 limit or restrict the rights of
policyholders, claimants and auditors.
18 Sec. 16. K.S.A.
1997 Supp. 40-2c21 is hereby amended to read as
19 follows: 40-2c21. The comparison of an
insurer's total adjusted capital to
20 any of its RBC levels is a regulatory tool,
and shall not be used to rank
21 insurers generally. Therefore, except as
otherwise required under the
22 provisions of this act, the making,
publishing, disseminating, circulating
23 or placing before the public, or causing,
directly or indirectly to be made,
24 published, disseminated, circulated or
placed before the public, in a news-
25 paper, magazine or other publication, or in
the form of a notice, circular,
26 pamphlet, letter or poster, or over any
radio or television station, or in
27 any other way, an advertisement,
announcement or statement containing
28 an assertion, representation or statement
with regard to the RBC levels
29 of any insurer, or of any component derived
in the calculation, by any
30 insurer, agent, broker
producer or other person engaged in any manner
31 in the insurance business is prohibited.
Notwithstanding the foregoing, if
32 any materially false statement with respect
to the comparison regarding
33 an insurer's total adjusted capital to any
of its RBC levels or an inappro-
34 priate comparison of any other amount to
the insurer's RBC levels is
35 published in any written publication and
the insurer is able to demon-
36 strate to the commissioner with substantial
proof the falsity or misrep-
37 resentative nature of such statement, the
insurer may publish a rebuttal
38 if the sole purpose of such publication is
to rebut the materially false or
39 improper statement.
40 Sec. 17. K.S.A.
40-741 is hereby amended to read as follows: 40-741.
41 As used in this act:
42 (a) ``Agent''
means an individual as defined in K.S.A. 40-239, and
43 amendments thereto.
HB 2741
17
1 (b)
(a) ``Benefit contract'' means the agreement for
provision of ben-
2 efits authorized by subsection (a) of
K.S.A. 40-742, as that agreement is
3 described in K.S.A. 40-749.
4 (c)
(b) ``Benefit member'' means an adult member who is
designated
5 by the laws or rules of the society
to be a benefit member under a benefit
6 contract.
7 (d)
(c) ``Certificate'' means the document issued as
written evidence
8 of the benefit contract.
9 (e)
(d) ``Commissioner'' means the commissioner of
insurance of this
10 state.
11 (f)
(e) ``Premiums'' means premiums, rates, dues or other
required
12 contributions by whatever name known, which
are payable under the
13 certificate.
14 (g)
(f) ``Laws'' means the society's articles of
incorporation, consti-
15 tution and bylaws, however designated.
16 (h)
(g) ``Rules'' means all rules, regulations or
resolutions adopted by
17 the supreme governing body or board of
directors which are intended to
18 have general application to the members of
the society.
19 (i)
(h) ``Society'' means fraternal benefit society, unless
otherwise in-
20 dicated.
21 (j)
(i) ``Lodge'' means subordinate member units of the
society,
22 known as camps, courts, councils, branches
or by any other designation.
23 Sec. 18. K.S.A.
40-1612 is hereby amended to read as follows: 40-
24 1612. In addition to the laws hereinbefore
referred to in this article, the
25 requirements and provisions set out in the
following sections of articles
26 2 and 20 of the Kansas Statutes Annotated,
or any amendments thereto,
27 which govern insurance companies shall
apply to reciprocal or interin-
28 surance exchanges: Sections 40-208, 40-214,
40-215, 40-218, 40-220,
29 40-221, 40-222, 40-223, 40-224, 40-225,
40-226, 40-227, 40-228, 40-229,
30 40-231, 40-233, 40-235, 40-236, 40-237,
40-238, 40-239, 40-240, 40-241,
31 40-242, 40-243,
40-244, 40-245, 40-246 except as to contracts
written
32 through traveling salaried
representatives to whom no commissions are
33 paid, 40-246a, 40-247,
40-248, 40-249, 40-250, 40-251, 40-253, 40-254,
34 40-2001, 40-2002, 40-2003, 40-2004, 40-2005
and 40-2006. All of the
35 requirements, provisions and regulations
set out in the foregoing sections
36 of articles 2 and 20 and which apply to
insurance companies are hereby
37 made to apply to reciprocal or
interinsurance exchanges and such recip-
38 rocal or interinsurance exchanges shall
comply with and be governed and
39 regulated by the provisions of such
foregoing sections.
40 Sec. 19. K.S.A.
40-1613 is hereby amended to read as follows: 40-
41 1613. Reciprocal or interinsurance
exchanges may, pursuant to authority
42 given by the commissioner of insurance,
engage in the business of writing
43 fidelity and surety bonds but only upon the
condition that such reciprocal
HB 2741
18
1 or interinsurance exchange have and
maintain a surplus equal to capital
2 and surplus required of domestic
stock insurance companies transacting
3 the same kind of business and any
such reciprocal or interinsurance
4 exchange shall be deemed a stock
insurance company for the purposes
5 of sections 40-214, 40-239 to
40-247, both sections inclusive, 40-252,
6 40-1107 and 40-1108 of the Kansas
Statutes Annotated or any amend-
7 ments thereto. No fidelity or surety
bond shall be issued by any such
8 reciprocal or interinsurance exchange
until form thereof shall have been
9 submitted to and accepted by
commissioner of insurance. Any fidelity or
10 surety bonds executed pursuant to this act
shall be received and accepted
11 as company, corporation or corporate
bonds.
12 Sec. 20. K.S.A.
1997 Supp. 40-1909 is hereby amended to read as
13 follows: 40-1909. (a) Such corporations
shall be subject to the provisions
14 of the Kansas general corporation code,
articles 60 to 74, inclusive, of
15 chapter 17 of the Kansas Statutes
Annotated, applicable to nonprofit cor-
16 porations, to the provisions of K.S.A.
40-214, 40-215, 40-216, 40-218, 40-
17 219, 40-222, 40-223, 40-224, 40-225,
40-226, 40-229, 40-230, 40-231, 40-
18 235, 40-236, 40-237,
40-247, 40-248, 40-249, 40-250, 40-251,
40-252,
19 40-254, 40-2,100, 40-2,101, 40-2,102,
40-2,103, 40-2,104, 40-2,105, 40-
20 2,114, 40-2,116, 40-2,117, 40-2a01 to
40-2a19, inclusive, 40-2216 to 40-
21 2221, inclusive, 40-2229, 40-2230, 40-2250,
40-2251, 40-2253, 40-2254,
22 40-2401 to 40-2421, inclusive, 40-3301 to
40-3313, inclusive, K.S.A. 1997
23 Supp. 40-2,153, 40-2,154, 40-2,160 and
40-2,161, and amendments
24 thereto, except as the context otherwise
requires, and shall not be subject
25 to any other provisions of the insurance
code except as expressly provided
26 in this act.
27 (b) No policy,
agreement, contract or certificate issued by a corpo-
28 ration to which this section applies shall
contain a provision which ex-
29 cludes, limits or otherwise restricts
coverage because medicaid benefits
30 as permitted by title XIX of the social
security act of 1965 are or may be
31 available for the same accident or
illness.
32 (c) Violation of
subsection (b) shall be subject to the penalties pre-
33 scribed by K.S.A. 40-2407 and 40-2411, and
amendments thereto.
34 Sec. 21. K.S.A.
1997 Supp. 40-19a10 is hereby amended to read as
35 follows: 40-19a10. (a) Such corporations
shall be subject to the provisions
36 of K.S.A. 40-214, 40-215, 40-216, 40-218,
40-219, 40-222, 40-223, 40-
37 224, 40-225, 40-226, 40-229, 40-230,
40-231, 40-235, 40-236, 40-237, 40-
38 247, 40-248, 40-249,
40-250, 40-251, 40-252, 40-254, 40-2,102, 40-2a01
39 et seq., 40-2215 to 40-2220,
inclusive, 40-2253, 40-2401 to 40-2421, in-
40 clusive, 40-3301 to 40-3313, inclusive,
K.S.A. 1997 Supp. 40-2,154 and
41 40-2,161, and amendments thereto, except as
the context otherwise re-
42 quires, and shall not be subject to any
other provisions of the insurance
43 code except as expressly provided in this
act.
HB 2741
19
1 (b) No policy,
agreement, contract or certificate issued by a corpo-
2 ration to which this section applies
shall contain a provision which ex-
3 cludes, limits or otherwise restricts
coverage because medicaid benefits
4 as permitted by title XIX of the
social security act of 1965 are or may be
5 available for the same accident or
illness.
6 (c) Violation of
subsection (b) shall be subject to the penalties pre-
7 scribed by K.S.A. 40-2407 and
40-2411, and amendments thereto.
8
Sec. 22. K.S.A. 1997 Supp. 40-19c09 is hereby amended to
read as
9 follows: 40-19c09. (a) Corporations
organized under the nonprofit med-
10 ical and hospital service corporation act
shall be subject to the provisions
11 of the Kansas general corporation code,
articles 60 to 74, inclusive, of
12 chapter 17 of the Kansas Statutes
Annotated, applicable to nonprofit cor-
13 porations, to the provisions of K.S.A.
40-214, 40-215, 40-216, 40-218, 40-
14 219, 40-222, 40-223, 40-224, 40-225,
40-226, 40-229, 40-230, 40-231, 40-
15 235, 40-236, 40-237,
40-247, 40-248, 40-249, 40-250, 40-251,
40-252,
16 40-254, 40-2,100, 40-2,101, 40-2,102,
40-2,103, 40-2,104, 40-2,105, 40-
17 2,116, 40-2,117, 40-2a01 et seq.,
40-2111 to 40-2116, inclusive, 40-2215
18 to 40-2220, inclusive, 40-2221a, 40-2221b,
40-2229, 40-2230, 40-2250,
19 40-2251, 40-2253, 40-2254, 40-2401 to
40-2421, inclusive, and 40-3301
20 to 40-3313, inclusive, K.S.A. 1997 Supp.
40-2,153, 40-2,154, 40-2,160 and
21 40-2,161, and amendments thereto, except as
the context otherwise re-
22 quires, and shall not be subject to any
other provisions of the insurance
23 code except as expressly provided in this
act.
24 (b) No policy,
agreement, contract or certificate issued by a corpo-
25 ration to which this section applies shall
contain a provision which ex-
26 cludes, limits or otherwise restricts
coverage because medicaid benefits
27 as permitted by title XIX of the social
security act of 1965 are or may be
28 available for the same accident or
illness.
29 (c) Violation of
subsection (b) shall be subject to the penalties pre-
30 scribed by K.S.A. 40-2407 and 40-2411, and
amendments thereto.
31 Sec. 23. K.S.A.
40-2209l is hereby amended to read as follows: 40-
32 2209l. (a) There is established a nonprofit
entity to be known as the
33 ``Kansas small employer health reinsurance
program.'' All carriers issuing
34 or maintaining health benefit plans in this
state on or after the effective
35 date of this act shall be members of the
program.
36 (b) Within 60 days
following the effective date of this act, the com-
37 missioner shall give notice to all members
of the time and place for the
38 initial organizational meeting, which shall
take place within 120 days fol-
39 lowing the effective date of this act. The
members shall select the initial
40 board subject to approval by the
commissioner. The board shall consist
41 of 11 members who shall serve staggered
terms as determined by the
42 program's plan of operation. At least 2/3
of the members of the board shall
43 be small employer carriers. In the event
there are not sufficient small
HB 2741
20
1 employer carriers to serve on the
board, the remaining seats shall be filled
2 by any insurer, health maintenance
organization, group-funded pool or
3 nonprofit medical and hospital
service plan offering health benefit plans
4 in this state. The board shall
include:
5 (1) The carrier
writing the largest market share of group health in-
6 surance written premiums during the
last 12 full calendar months im-
7 mediately preceding selection;
8 (2) a carrier
whose principal health insurance business is in the small
9 employer market;
10 (3) a carrier whose
principal health insurance business is in the large
11 employer market;
12 (4) nonprofit medical
and hospital service corporation;
13 (5) a health maintenance
organization;
14 (6) a licensed resident
agent producer actively involved in the
solic-
15 itation and sale of health benefit plans
for small employers; and
16 (7) a representative of
small employers.
17 Following the first full year
of operation, a majority of the board shall,
18 to the extent possible, be reinsuring
carriers. No person or entity shall fill
19 more than one of the described positions on
the board.
20 The commissioner shall be an
ex-officio member of the board. In ap-
21 proving the selection of the board, the
commissioner shall assure that all
22 members of the program are fairly
represented. The membership of all
23 boards subsequent to the initial board
shall, to the extent possible, reflect
24 the same distribution described above.
25 (c) If the initial board
is not elected at the organizational meeting,
26 the commissioner shall appoint the initial
board within 30 days of the
27 organizational meeting.
28 (d) Within 180 days
after the appointment of the initial board, the
29 board shall submit to the commissioner a
plan of operation, and thereafter
30 any amendments thereto necessary or
suitable, to assure the fair, reason-
31 able and equitable administration of the
program. The commissioner
32 shall, after notice and hearing, approve
the plan of operation provided
33 the commissioner determines it to be
suitable to assure the fair, reason-
34 able and equitable administration of the
program and provides for the
35 sharing of program gains or losses on an
equitable and proportionate basis
36 in accordance with the provisions of
subsection (k). The plan of operation
37 shall become effective upon approval in
writing by the commissioner con-
38 sistent with the date on which the coverage
under this section shall be
39 made available. Any plan of operation, or
amendments thereto, submitted
40 to the commissioner by the board pursuant
to this subsection shall be
41 deemed approved by the commissioner if not
expressly disapproved in
42 writing by the commissioner within 90 days
of its receipt by the commis-
43 sioner.
HB 2741
21
1 (e) If the board
fails to submit a suitable plan of operation within 180
2 days after its appointment, the
commissioner shall, after notice and hear-
3 ing, adopt and promulgate a temporary
plan of operation. The commis-
4 sioner shall amend or rescind any
plan adopted by the commissioner
5 under this subsection at the time a
plan of operation is submitted by the
6 board and approved by the
commissioner.
7 (f) The plan of
operation shall establish rules, conditions, and pro-
8 cedures for:
9 (1) The handling
and accounting of assets and moneys of the program
10 and for an annual fiscal reporting to the
commissioner;
11 (2) filling vacancies on
the board, subject to the approval of the com-
12 missioner;
13 (3) selecting an
administering insurer which shall be a carrier as de-
14 fined in subsection (f) of K.S.A. 40-2209d
and setting forth the powers
15 and duties of the administering
insurer;
16 (4) reinsuring risks in
accordance with the provisions of this section;
17 (5) collecting
assessments subject to subsection (k) from all members
18 to provide for claims reinsured by the
program and for administrative
19 expenses incurred or estimated to be
incurred during the period for which
20 the assessment is made;
21 (6) providing protection
for carriers from the financial risk associated
22 with small employers that present poor
credit risks;
23 (7) establishing
standards for the coverage of small employers that
24 have high turnover employees;
25 (8) establishing an
appeals process for carriers to seek relief when a
26 carrier has experienced an unfair share of
administrative and credit risks;
27 (9) determining the
adjusted average market premium prices for
28 SEHC plans sold in this state;
29 (10) establishing
participation standards at issue and renewal for re-
30 insured cases;
31 (11) establishing
standards for those conditions under which a carrier
32 would not be required to write business
received from a particular agent
33 or broker
producer;
34 (12) establishing
reporting requirements for carriers, agents,
brokers
35 producers and third-party
administrators that will reasonably measure the
36 distribution of individuals and groups
covered by a health benefit plan
37 developed by the board and risks reinsured
by the program; and
38 (13) any additional
matters at the discretion of the board.
39 (g) The program shall
have the general powers and authority granted
40 under the laws of the state to insurance
companies licensed to transact
41 health insurance except the power to issue
insurance. In addition the
42 board shall have the specific authority
to:
43 (1) Enter into contracts
as are necessary or proper to carry out the
HB 2741
22
1 provisions and purposes of this
section, including the authority, with the
2 approval of the commissioner, to
enter into contracts with similar pro-
3 grams of other states for the joint
performance of common functions, or
4 with persons or other organizations
for the performance of administrative
5 functions;
6 (2) sue or be
sued, including taking any legal actions necessary or
7 proper for recovery of any
assessments for, on behalf of, or against any
8 program or board member;
9 (3) take such
legal action as necessary to avoid the payment of im-
10 proper claims against the program;
11 (4) design the basic and
standard small employer health care plans
12 for which reinsurance will be provided and
issue reinsurance policies in
13 accordance with the requirements of this
act;
14 (5) establish rules,
conditions and procedures pertaining to the re-
15 insurance of members' risks by the program
including such variations as
16 may be necessary to be compatible with the
operation of health mainte-
17 nance organizations;
18 (6) establish adequate
and appropriate rates, rate schedules, rate ad-
19 justments, rate classifications and any
other actuarial functions appropri-
20 ate to the operation of the program;
21 (7) assess members in
accordance with the provisions of subsection
22 (k), and to make such advance interim
assessments as may be reasonable
23 and necessary for organizational and
interim operating expenses. Any
24 such interim assessments shall be credited
as offsets against any regular
25 assessments due following the close of the
fiscal year;
26 (8) appoint from among
members appropriate legal, actuarial and
27 other committees as are necessary to
provide technical assistance in the
28 operation of the program, policy and other
contract design, and any other
29 function within the authority of the
program; and
30 (9) borrow money to
affect the purposes of the program. Any notices
31 or other evidence of indebtedness of the
program not in default shall be
32 legal investments for carriers and may be
carried as admitted assets.
33 (h) Any member may
reinsure coverage of any small employer group
34 with the program provided:
35 (1) With respect to an
SEHC plan, the program shall reinsure the
36 level of coverage provided;
37 (2) with respect to
other plans delivered, or issued to small employers
38 on and after the date the program becomes
operational, the program shall
39 reinsure the level of coverage provided up
to, but not exceeding, the level
40 of coverage provided in a SEHC plan;
41 (3) with respect to the
coverage provided to small employers issued
42 after the effective date of this act, the
carrier shall be required to use
43 high-cost case management, hospital
precertification techniques, and
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23
1 other cost containment techniques as
established by the program;
2 (4) with respect
to eligible employees and their dependents, a carrier
3 may reinsure the entire employer
group within 60 days of the commence-
4 ment of the group's coverage under
the plan;
5 (5) if, following
the first 12 calendar months of operation, the board
6 determines that permitting carriers
to reinsure individual employees or
7 dependents is in the best interests
of small employers, carriers or covered
8 participants as a whole, the board
may, with the approval of the commis-
9 sioner, authorize the offering or
issuance of reinsurance on individual
10 employees and dependents. Such
authorization shall incorporate provi-
11 sions necessary to implement the
authorization including but not limited
12 to the commencement of the reinsurance
coverage with respect to eligible
13 employees and dependents who:
14 (A) Are covered by a
SEHC plan that is not reinsured by the program
15 at the time the authorization becomes
effective;
16 (B) are hired subsequent
to the commencement of an employer's
17 SEHC coverage;
18 (C) are employed by a
small employer as of the date the employer's
19 SEHC plan coverage commences; or
20 (D) are late enrollees.
The authority to reinsure individual employees
21 or dependents shall become effective on all
policies issued, renewed or
22 continued on and after 45 calendar days
following the commissioner's
23 approval and shall remain in effect unless
removed by the board with the
24 commissioner's approval;
25 (6) if an employer group
is covered under a plan other than an SEHC
26 plan and the carrier chooses to reinsure
the group subsequent to the
27 effective date of this act the carrier
cannot force the employer to change
28 to a small employer health care benefit
plan. The carrier must allow the
29 employer to maintain the same benefit plan
and reinsure only the portion
30 of the plan consistent with an SEHC
plan.
31 (i) Premium rates
charged for coverage reinsured by the program
32 shall be established by the board created
pursuant to subsection (b).
33 (j) The reinsurance
program shall not reimburse a participating car-
34 rier with respect to the claims of a
reinsured employee or dependent until
35 the carrier has paid a deductible of or
delivered services equal to $10,000
36 in a calendar year for benefits covered by
the program. In addition, the
37 participating carrier shall retain 10% of
the next $50,000 of benefit pay-
38 ments or services per reinsured employee or
dependent during a calendar
39 year and the program shall reinsure the
remainder. A participating car-
40 rier's liability under this paragraph shall
not exceed, in any one calendar
41 year, a maximum amount equal to 20% of the
total health benefit plan
42 premiums earned in this state from health
benefit plans covering small
43 employers during the immediately preceding
calendar year. Subject to
HB 2741
24
1 the approval of the commissioner, the
board may adjust the deductible,
2 retention percentage, or maximum
limit to achieve better operating re-
3 sults under the program.
4 (k) (1) Following
the close of each fiscal year, the administering in-
5 surer shall determine the net
premiums, the program expenses for ad-
6 ministration and the incurred losses,
if any, for the year, taking into ac-
7 count investment income and other
appropriate gains and losses. Health
8 benefit plan premiums and benefits
paid by a member that are less than
9 an amount determined by the board to
justify the cost of collection shall
10 not be considered for purposes of
determining assessments. For purposes
11 of this subsection, ``net premiums'' means
health benefit plan premiums,
12 less administrative expense allowances.
13 (2) Any net loss for the
year shall be recouped first by assessments
14 of members to the extent provided
below:
15 (A) Assessments shall
first be apportioned by the board among all
16 carriers utilizing the program in
proportion to their respective shares of
17 the total health benefit plan premiums
earned in this state from health
18 benefit plans covering small employers
during the calendar year coincid-
19 ing with or ending during the fiscal year
of the program, or on any other
20 equitable basis reflecting coverage of
small employers as may be provided
21 in the plan of operation. An assessment
shall be made pursuant to this
22 subsection against a health maintenance
organization including those ap-
23 proved by the secretary of health and human
services as a federally qual-
24 ified health maintenance organization
pursuant to 42 U.S.C. 300 et seq.
25 in accordance with an assessment formula
adopted by the board and ap-
26 proved by the commissioner for health
maintenance organizations. Such
27 assessment formula shall recognize the
restrictions imposed on health
28 maintenance organizations by federal law
and shall be adopted by the
29 board and approved by the commissioner
prior to the first anniversary of
30 the program's operation.
31 (B) To the extent any
such net loss is not recouped from the assess-
32 ments levied under subsection (k)(2)(A) an
assessment shall be appor-
33 tioned by the board among all insurers,
health maintenance organizations,
34 municipal group funded pools and nonprofit
medical and hospital service
35 corporations in proportion to their
respective shares of total health in-
36 surance premiums received in this state for
hospital or medical expense
37 policies, certificates, subscriber
agreements or other contracts exclusive
38 of those not included in the definition of
health benefit plan pursuant to
39 subsection (n) of K.S.A. 40-2209d and the
premium earned by any small
40 employer carrier in this state from health
benefit plans covering small
41 employers during the calendar year
coinciding with or ending during the
42 fiscal year of this program.
43 (C) Assessments under
subsection (k)(2)(A) shall not exceed an
HB 2741
25
1 amount equal to 5% of such premium
for health benefit plans covering
2 small employers. Assessments under
subsection (k)(2)(B) shall not exceed
3 an amount equal to 1% of the total
premium upon which the assessment
4 is based.
5 (3) If assessments
exceed actual losses and administrative expenses
6 of the program, the excess shall be
held at interest and used by the board
7 to offset future losses or to reduce
program premiums. As used in this
8 subsection, ``future losses''
includes reserves for incurred but not reported
9 claims.
10 (4) Each member's
proportion of participation in the program shall
11 be determined annually by the board based
on annual statements and
12 other reports deemed necessary by the board
and filed by the member
13 with the board.
14 (5) Provision shall be
made in the plan of operation for the imposition
15 of an interest penalty for late payment of
assessments.
16 (6) A member may seek
from the commissioner a deferment, in
17 whole or in part, from any assessment
issued by the board. The commis-
18 sioner may defer, in whole or in part, the
assessment of a member if, in
19 the opinion of the commissioner, payment of
the assessment would en-
20 danger the member's ability to fulfill its
contractual obligations.
21 (7) In the event an
assessment against a member is deferred in whole
22 or in part, the amount by which such
assessment is deferred may be
23 assessed against the other members in a
manner consistent with the basis
24 for assessments set forth in this
subsection. The member receiving such
25 deferment shall remain liable to the
program for the amount deferred.
26 The commissioner may attach appropriate
conditions to any such defer-
27 ment.
28 (l) Neither the
participation as members of the program or as board
29 members, the establishment of rates, forms,
or procedures for coverage
30 issued by the program, nor any other joint
or collective action required
31 by this act, shall be the basis of any
legal action, criminal or civil liability
32 or penalty against the program, the board,
or any of its members either
33 jointly or separately.
34 (m) The Kansas small
employer reinsurance program shall be exempt
35 from any and all premium taxes.
36 Sec. 24. K.S.A.
40-2209m is hereby amended to read as follows:
37 40-2209m. (a) Each small employer carrier
shall actively market health
38 benefit plan coverage, including the basic
and standard health benefit
39 plans, to eligible small employers in the
state. If a small employer carrier
40 denies coverage not subject to this act to
a small employer on the basis
41 of the health status or claims experience
of the small employer or its
42 employees or dependents, the small employer
carrier shall offer the small
43 employer the opportunity to purchase a
basic health benefit plan and a
HB 2741
26
1 standard health benefit plan.
2
(b) (1) Except as provided in paragraph (2), no small
employer car-
3 rier, agent or
broker producer shall, directly or indirectly,
engage in the
4 following activities:
5 (A) Encouraging or
directing small employers to refrain from filing
6 an application for coverage with the
small employer carrier because of
7 the health status, claims experience,
industry, occupation or geographic
8 location of the small employer;
9 (B) encouraging or
directing small employers to seek coverage from
10 another carrier because of the health
status, claims experience, industry,
11 occupation or geographic location of the
small employer.
12 (2) The provisions of
paragraph (1) shall not apply with respect to
13 information provided by a small employer
carrier or producer to a small
14 employer regarding the established
geographic service area or a restricted
15 network provision of a small employer
carrier.
16 (c) (1) Except as
provided in paragraph (2), no small employer car-
17 rier shall, directly or indirectly, enter
into any contract, agreement or
18 arrangement with an agent or
broker a producer that provides for or
19 results in the compensation paid to such
person for the sale of a health
20 benefit plan to be varied because of the
health status, claims experience,
21 industry, occupation or geographic location
of the small employer.
22 (2) Paragraph (1) shall
not apply with respect to a compensation ar-
23 rangement that provides compensation to
an agent or broker a producer
24 on the basis of percentage of premium,
provided that the percentage shall
25 not vary because of the health status,
claims experience, industry, occu-
26 pation or geographic area of the small
employer.
27 (d) A small employer
carrier shall provide reasonable compensation
28 to licensed agents and
brokers producers, if any, as provided under
the
29 plan of operation of the program for the
sale of a basic or standard health
30 benefit plan.
31 (e) No small employer
carrier shall terminate, fail to renew or limit
32 its contract or agreement of representation
with an agent or broker for
33 any reason related to the health status,
claims experience, occupation, or
34 geographic location of the small employers
placed by the agent or broker
35 producer with the small employer
carrier.
36 (f) No small employer
carrier, agent or broker producer shall
induce
37 or otherwise encourage a small employer to
separate or otherwise exclude
38 an employee from health coverage or
benefits provided in connection
39 with the employee's employment.
40 (g) Denial by a small
employer carrier of an application for coverage
41 from a small employer shall be in writing
and shall state the reason or
42 reasons for the denial.
43 (h) The commissioner may
adopt rules and regulations setting forth
HB 2741
27
1 additional standards to provide for
the fair marketing and broad availa-
2 bility of health benefit plans to
small employers in this state.
3 (i) If a small
employer carrier enters into a contract, agreement or
4 other arrangement with a third-party
administrator to provide adminis-
5 trative, marketing or other services
related to the offering of health ben-
6 efit plans to small employers in this
state, the third-party administrator
7 shall be subject to this section as
if it were a small employer carrier.
8 (j) The board
shall make available a broadly publicized toll free tel-
9 ephone number for access by small
employers to information concerning
10 this act and the health benefit plans
developed pursuant to K.S.A. 40-
11 2209k.
12 (k) Except as provided
in paragraph (l), for the purposes of this act,
13 carriers that are affiliated companies or
that are eligible to file a consol-
14 idated tax return shall be treated as one
carrier and any restrictions or
15 limitations imposed by this act shall apply
as if all health benefit plans
16 issued to small employers in this state by
such affiliated carriers were
17 issued by one carrier.
18 (l) An affiliated
carrier that is a health maintenance organization hav-
19 ing a certificate of authority under K.S.A.
40-3201 et seq. and amend-
20 ments thereto, may be considered to be a
separate carrier for the purpose
21 of this act.
22 Sec. 25. K.S.A.
1997 Supp. 40-2404 is hereby amended to read as
23 follows: 40-2404. The following are hereby
defined as unfair methods of
24 competition and unfair or deceptive acts or
practices in the business of
25 insurance:
26 (1)
(a) Misrepresentations and false advertising of
insurance policies.
27 Making, issuing, circulating or causing to
be made, issued or circulated,
28 any estimate, illustration, circular,
statement, sales presentation, omission
29 or comparison which:
30 (a)
(1) Misrepresents the benefits, advantages, conditions
or terms of
31 any insurance policy;
32 (b)
(2) misrepresents the dividends or share of the surplus
to be re-
33 ceived on any insurance policy;
34 (c)
(3) makes any false or misleading statements as to the
dividends
35 or share of surplus previously paid on any
insurance policy;
36 (d)
(4) is misleading or is a misrepresentation as to the
financial con-
37 dition of any person, or as to the legal
reserve system upon which any life
38 insurer operates;
39 (e)
(5) uses any name or title of any insurance policy or
class of in-
40 surance policies misrepresenting the true
nature thereof;
41 (f)
(6) is a misrepresentation for the purpose of inducing
or tending
42 to induce the lapse, forfeiture, exchange,
conversion or surrender of any
43 insurance policy;
HB 2741
28
1 (g)
(7) is a misrepresentation for the purpose of effecting
a pledge or
2 assignment of or effecting a loan
against any insurance policy; or
3 (h)
(8) misrepresents any insurance policy as being shares
of stock.
4 (2)
(b) False information and advertising generally.
Making, publish-
5 ing, disseminating, circulating or
placing before the public, or causing,
6 directly or indirectly, to be made,
published, disseminated, circulated or
7 placed before the public, in a
newspaper, magazine or other publication,
8 or in the form of a notice, circular,
pamphlet, letter or poster, or over any
9 radio or television station, or in
any other way, an advertisement, an-
10 nouncement or statement containing any
assertion, misrepresentation or
11 statement with respect to the business of
insurance or with respect to any
12 person in the conduct of such person's
insurance business, which is un-
13 true, deceptive or misleading.
14 (3)
(c) Defamation. Making, publishing,
disseminating or circulating,
15 directly or indirectly, or aiding, abetting
or encouraging the making, pub-
16 lishing, disseminating or circulating of
any oral or written statement or
17 any pamphlet, circular, article or
literature which is false, or maliciously
18 critical of or derogatory to the financial
condition of any person, and which
19 is calculated to injure such person.
20 (4)
(d) Boycott, coercion and intimidation. Entering
into any agree-
21 ment to commit, or by any concerted action
committing, any act of boy-
22 cott, coercion or intimidation resulting in
or tending to result in unrea-
23 sonable restraint of the business of
insurance, or by any act of boycott,
24 coercion or intimidation monopolizing or
attempting to monopolize any
25 part of the business of insurance.
26 (5)
(e) False statements and entries.
(a) (1) Knowingly filing with any
27 supervisory or other public official, or
knowingly making, publishing, dis-
28 seminating, circulating or delivering to
any person, or placing before the
29 public, or knowingly causing directly or
indirectly, to be made, published,
30 disseminated, circulated, delivered to any
person, or placed before the
31 public, any false material statement of
fact as to the financial condition
32 of a person.
33 (b)
(2) Knowingly making any false entry of a material fact
in any
34 book, report or statement of any person or
knowingly omitting to make
35 a true entry of any material fact
pertaining to the business of such person
36 in any book, report or statement of such
person.
37 (6)
(f) Stock operations and advisory board
contracts. Issuing or de-
38 livering or permitting agents, officers or
employees to issue or deliver,
39 agency company stock or other capital
stock, or benefit certificates or
40 shares in any common-law corporation, or
securities or any special or
41 advisory board contracts or other contracts
of any kind promising returns
42 and profits as an inducement to insurance.
Nothing herein shall prohibit
43 the acts permitted by K.S.A. 40-232, and
amendments thereto.
HB 2741
29
1 (7)
(g) Unfair discrimination. (a)
(1) Making or permitting any unfair
2 discrimination between individuals of
the same class and equal expecta-
3 tion of life in the rates charged for
any contract of life insurance or life
4 annuity or in the dividends or other
benefits payable thereon, or in any
5 other of the terms and conditions of
such contract.
6 (b)
(2) Making or permitting any unfair discrimination
between in-
7 dividuals of the same class and of
essentially the same hazard in the
8 amount of premium, policy fees or
rates charged for any policy or contract
9 of accident or health insurance or in
the benefits payable thereunder, or
10 in any of the terms or conditions of such
contract, or in any other manner
11 whatever.
12 (c)
(3) Refusing to insure, or refusing to continue to
insure, or limiting
13 the amount, extent or kind of coverage
available to an individual, or charg-
14 ing an individual a different rate for the
same coverage solely because of
15 blindness or partial blindness. With
respect to all other conditions, in-
16 cluding the underlying cause of the
blindness or partial blindness, persons
17 who are blind or partially blind shall be
subject to the same standards of
18 sound actuarial principles or actual or
reasonably anticipated experience
19 as are sighted persons. Refusal to insure
includes denial by an insurer of
20 disability insurance coverage on the
grounds that the policy defines ``dis-
21 ability'' as being presumed in the event
that the insured loses such per-
22 son's eyesight. However, an insurer may
exclude from coverage disabili-
23 ties consisting solely of blindness or
partial blindness when such condition
24 existed at the time the policy was
issued.
25 (d)
(4) Refusing to insure, or refusing to continue to
insure, or limit-
26 ing the amount, extent or kind of coverage
available for accident and
27 health and life insurance to an applicant
who is the proposed insured or
28 charge a different rate for the same
coverage or excluding or limiting
29 coverage for losses or denying a claim
incurred by an insured as a result
30 of abuse based on the fact that the
applicant who is the proposed insured
31 is, has been, or may be the subject of
domestic abuse, except as provided
32 in subpart (v)
subparagraph (E). ``Abuse'' as used in this subsection
(7)(d)
33 means one or more acts defined in
subsection (a) or (b) of K.S.A. 60-3102
34 and amendments thereto between family
members, current or former
35 household members, or current or former
intimate partners.
36 (i)
(A) An insurer may not ask an applicant for life or
accident and
37 health insurance who is the proposed
insured if the individual is, has been
38 or may be the subject of domestic abuse or
seeks, has sought or had reason
39 to seek medical or psychological treatment
or counseling specifically for
40 abuse, protection from abuse or shelter
from abuse.
41 (ii)
(B) Nothing in this section shall be construed to
prohibit a person
42 from declining to issue an insurance policy
insuring the life of an individ-
43 ual who is, has been or has the potential
to be the subject of abuse if the
HB 2741
30
1 perpetrator of the abuse is the
applicant or would be the owner of the
2 insurance policy.
3 (iii)
(C) No insurer that issues a life or accident and
health policy to
4 an individual who is, has been or may
be the subject of domestic abuse
5 shall be subject to civil or criminal
liability for the death or any injuries
6 suffered by that individual as a
result of domestic abuse.
7 (iv)
(D) No person shall refuse to insure, refuse to
continue to insure,
8 limit the amount, extent or kind of
coverage available to an individual or
9 charge a different rate for the same
coverage solely because of physical
10 or mental condition, except where the
refusal, limitation or rate differ-
11 ential is based on sound actuarial
principles.
12 (v)
(E) Nothing in this section shall be construed to
prohibit a person
13 from underwriting or rating a risk on the
basis of a preexisting physical
14 or mental condition, even if such condition
has been caused by abuse,
15 provided that:
16 (A)
(i) The person routinely underwrites or rates such
condition in
17 the same manner with respect to an insured
or an applicant who is not a
18 victim of abuse;
19 (B)
(ii) the fact that an individual is, has been or may be
the subject
20 of abuse may not be considered a physical
or mental condition; and
21 (C)
(iii) such underwriting or rating is not used to evade
the intent
22 of this section or any other provision of
the Kansas insurance code.
23 (vi)
(F) Any person who underwrites or rates a risk on the
basis of
24 preexisting physical or mental condition as
set forth in subsection (7)(d)(v)
25 (g)(4)(E), shall treat such
underwriting or rating as an adverse under-
26 writing decision pursuant to K.S.A.
40-2,112, and amendments thereto.
27 (vii)
(G) The provisions of subsection (d)
(4) shall apply to all policies
28 of life and accident and health insurance
issued in this state after the
29 effective date of this act and all existing
contracts which are renewed on
30 or after the effective date of this
act.
31 (8)
(h) Rebates. (a) (1)
Except as otherwise expressly provided by law,
32 knowingly permitting, offering to make or
making any contract of life
33 insurance, life annuity or accident and
health insurance, or agreement as
34 to such contract other than as plainly
expressed in the insurance contract
35 issued thereon; paying, allowing, giving or
offering to pay, allow or give,
36 directly or indirectly, as inducement to
such insurance, or annuity, any
37 rebate of premiums payable on the contract,
any special favor or advan-
38 tage in the dividends or other benefits
thereon, or any valuable consid-
39 eration or inducement whatever not
specified in the contract; or giving,
40 selling, purchasing or offering to give,
sell or purchase as inducement to
41 such insurance contract or annuity or in
connection therewith, any stocks,
42 bonds or other securities of any insurance
company or other corporation,
43 association or partnership, or any
dividends or profits accrued thereon,
HB 2741
31
1 or anything of value whatsoever not
specified in the contract.
2 ``Valuable
consideration or inducement'' shall not include marketing
or
3 promotional items of nominal
value. Items with a market value of $25 or
4 less shall be presumed to be
nominal in value.
5 (b)
(2) Nothing in subsection (7)
(g) or (8)
(h)(a)(1) shall be construed
6 as including within the definition of
discrimination or rebates any of the
7 following practices:
8 (i)
(A) In the case of any contract of life insurance or
life annuity,
9 paying bonuses to policyholders or
otherwise abating their premiums in
10 whole or in part out of surplus accumulated
from nonparticipating insur-
11 ance. Any such bonuses or abatement of
premiums shall be fair and eq-
12 uitable to policyholders and for the best
interests of the company and its
13 policyholders;
14 (ii)
(B) in the case of life insurance policies issued on
the industrial
15 debit plan, making allowance to
policyholders who have continuously for
16 a specified period made premium payments
directly to an office of the
17 insurer in an amount which fairly
represents the saving in collection ex-
18 penses; or
19 (iii)
(C) readjustment of the rate of premium for a group
insurance
20 policy based on the loss or expense
experience thereunder, at the end of
21 the first or any subsequent policy year of
insurance thereunder, which
22 may be made retroactive only for such
policy year.
23 (9)
(i) Unfair claim settlement practices. It is an
unfair claim settle-
24 ment practice if any of the following or
any rules and regulations pertain-
25 ing thereto are: (A)
Committed committed flagrantly and in conscious
26 disregard of such
provisions, or (B) committed with
such frequency as to
27 indicate a general business practice.
28 (a)
(1) Misrepresenting pertinent facts or insurance policy
provisions
29 relating to coverages at issue;
30 (b)
(2) failing to acknowledge and act reasonably promptly
upon com-
31 munications with respect to claims arising
under insurance policies;
32 (c)
(3) failing to adopt and implement reasonable standards
for the
33 prompt investigation of claims arising
under insurance policies;
34 (d)
(4) refusing to pay claims without conducting a
reasonable inves-
35 tigation based upon all available
information;
36 (e)
(5) failing to affirm or deny coverage of claims within
a reasonable
37 time after proof of loss statements have
been completed;
38 (f)
(6) not attempting in good faith to effectuate prompt,
fair and
39 equitable settlements of claims in which
liability has become reasonably
40 clear;
41 (g)
(7) compelling insureds to institute litigation to
recover amounts
42 due under an insurance policy by offering
substantially less than the
43 amounts ultimately recovered in actions
brought by such insureds;
HB 2741
32
1 (h)
(8) attempting to settle a claim for less than the
amount to which
2 a reasonable person would have
believed that such person was entitled
3 by reference to written or printed
advertising material accompanying or
4 made part of an application;
5 (i)
(9) attempting to settle claims on the basis of an
application which
6 was altered without notice to, or
knowledge or consent of the insured;
7 (j)
(10) making claims payments to insureds or
beneficiaries not ac-
8 companied by a statement setting
forth the coverage under which pay-
9 ments are being made;
10 (k)
(11) making known to insureds or claimants a policy of
appealing
11 from arbitration awards in favor of
insureds or claimants for the purpose
12 of compelling them to accept settlements or
compromises less than the
13 amount awarded in arbitration;
14 (l)
(12) delaying the investigation or payment of claims by
requiring
15 an insured, claimant or the physician of
either to submit a preliminary
16 claim report and then requiring the
subsequent submission of formal
17 proof of loss forms, both of which
submissions contain substantially the
18 same information;
19 (m)
(13) failing to promptly settle claims, where liability
has become
20 reasonably clear, under one portion of the
insurance policy coverage in
21 order to influence settlements under other
portions of the insurance pol-
22 icy coverage; or
23 (n)
(14) failing to promptly provide a reasonable
explanation of the
24 basis in the insurance policy in relation
to the facts or applicable law for
25 denial of a claim or for the offer of a
compromise settlement.
26 (10)
(j) Failure to maintain complaint handling
procedures. Failure
27 of any person, who is an insurer on an
insurance policy, to maintain a
28 complete record of all the complaints which
it has received since the date
29 of its last examination under K.S.A.
40-222, and amendments thereto; but
30 no such records shall be required for
complaints received prior to the
31 effective date of this act. The record
shall indicate the total number of
32 complaints, their classification by line of
insurance, the nature of each
33 complaint, the disposition of the
complaints, the date each complaint was
34 originally received by the insurer and the
date of final disposition of each
35 complaint. For purposes of this subsection,
``complaint'' means any writ-
36 ten communication primarily expressing a
grievance related to the acts
37 and practices set out in this section.
38 (11)
(k) Misrepresentation in insurance applications.
Making false or
39 fraudulent statements or representations on
or relative to an application
40 for an insurance policy, for the purpose of
obtaining a fee, commission,
41 money or other benefit from any insurer,
agent, broker or individual.
42 (12)
(l) Statutory violations. Any violation of any
of the provisions of
43 K.S.A. 40-276a, 40-1515, and amendments
thereto, or K.S.A. 1997 Supp.
HB 2741
33
1 40-2,155 and amendments thereto.
2 (13)
(m) Disclosure of information relating to adverse
underwriting
3 decisions and refund of
premiums. Failing to comply with the provisions
4 of K.S.A. 40-2,112, and amendments
thereto, within the time prescribed
5 in such section.
6 (14)
(n) Rebates and other inducements in title
insurance. (a) (1) No
7 title insurance company or title
insurance agent, or any officer, employee,
8 attorney, agent or solicitor thereof,
may pay, allow or give, or offer to pay,
9 allow or give, directly or
indirectly, as an inducement to obtaining any
10 title insurance business, any rebate,
reduction or abatement of any rate
11 or charge made incident to the issuance of
such insurance, any special
12 favor or advantage not generally available
to others of the same classifi-
13 cation, or any money, thing of value or
other consideration or material
14 inducement. The words ``charge made
incident to the issuance of such
15 insurance'' includes, without limitations,
escrow, settlement and closing
16 charges.
17 (b)
(2) No insured named in a title insurance policy or
contract nor
18 any other person directly or indirectly
connected with the transaction
19 involving the issuance of the policy or
contract, including, but not limited
20 to, mortgage lender, real estate broker,
builder, attorney or any officer,
21 employee, agent representative or solicitor
thereof, or any other person
22 may knowingly receive or accept, directly
or indirectly, any rebate, re-
23 duction or abatement of any charge, or any
special favor or advantage or
24 any monetary consideration or inducement
referred to in (14)(a) (n)(1).
25 (c)
(3) Nothing in this section shall be construed as
prohibiting:
26 (i)
(A) The payment of reasonable fees for services
actually rendered
27 to a title insurance agent in connection
with a title insurance transaction;
28 (ii)
(B) the payment of an earned commission to a duly
appointed
29 title insurance agent for services actually
performed in the issuance of the
30 policy of title insurance; or
31 (iii)
(C) the payment of reasonable entertainment and
advertising ex-
32 penses.
33 (d)
(4) Nothing in this section prohibits the division of
rates and
34 charges between or among a title insurance
company and its agent, or
35 one or more title insurance companies and
one or more title insurance
36 agents, if such division of rates and
charges does not constitute an unlaw-
37 ful rebate under the provisions of this
section and is not in payment of a
38 forwarding fee or a finder's fee.
39 (e)
(5) No title insurer or title agent may accept any
order for, issue
40 a title insurance policy to, or provide
services to, an applicant if it knows
41 or has reason to believe that the applicant
was referred to it by any pro-
42 ducer of title business or by any associate
of such producer, where the
43 producer, the associate, or both, have a
financial interest in the title in-
HB 2741
34
1 surer or title agent to which
business is referred unless the producer has
2 disclosed to the buyer, seller and
lender the financial interest of the pro-
3 ducer of title business or associate
referring the title insurance business.
4 (f)
(6) No title insurer or title agent may accept an order
for title
5 insurance business, issue a title
insurance policy, or receive or retain any
6 premium, or charge in connection with
any transaction if: (i) (A) The title
7 insurer or title agent knows or has
reason to believe that the transaction
8 will constitute controlled business
for that title insurer or title agent, and
9 (ii) (B)
20% twenty percent or more of the gross
operating revenue of
10 that title insurer or title agent during
the six full calendar months im-
11 mediately preceding the month in which the
transaction takes place is
12 derived from controlled business. The
prohibitions contained in this sub-
13 paragraph shall not apply to transactions
involving real estate located in
14 a county that has a population, as shown by
the last preceding decennial
15 census, of 10,000 or less.
16 (g)
(7) The commissioner shall adopt any regulations
necessary to
17 carry out the provisions of this act.
18 Sec. 26. K.S.A.
40-2406 is hereby amended to read as follows: 40-
19 2406. (a) Whenever the commissioner has
reason to believe that any such
20 person has been engaged or is engaging in
this state in any unfair method
21 of competition or any unfair or deceptive
act or practice, whether or not
22 defined in K.S.A. 40-2404 and amendments
thereto, and that a proceed-
23 ing by the commissioner in respect thereto
would be in the interest of
24 the public, the commissioner shall issue
and serve upon such person a
25 statement of the charges in that respect
and conduct a hearing thereon
26 in accordance with the provisions of the
Kansas administrative procedure
27 act.
28 (b) If, after such
hearing, the commissioner determines that the per-
29 son charged has engaged in any unfair
method of competition or any
30 unfair or deceptive act or practice, any
costs incurred as a result of con-
31 ducting any administrative hearing
authorized under the provisions of this
32 section shall be assessed against such
person or the company or compa-
33 nies represented by such person as
an agent, broker a producer or ad-
34 juster who is a participating party to the
matters giving rise to the hearing.
35 As used in this subsection, ``costs'' shall
include witness fees, mileage
36 allowances, any costs associated with
reproduction of documents which
37 become a part of the hearing record and the
expense of making a record
38 of the hearing.
39 Sec. 27. K.S.A.
40-2508 is hereby amended to read as follows: 40-
40 2508. (a) Each and every automobile club
operating in this state pursuant
41 to a certificate of authority issued
hereunder shall file with the commis-
42 sioner a notice of appointment of a club
agent by an automobile club to
43 sell memberships in the automobile club to
the public.
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35
1 (b) Any person
desiring to engage in automobile club services, as an
2 agent, shall first apply to the
insurance commissioner in the manner
3 herein prescribed, for an automobile
club agent registration, to authorize
4 such person to engage in and transact
business as an automobile services
5 club agent. Such applicant shall be
vouched for by an official or repre-
6 sentative of an authorized automobile
club for whom such person pro-
7 poses to negotiate contracts of
automobile club memberships. The notice
8 of appointment as club agent shall be
upon such form as the commissioner
9 may prescribe and shall contain the
name, address, age, sex and social
10 security number of such club agent, and
also contain proof satisfactory to
11 the commissioner that such applicant is of
good reputation and that such
12 applicant has received training from the
club or is otherwise qualified in
13 the field of automobile club service
contracts and the laws of this state
14 pertaining thereto. Upon termination of any
club agent's employment by
15 an automobile club, such automobile club
shall within 30 days notify the
16 commissioner of such termination.
17 (c) The application fee
for registration of club agents shall be $15 and
18 the registration for such club agents shall
be renewable on a biennial basis
19 upon the payment of a fee of $15. Such
registration shall expire on May
20 1 of the second year of the registration
period unless sooner revoked or
21 suspended.
22 (d) Such registration
may, upon notice and hearing, be suspended or
23 revoked by the commissioner if any
registered club agent violates any of
24 the provisions or requirements of this
act.
25 (e) The procedure used
at the hearing will be the same as that pro-
26 vided for in K.S.A. 40-242, and
amendments thereto, subject to the pro-
27 visions contained in K.S.A. 40-243,
and amendments thereto section 56
28 subject to the provisions of section
57.
29 Sec. 28. K.S.A.
40-2612 is hereby amended to read as follows: 40-
30 2612. (a) When a premium finance agreement
contains a power of attor-
31 ney enabling the premium finance company to
cancel any insurance con-
32 tract or contracts listed in the agreement,
the insurance contract or
33 contracts shall not be canceled by the
premium finance company unless
34 such cancellation is effectuated in
accordance with this section.
35 (b) In the event the
insured fails to make the payments at the time
36 and in the amount provided in the premium
finance agreement, the pre-
37 mium finance company shall mail to the
insured a written notice of the
38 intent of the premium finance company to
cancel the insurance contract
39 because of the default in payments by the
insured unless the default in
40 payments is cured within a time certain
stated in the notice, which time
41 shall not be less than 10 days. A copy of
such notice shall also be sent to
42 the insurance agent or insurance broker
indicated on the premium fi-
43 nance agreements.
HB 2741
36
1 (c) After
expiration of such 10 day period, the premium finance com-
2 pany may thereafter request in the
name of the insured, cancellation of
3 such insurance contract or contracts
by mailing to the insurer a notice of
4 cancellation, and the insurance
contract shall be canceled as if such notice
5 of cancellation had been submitted by
the insured, but without requiring
6 the return of the insurance contract
or contracts. The premium finance
7 company shall also mail a notice of
cancellation to the insured at the
8 insured's last known address and to
the insurance agent or insurance
9 broker
producer indicated on the premium finance agreement.
10 (d) All statutory,
regulatory, and contractual restrictions providing
11 that the insurance contract may not be
canceled unless notice is given to
12 a governmental agency, mortgagee, or other
third party shall apply where
13 cancellation is effected under the
provisions of this section. The insurer
14 shall give the prescribed notice in behalf
of itself or the insured to any
15 governmental agency, mortgagee, or other
third party on or before the
16 second business day after the day it
receives the notice of cancellation
17 from the premium finance company and shall
determine the effective
18 date of cancellation taking into
consideration the number of days notice
19 required to complete the cancellation.
20 (e) Whenever a financed
insurance contract is canceled, the insurer
21 shall, within 20 days of the effective date
of cancellation, return whatever
22 gross unearned premiums are due under the
insurance contract to the
23 premium finance company, either directly or
via the agent or agency
24 writing the insurance, where an assignment
of such funds is included in
25 the premium finance agreement for the
account of the insured or in-
26 sureds.
27 (f) In the event that
the crediting of return premiums to the account
28 of the insured results in a surplus over
the amount due from the insured,
29 the premium finance company shall refund
such excess to the insured via
30 the insured's insurance agent or agency,
but no such refund shall be
31 required if it amounts to less than $1.
32 Sec. 29. K.S.A.
40-3608 is hereby amended to read as follows: 40-
33 3608. (a) No delinquency proceeding shall
be commenced under this
34 section by anyone other than the
commissioner and no court shall have
35 jurisdiction to entertain, hear or
determine any such proceeding com-
36 menced by any other person.
37 (b) No court shall have
jurisdiction to entertain, hear or determine
38 any complaint praying for the dissolution,
liquidation, rehabilitation, se-
39 questration, conservation or receivership
of any insurer; or praying for an
40 injunction or restraining order or other
relief preliminary to, incidental
41 to or relating to such proceedings other
than in accordance with this act.
42 (c) In addition to other
grounds for jurisdiction provided by law, a
43 court having jurisdiction of the subject
matter has jurisdiction over a per-
HB 2741
37
1 son served pursuant to K.S.A. 60-101
et seq. and amendments thereto,
2 Kansas rules of civil procedure, or
other applicable provisions of law in
3 an action brought by the receiver of
a domestic insurer or an alien insurer
4 domiciled in this state:
5 (1) If the person
served is an agent, broker a producer or
other person
6 who has at any time written policies
of insurance for or has acted in any
7 manner whatsoever on behalf of an
insurer against which a delinquency
8 proceeding has been instituted, in
any action resulting from or incident
9 to such a relationship with the
insurer;
10 (2) if the person served
is a reinsurer who has at any time entered
11 into a contract of reinsurance with an
insurer against which a delinquency
12 proceeding has been instituted, or is
an agent or broker a producer of or
13 for the reinsurer, in any action on or
incident to the reinsurance contract;
14 (3) if the person served
is or has been an officer, director, manager,
15 trustee, organizer, promoter or other
person in a position of comparable
16 authority or influence over an insurer
against which a delinquency pro-
17 ceeding has been instituted, in any action
resulting from or incident to
18 such a relationship with the insurer;
19 (4) if the person served
is or was at the time of the institution of the
20 delinquency proceeding against the insurer
holding assets in which the
21 receiver claims an interest on behalf of
the insurer, in any action con-
22 cerning the assets; or
23 (5) if the person served
is obligated to the insurer in any way what-
24 soever, in any action on or incident to the
obligation.
25 (d) If the court on
motion of any party finds that any action should
26 as a matter of substantial justice be tried
in a forum outside this state,
27 the court may enter an appropriate order to
stay further proceedings on
28 the action in this state.
29 (e) All actions herein
authorized shall be brought in the district court
30 of Shawnee county, Kansas.
31 Sec. 30. K.S.A.
40-3618 is hereby amended to read as follows: 40-
32 3618. (a) The commissioner as rehabilitator
may appoint one or more
33 special deputies, who shall have all the
powers and responsibilities of the
34 rehabilitator granted under this section,
and the commissioner may em-
35 ploy such counsel, clerks and assistants as
deemed necessary. The com-
36 pensation of the special deputy, counsel,
clerks and assistants and all ex-
37 penses of taking possession of the insurer
and of conducting the
38 proceedings shall be fixed by the
commissioner, with the approval of the
39 court and shall be paid out of the funds or
assets of the insurer. The
40 persons appointed under this section shall
serve at the pleasure of the
41 commissioner.
42 (b) The commissioner, as
rehabilitator, may appoint an advisory com-
43 mittee of policyholders or other creditors
including guaranty associations
HB 2741
38
1 should such a committee be deemed
necessary. Such committees shall
2 serve at the pleasure of the
commissioner and shall serve without com-
3 pensation other than reimbursement
for reasonable travel and per diem
4 living expenses. No other committee
of any nature shall be appointed by
5 the commissioner or the court in
rehabilitation proceedings conducted
6 under this act.
7 (c) The
rehabilitator may take such action as necessary or appropriate
8 to reform and revitalize the insurer.
The rehabilitator shall have all the
9 powers of the directors, officers and
managers, whose authority shall be
10 suspended, except as they are redelegated
by the rehabilitator. The re-
11 habilitator shall have full power to direct
and manage, to hire and dis-
12 charge employees subject to any contract
rights they may have, and to
13 deal with the property and business of the
insurer.
14 (d) If it appears to the
rehabilitator that there has been criminal or
15 tortious conduct, or breach of any
contractual or fiduciary obligation det-
16 rimental to the insurer by any officer,
manager, agent, broker, producer,
17 employee or other person, the rehabilitator
may pursue all appropriate
18 legal remedies on behalf of the
insurer.
19 (e) If the rehabilitator
determines that reorganization, consolidation,
20 conversion, reinsurance, merger or other
transformation of the insurer is
21 appropriate, the rehabilitator shall
prepare a plan to effect such changes.
22 Upon application of the rehabilitator for
approval of the plan, and after
23 such notice and hearings as the court may
prescribe, the court may either
24 approve or disapprove the plan proposed, or
may modify the plan and
25 approve it as modified. Any plan approved
under this section shall be, in
26 the judgment of the court, fair and
equitable to all parties concerned. If
27 the plan is approved, the rehabilitator
shall carry out the plan. In the case
28 of a life insurer, the plan proposed may
include the imposition of liens
29 upon the policies of the company, if all
rights of shareholders are first
30 relinquished. A plan for a life insurer may
also propose imposition of a
31 moratorium upon loan and cash surrender
rights under policies, for such
32 period and to such an extent as may be
necessary.
33 (f) The rehabilitator
shall have the power under K.S.A. 40-3629 and
34 40-3630 to avoid fraudulent transfers.
35 Sec. 31. K.S.A.
40-37a01 is hereby amended to read as follows: 40-
36 37a01. This act may be cited as the
business transacted with broker pro-
37 ducer controlled insurer act.
38 Sec. 32. K.S.A.
40-37a02 is hereby amended to read as follows: 40-
39 37a02. As used in this act:
40 (a) ``Accredited state''
means a state in which the insurance depart-
41 ment or regulatory agency has qualified as
meeting the minimum financial
42 regulatory standards promulgated and
established by the national asso-
43 ciation of insurance commissioners.
HB 2741
39
1 (b) ``Control'' or
``controlled'' has the meaning ascribed in subsection
2 (c) of K.S.A. 40-3302 and amendments
thereto.
3 (c) ``Controlled
insurer'' means a licensed insurer which is controlled,
4 directly or indirectly by a
broker producer.
5 (d) ``Controlling
broker producer'' means a
broker producer who, di-
6 rectly or indirectly, controls an
insurer.
7 (e) ``Licensed
insurer'' or ``insurer'' means any person, firm, associa-
8 tion or corporation duly licensed to
transact a property or casualty insur-
9 ance business in this state. The
following, inter alia, are not licensed in-
10 surers for the purposes of this act:
11 (1) All risk retention
groups as defined in the superfund amendments
12 reauthorization act of 1986, P. L. No.
99-499, 100 Stat. 1613 (1986); the
13 risk retention act, 15 U.S.C. §3901
et seq. (1982 & Supp. 1986); and
14 K.S.A. 40-4101 et seq. and
amendments thereto; and
15 (2) all residual market
pools and joint underwriting authorities or as-
16 sociations.
17 (f) ``Broker''
means an insurance broker or brokers as defined in
sub-
18 section (a) of K.S.A. 40-3702 and
amendments thereto, or any other per-
19 son, firm, association or
corporation, when, for any compensation, com-
20 mission or other thing of value,
such person, firm, association or
21 corporation acts or aids in any
manner in soliciting, negotiating or pro-
22 curing the making of any insurance
contract on behalf of an insured other
23 than the person, firm, association
or corporation. ``Broker'' does not mean
24 an insurance agent as defined in
K.S.A. 40-239 and amendments thereto.
25 Sec. 33. K.S.A.
40-37a04 is hereby amended to read as follows: 40-
26 37a04. (a) (1) The provisions of
K.S.A. 40-37a04 shall apply if, in any
27 calendar year, the aggregate amount of
gross written premium on busi-
28 ness placed with a controlled insurer by a
controlling broker is equal to
29 or greater than five percent of the
admitted assets of the controlled in-
30 surer, as reported in the controlled
insurer's quarterly statement filed as
31 of September 30 of the prior year.
32 (2) Notwithstanding
paragraph (1) of this subsection, the provisions
33 of this section shall not apply if:
34 (A) The controlling
broker producer:
35 (i) Places insurance
only with the controlled insurer, or only with the
36 controlled insurer and a member or members
of the controlled insurer's
37 holding company system, or the controlled
insurer's parent, affiliate or
38 subsidiary and receives no compensation
based upon the amount of pre-
39 miums written in connection with such
insurance; and
40 (ii) accepts insurance
placements only from nonaffiliated subprodu-
41 cers, and not directly from insureds;
and
42 (B) the controlled
insurer, except for insurance business written
43 through a residual market facility
established pursuant to Kansas statutes
HB 2741
40
1 or administrative regulations,
accepts insurance business only from a con-
2 trolling broker, a
broker producer controlled by the
controlled insurer,
3 or a broker
producer that is a subsidiary of the controlled insurer.
4 (b) A controlled
insurer shall not accept business from a controlling
5 broker
producer and a controlling broker shall not place business
with a
6 controlled insurer unless there is a
written contract between the con-
7 trolling broker
producer and the insurer specifying the responsibilities
of
8 each party, which contract has been
approved by the board of directors
9 of the insurer and contains the
following minimum provisions:
10 (1) The controlled
insurer may terminate the contract for cause, upon
11 written notice to the controlling
broker producer. The controlled insurer
12 shall suspend the authority of the
controlling broker to write business
13 during the pendency of any dispute
regarding the cause for the termi-
14 nation;
15 (2) the controlling
broker producer shall render accounts to
the con-
16 trolled insurer detailing all material
transactions, including information
17 necessary to support all commissions,
charges and other fees received by,
18 or owing to, the controlling
broker producer;
19 (3) the controlling
broker producer shall remit all funds due
under
20 the terms of the contract to the controlled
insurer on at least a monthly
21 basis. The due date shall be fixed so that
premiums or installments thereof
22 collected shall be remitted no later than
90 days after the effective date
23 of any policy placed with the controlled
insurer under this contract;
24 (4) all funds collected
for the controlled insurer's account shall be
25 held by the controlling broker in a
fiduciary capacity, in one or more
26 appropriately identified bank accounts in
banks that are members of the
27 federal reserve system, in accordance with
the provisions of the insurance
28 law as applicable. Notwithstanding the
foregoing, funds of a controlling
29 broker producer not
required to be licensed in this state shall be main-
30 tained in compliance with the requirements
of the controlling broker's
31 producer's state of domicile;
32 (5) the controlling
broker producer shall maintain separately
identi-
33 fiable records of business written for the
controlled insurer;
34 (6) the contract shall
not be assigned in whole or in part by the con-
35 trolling broker
producer;
36 (7) the controlled
insurer shall provide the controlling broker
pro-
37 ducer with its underwriting
standards, rules and procedures, manuals set-
38 ting forth the rates to be charged, and the
conditions for the acceptance
39 or rejection of risks. The controlling
broker producer shall adhere to the
40 standards, rules, procedures, rates and
conditions. The standards, rules,
41 procedures, rates and conditions shall be
the same as those applicable to
42 comparable business placed with the
controlled insurer by a broker pro-
43 ducer other than the controlling
broker producer;
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41
1 (8) the rates and
terms of the controlling broker's commissions,
2 charges or other fees and the
purposes for those charges or fees. The
3 rates of the commissions, charges and
other fees shall be no greater than
4 those applicable to comparable
business placed with the controlled in-
5 surer by brokers
producers other than controlling brokers. For purposes
6 of this paragraph and paragraph (7)
of this subsection, examples of ``com-
7 parable business'' includes the same
lines of insurance, same kinds of
8 insurance, same kinds of risks,
similar policy limits, and similar quality of
9 business;
10 (9) if the contract
provides that the controlling broker
producer, on
11 insurance business placed with the insurer,
is to be compensated contin-
12 gent upon the insurer's profits on that
business, then such compensation
13 shall not be determined and paid until at
least five years after the pre-
14 miums on liability insurance are earned and
at least one year after the
15 premiums are earned on any other insurance.
In no event shall the com-
16 mission be paid until the adequacy of the
controlled insurer's reserves on
17 remaining claims has been independently
verified pursuant to subsection
18 (c) of this section;
19 (10) a limit on the
controlling broker's producer's writings in
relation
20 to the controlled insurer's surplus and
total writings. The insurer may
21 establish a different limit for each line
or subline of business. The con-
22 trolled insurer shall notify the
controlling broker producer when the
ap-
23 plicable limit is approached and shall not
accept business from the con-
24 trolling broker
producer if the limit is reached. The controlling
broker
25 producer shall not place business
with the controlled insurer if it has been
26 notified by the controlled insurer that the
limit has been reached; and
27 (11) the controlling
broker producer may negotiate but shall not
bind
28 reinsurance on behalf of the controlled
insurer on business the controlling
29 broker places with the controlled insurer,
except that the controlling bro-
30 ker producer may
bind faculative reinsurance contracts pursuant to oblig-
31 atory faculative agreements if the contract
with the controlled insurer
32 contains underwriting guidelines including,
for both reinsurance assumed
33 and ceded, a list of reinsurers with which
such automatic agreements are
34 in effect, the coverages and amounts or
percentages that may be reinsured
35 and commission schedules.
36 (c) Every controlled
insurer shall have an audit committee of the
37 board of directors composed of independent
directors. The audit com-
38 mittee shall annually meet the management,
the insurer's independent
39 certified public accountants, and an
independent casualty actuary or other
40 independent loss reserve specialist
acceptable to the commissioner to
41 review the adequacy of the insurer's loss
reserves.
42 (d) (1) In addition
to any other required loss reserve certification,
43 the controlled insurer shall annually, on
April 1 of each year, file with the
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42
1 commissioner an opinion of an
independent casualty actuary or other
2 independent loss reserve specialist
acceptable to the commissioner, re-
3 porting loss ratios for each line of
business written and attesting to the
4 adequacy of loss reserves established
for losses incurred and outstanding
5 as of year-end, including incurred
but not reported losses, on business
6 placed by the broker
producer; and
7 (2) the controlled
insurer shall annually report to the commissioner
8 the amount of commissions paid to the
broker producer, the percentage
9 such amount represents of the net
premiums written and comparable
10 amounts and percentage paid to
noncontrolling brokers producers for
11 placements of the same kinds of
insurance.
12 Sec. 34. K.S.A.
40-37a05 is hereby amended to read as follows: 40-
13 37a05. The broker
producer, prior to the effective date of the policy,
shall
14 deliver written notice to the prospective
insured disclosing the relation-
15 ship between the broker
producer and the controlled insurer; except that,
16 if the business is placed through a person
who is not a controlling broker
17 producer, the controlling
broker producer shall retain in records a
signed
18 commitment from the person that such person
is aware of the relationship
19 between the insurer and the
broker producer and that the person has
or
20 will notify the insured.
21 Sec. 35. K.S.A.
40-37a06 is hereby amended to read as follows: 40-
22 37a06. (a) (1) If the commissioner
believes the controlling broker pro-
23 ducer or any other person has not
complied with this act, or any regulation
24 or order promulgated hereunder, the
commissioner may, after a hearing
25 conducted under the provisions of the
Kansas administrative procedures
26 act, order the controlling broker to cease
placing business with the con-
27 trolled insurer; and
28 (2) if it was found that
because of such noncompliance, the controlled
29 insurer or any policyholder thereof has
suffered any loss or damage, the
30 commissioner may maintain a civil action or
intervene in an action
31 brought by or on behalf of the insurer or
policyholder for recovery of
32 compensatory damages for the benefit of the
insurer or policyholder or
33 other appropriate relief.
34 (b) If an order for
liquidation or rehabilitation of the controlled in-
35 surer has been entered pursuant to K.S.A.
40-3605 et seq. and amend-
36 ments thereto, and the receiver appointed
under that order believes that
37 the controlling broker
producer or any other person has not materially
38 complied with this act, or any regulation
or order promulgated hereunder,
39 and the insurer suffered any loss or damage
therefrom, the receiver may
40 maintain a civil action for recovery of
damages or other appropriate sanc-
41 tions for the benefit of the insurer.
42 (c) Nothing contained in
this section shall affect the right of the com-
43 missioner to impose any other penalties
provided for in chapter 40 of the
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43
1 Kansas Statutes Annotated.
2 (d) Nothing
contained in this section is intended to or shall in any
3 manner alter or affect the rights of
policyholders, claimants, creditors or
4 other third parties.
5
Sec. 36. K.S.A. 40-4103 is hereby amended to read as
follows: 40-
6 4103. Risk retention groups chartered
in states other than this state seek-
7 ing to do business as a risk
retention group in this state shall observe and
8 abide by the laws of this state as
follows:
9 (a) Notice of
operations and designation of commissioner as agent.
10 Before offering insurance in this state, a
risk retention group shall submit
11 to the commissioner:
12 (1) A statement
identifying the state or states in which the risk re-
13 tention group is chartered and licensed as
a liability insurance company,
14 date of chartering, its principal place of
business and such other infor-
15 mation including information on its
membership, as the commissioner of
16 this state may require to verify that the
risk retention group is qualified
17 under subsection (k) of K.S.A. 40-4101 and
amendments thereto;
18 (2) a copy of its plan
of operations or a feasibility study and revisions
19 of such plan or study submitted to its
state of domicile; but the provision
20 relating to the submission of a plan of
operation or a feasibility study shall
21 not apply with respect to any line or
classification of liability insurance
22 which:
23 (A) Was defined in the
product liability risk retention act of 1981
24 before October 27, 1986; and
25 (B) was offered before
such date by any risk retention group which
26 had been chartered and operating for not
less than three years before
27 such date;
28 (3) a statement of
registration which designates the commissioner as
29 its agent for the purpose of receiving
service of legal documents or pro-
30 cess; and
31 (4) a notification fee
in the amount of $250.
32 (b) Financial
condition. Any risk retention group doing business in
33 this state shall submit to the
commissioner:
34 (1) A copy of the
group's financial statement submitted to its state of
35 domicile, which shall be certified by an
independent public accountant
36 and contain a statement of opinion on loss
and loss adjustment expense
37 reserves made by a member of the American
academy of actuaries or a
38 qualified loss reserve specialist (under
criteria established by the national
39 association of insurance
commissioners);
40 (2) a copy of each
examination of the risk retention group as certified
41 by the commissioner or public official
conducting the examination;
42 (3) upon request by the
commissioner, a copy of any audit performed
43 with respect to the risk retention group;
and
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44
1 (4) such
information as may be required to verify its continuing qual-
2 ification as a risk retention group
under subsection (k) of K.S.A. 40-4101
3 and amendments thereto.
4
(c) Taxation. (1) All premiums paid for coverages
within this state to
5 risk retention groups chartered
outside this state shall be subject to tax-
6 ation at the same rate and subject to
the same interest, fines and penalties
7 for nonpayment as that provided by
K.S.A. 40-246c and amendments
8 thereto. Risk retention groups
chartered or licensed in this state shall be
9 taxed in accordance with K.S.A.
40-252, and amendments thereto.
10 (2) To the extent
agents or brokers producers are utilized,
they shall
11 report and pay the taxes for the premiums
for risks which they have placed
12 with or on behalf of a risk retention group
not chartered in this state.
13 (3) To the extent
agents or brokers producers are not
utilized or fail
14 to pay the tax, each risk retention group
shall pay the tax for risks insured
15 within the state. Further, each risk
retention group shall report all pre-
16 miums paid to it for risks insured within
the state.
17 (d) Compliance with
unfair claims settlement practices law. Any risk
18 retention group, its agents and
representatives, shall comply with subsec-
19 tion (9) (i) of
K.S.A. 40-2404 and amendments thereto.
20 (e) Deceptive, false
or fraudulent practices. Any risk retention group
21 shall comply with the laws of this state
regarding deceptive, false or fraud-
22 ulent acts or practices. However, if the
commissioner seeks an injunction
23 regarding such conduct, the injunction
shall be obtained from a court of
24 competent jurisdiction.
25 (f) Examination
regarding financial condition. Any risk retention
26 group shall submit to an examination in
accordance with K.S.A. 40-222
27 and 40-223, and amendments thereto, by the
commissioner to determine
28 its financial condition if the commissioner
of the jurisdiction in which the
29 group is chartered has not initiated an
examination or does not initiate
30 an examination within 60 days after a
request by the commissioner of this
31 state.
32 (g) Notice to
purchasers. Any policy issued by a risk retention group
33 shall contain in 10 point type on the front
page and the declaration page,
34 the following notice:
35
NOTICE
36 This policy is
issued by your risk retention group. Your risk retention group
may
37 not be subject to all
of the insurance laws and regulations of your state. State
insur-
38 ance insolvency
guaranty funds are not available for your risk retention group.
39 (h) Prohibited acts
regarding solicitation or sale. The following acts
40 by a risk retention group are hereby
prohibited:
41 (1) The solicitation or
sale of insurance by a risk retention group to
42 any person who is not eligible for
membership in such group; and
43 (2) the solicitation or
sale of insurance by, or operation of, a risk
HB 2741
45
1 retention group that is in a
hazardous financial condition or is financially
2 impaired.
3 (i) Prohibition
on ownership by an insurance company. No risk re-
4 tention group shall be allowed to do
business in this state if an insurance
5 company is directly or indirectly a
retention group all of whose members
6 are insurance companies.
7 (j) Prohibited
coverage. No risk retention group may offer insurance
8 policy coverage prohibited by the
laws of this state or declared unlawful
9 by the supreme court of the state of
Kansas.
10 (k) Delinquency
proceedings. A risk retention group not chartered in
11 this state and doing business in this state
must comply with a lawful order
12 issued in a voluntary dissolution
proceeding or in a delinquency proceed-
13 ing commenced by a state insurance
commissioner if there has been a
14 finding of financial impairment after an
examination under subsection (f)
15 of this section.
16 Sec. 37. K.S.A.
40-4117 is hereby amended to read as follows: 40-
17 4117. A purchasing group may not purchase
insurance from a risk reten-
18 tion group that is not chartered in a state
or from an insurer not admitted
19 in the state in which the purchasing group
is located, unless the purchase
20 is effected through a licensed
agent or broker producer acting
pursuant
21 to the surplus lines laws and regulations
of such state.
22 Sec. 38. K.S.A.
40-4119 is hereby amended to read as follows: 40-
23 4119. Any person acting, or offering to
act, as an agent or broker a pro-
24 ducer for a risk retention group,
which solicits members, sells insurance
25 coverage, purchases coverage for its
members located within the state or
26 otherwise does business in this state
shall, before commencing any such
27 activity, obtain a license from the
commissioner.
28 Sec. 39. K.S.A.
44-592 is hereby amended to read as follows: 44-592.
29 Any person soliciting the business of
workers compensation insurance for
30 a group-funded workers compensation pool
must be licensed as provided
31 in K.S.A. 40-240 through
40-243 sections 26 through 33, and amendments
32 thereto, except that no such person shall
be required to satisfy the cer-
33 tification requirements regarding insurance
companies providing rein-
34 surance, secondary insurance, or excess
coverage.
35 New Sec. 40. This
act may be cited and shall be known as the Kansas
36 Uniform Insurance Producers License
Law.
37 New Sec. 41. (a)
``Biennial due date'' means the date of birth of the
38 licensed insurance producer, limited
insurance representative or insur-
39 ance consultant who renews such license or
who is required to complete
40 continuing education credits at the end of
the biennium following initial
41 licensure or license renewal. The biennial
due date of a registered firm
42 shall be the end of the biennium following
the date of initial registration
43 with the commissioner or renewal of that
registration.
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46
1 (b) ``Biennium''
means, for producers born in an odd-numbered year,
2 the period starting with the
producer's biennial due date in 1999 and
3 each two-year period thereafter; for
those producers born in an even-
4 numbered year, the term shall mean
the period starting with the pro-
5 ducer's biennial due date in 2000 and
each two-year period thereafter.
6 The biennium for a registered firm
shall be the two-year period following
7 registration or renewal of that
registration.
8 (c) ``Continuing
education credit'' or ``CEC'' equals at least 50
9 minutes of each clock hour of
instruction or the CEC value assigned by
10 the commissioner or commissioner's
designee.
11 (d) ``Inactive insurance
producer'' means a licensed producer who
12 presents evidence satisfactory to the
commissioner which demonstrates
13 such producer will not do any act toward
transacting the business of in-
14 surance for not less than two but not more
than four years from the date
15 such evidence is received by the
commissioner.
16 (e) ``Insurance'' means
any of the classes of insurance found in Chap-
17 ter 40 of the Kansas Statutes
Annotated.
18 (f) ``Insurance
producer'' or ``producer'' means an individual who so-
19 licits, negotiates, effects, procures,
renews, continues or binds policies of
20 insurance covering persons, property or
risks located in Kansas, whether
21 the individual represents the insured or
the insurance company. ``Insur-
22 ance producer'' and ``producer'' shall
include surplus lines producer and
23 insurance consultant, unless stated
otherwise in this act. Wherever the
24 term ``agent'' or ``broker'' appears in the
insurance code it shall mean
25 ``insurance producer.''
26 (g) ``License'' means a
document authorizing an individual to act as
27 an insurance producer, surplus lines
producer, limited insurance repre-
28 sentative, temporary insurance producer or
insurance consultant, as spec-
29 ified in such document.
30 (h) ``Limited insurance
representative'' means an individual ap-
31 pointed by an insurance company or
registered firm to represent that
32 company or firm regarding the types of
insurance set forth in section 10.
33 (i) ``Registered firm''
means a corporation, sole proprietorship or
34 partnership which transacts the business of
insurance as an insurance
35 agency.
36 (j) ``State'' shall
include the District of Columbia, U.S. territories,
37 Canadian territories and states of foreign
countries.
38 (k) ``Surplus lines
producer'' means any producer licensed under
39 K.S.A. 40-246b et seq., and
amendments thereto, to negotiate the con-
40 tracts of insurance specified under K.S.A.
40-246b, and amendments
41 thereto.
42 New Sec. 42. (a) No
person shall act as or hold oneself out to be an
43 insurance producer unless duly licensed in
accordance with this act for
HB 2741
47
1 the class or classes of insurance as
to which the person acts as an insurance
2 producer.
3 (b) No person
shall engage in the business of offering any advice,
4 counsel, opinion or service with
respect to the benefits, advantages or
5 disadvantages under any policy of
insurance that could be issued in Kan-
6 sas, unless that person is:
7 (1) A licensed
insurance producer, limited insurance representative
8 or temporary insurance producer
offering advice concerning a class of
9 insurance as to which the person is
licensed to transact business;
10 (2) engaged or employed
as an attorney licensed to practice law, ex-
11 cept when soliciting insurance
business;
12 (3) a trust officer of a
bank performing duties incidental to the po-
13 sition, except when soliciting insurance
business;
14 (4) an actuary or a
certified public accountant engaged or employed
15 in a consulting capacity, performing duties
incidental to that position; or
16 (5) a licensed insurance
consultant.
17 (c) In addition to any
other penalty set forth in this act, any person
18 violating paragraph (a) or (b) is guilty of
a class A nonperson misde-
19 meanor. Any person violating paragraph (a)
or (b) and misappropriating
20 or converting any moneys collected in
conjunction with such violation is
21 guilty of a severity level 8, nonperson
felony.
22 New Sec. 43. All
policies the solicitation of which involves an insur-
23 ance producer, limited insurance
representative or registered firm shall
24 identify the name of such producer,
representative or firm. All policy
25 applications, to include individual life or
accident and health applications
26 and master policy applications for life or
accident and health group cov-
27 erages, shall bear the printed or typed
name and signature of the licensee
28 who solicited and wrote the
application.
29 New Sec. 44. (a)
Each application for an insurance producer license
30 shall be made on a form specified by the
commissioner, and shall be
31 signed by the applicant declaring under
penalty of refusal, suspension or
32 revocation of the license that the
statements made in the application are
33 true, correct and complete to the best of
the applicant's knowledge and
34 belief. Before approving the application,
the commissioner shall be sat-
35 isfied that the applicant (1) is at least
18 years of age; (2) is competent,
36 trustworthy and of good business
reputation; (3) has, pursuant to this act,
37 filed an E&O policy which is in force
and effect or is exempt from the
38 requirement of filing such policy; and (4)
has paid the fees required by
39 this act.
40 (b) Applicants for an
insurance producer, limited insurance repre-
41 sentative, surplus lines and insurance
consultant license shall pass a writ-
42 ten examination unless exempt pursuant to
sections 46 and 48. The ex-
43 amination shall reasonably test the
knowledge of the applicant concerning
HB 2741
48
1 the class or classes of insurance for
which a license is applied, the duties
2 and responsibilities of an insurance
producer and the insurance laws and
3 rules and regulations of the state of
Kansas. The examinations provided
4 for by this section shall be
conducted under rules and regulations pre-
5 scribed by the commissioner. The
commissioner may make arrangements,
6 including contracting with an outside
testing service, for administering
7 such examinations and collecting the
nonrefundable testing fee provided
8 for by this act.
9 If an applicant fails
to satisfactorily complete an examination, the ap-
10 plicant may retake the examination
following a waiting period of not less
11 than seven days from the date of the last
attempt. After a second unsuc-
12 cessful attempt to pass the examination,
the applicant must wait until six
13 months from the date of the last attempt to
retake the examination. After
14 the third unsuccessful attempt, the
applicant must petition the commis-
15 sioner of insurance for permission to
retake the examination, stating those
16 facts which would justify the conclusion
any additional attempts to take
17 the exam would be successful.
18 Each applicant required to
take an examination shall pay the exami-
19 nation fee required by the commissioner and
shall separately submit the
20 application for license to the
commissioner, together with the fees re-
21 quired by this act. An applicant who fails
to appear for the examination
22 as scheduled, or appears but fails to pass,
shall not be entitled to any
23 refund, and shall be required to submit a
new request for examination
24 together with all of the requisite fees
before being rescheduled for an-
25 other examination at a later date.
26 (c) Before each license
renewal, an insurance producer shall satisfac-
27 torily complete at least 15 hours of
continuing education in accordance
28 with rules and regulations prescribed by
the commissioner. An insurance
29 producer holding only a crop insurance,
title insurance, bail bond agent,
30 auto rental agent or prearranged funeral
license shall satisfactorily com-
31 plete at least five hours of continuing
education in accordance with rules
32 and regulations prescribed by the
commissioner.
33 Licensees who hold both
property or casualty and life or variable con-
34 tracts or accident and health licenses, or
any combination thereof, and
35 who earn CECs from courses certified by the
commissioner as qualifying
36 for credit in any class, may apply those
CECs toward either the property
37 or casualty or life or accident and health
or variable contracts continuing
38 education requirement. However, a CEC shall
not be applied to satisfy
39 requirements for both property and casualty
or life, accident and health
40 or variable contracts requirements or any
combination of those require-
41 ments.
42 The commissioner may not
approve a course of study unless the course
43 provides for classroom, seminar, or
self-study instruction methods. Class-
HB 2741
49
1 room study shall include courses
provided by teleconferencing approved
2 by the commissioner. A course given
in a combination instruction method
3 of classroom or seminar and
self-study shall be deemed to be a self-study
4 course unless the classroom or
seminar certified hours meets or exceed
5 2/3 of total hours certified for the
course. The self-study material used in
6 the combination course must be
directly related to and complement the
7 classroom portion of the course in
order to be considered for credit. An
8 instruction method other than
classroom or seminar shall be considered
9 as self-study methodology. Self-study
credit hours require the successful
10 completion of an examination covering the
self-study material, which shall
11 not be self-evaluated. Provided, however,
that if the self-study material
12 is completed through the use of a
computerized interactive format ap-
13 proved by the commissioner, to include
appropriate validation of suc-
14 cessful completion of the self-study
material, no additional examination
15 shall be required.
16 (d) If the required
report showing proof of continuing education
17 completion is not received by the
commissioner by the biennial due date,
18 the individual producer's qualification and
corresponding license or li-
19 censes shall be automatically suspended for
a period of 90 calendar days
20 or until the producer satisfactorily
demonstrates completion of the con-
21 tinuing education requirement, whichever is
sooner, and the penalty re-
22 quired by new section 61 shall be assessed
for each licensee suspended.
23 If such proof is not submitted within 90
calendar days of the biennial due
24 date, the individual producer's license or
licenses shall automatically ex-
25 pire. An applicant for an individual
producer's license who previously held
26 a license which was terminated for failure
to complete continuing edu-
27 cation requirements and who seeks
relicensing must complete all contin-
28 uing education requirements the applicant
would have been required to
29 complete had the applicant's license not
expired before an application for
30 relicensing will be accepted, and pay the
reinstatement fee required by
31 section 61.
32 (e) The holder of any
license shall inform the commissioner in writing
33 of a change in the licenseholder's
residential or business address within
34 30 days of such change.
35 (f) Each provider of a
continuing education course required by this
36 section shall pay an annual registration
fee and course registration fees
37 for each course being registered as
provided by this act.
38 (g) The commissioner
shall accept compliance with continuing edu-
39 cation requirements of this section by
nonresident producers if the pro-
40 ducers submit certification from the
insurance supervisory authority in
41 the producer's home state affirming that
the producer is in compliance
42 with the continuing education requirements
of that jurisdiction.
43 (h) The commissioner, in
cases of medical hardship, military service,
HB 2741
50
1 or circumstances outside the control
of the licensee, may extend the time
2 within which to fulfill the
continuing education requirements of the li-
3 censee for a period not to exceed 180
days.
4 (i) This section
shall not apply to inactive insurance producers during
5 the period of inactivity. Upon return
to active status or expiration of the
6 maximum inactive period, the producer
shall have 180 days to comply
7 with continuing education
requirements.
8 New
Sec. 45. (a) An individual who is at least 18 years of
age and
9 whom the commissioner considers to be
competent, trustworthy and of
10 good business reputation may obtain a
limited insurance representative
11 license, without obtaining an insurance
producer license, for one or more
12 of the following classes:
13 (1) Crop insurance;
14 (2) burial or funeral
pre-need contracts;
15 (3) title insurance;
16 (4) bail bond
agents;
17 (5) auto rental agents;
and
18 (6) travel insurance
agents who act only as agents for transportation
19 tickets of common carriers.
20 (b) The application for
a limited insurance representative license shall
21 be submitted on a form prescribed by the
commissioner.
22 (c) A limited insurance
representative may represent more than one
23 insurance company.
24 (d) An auto rental
agency may offer or sell insurance only in connec-
25 tion with and incidental to the rental of
motor vehicles, whether at the
26 rental office or by pre-selection of
coverage in a master, corporate or
27 group rental agreement, in any of the
following general categories: (1)
28 Personal accident insurance covering risks
of travel, (2) motor vehicle
29 liability insurance, (3) personal effects
insurance providing coverage to
30 renters and other occupants of the motor
vehicle, (4) roadside assistance
31 and emergency sickness protection programs,
and (5) any other travel or
32 auto-related coverage an auto rental
company may offer in connection
33 with and incidental to rental of motor
vehicles. No insurance may be
34 issued by a limited insurance
representative unless the rental period of
35 the rental agreement does not exceed 90
consecutive days and brochures
36 and other written material clearly and
correctly explaining insurance cov-
37 erages offered by the agency are available
for prospective renters and
38 clear and complete disclosures are provided
to prospective renters that
39 such coverage may be duplicative of other
insurance owned by the renter,
40 that purchase of insurance coverage is not
a condition for renting a motor
41 vehicle and describing the process for
filing a claim.
42 Auto rental agencies
employing limited insurance representatives shall
43 conduct a training program for each
representative, providing instruction
HB 2741
51
1 on the kinds of insurance coverage
offered by the agency.
2 No auto rental agent or
auto rental agency shall offer or solicit any
3 insurance other than the coverages
described in this section without an
4 appropriate insurance producer
license. No auto rental agent or auto
5 rental agency shall advertise or
otherwise hold themselves out as licensed
6 insurers, insurance producers or
insurance brokers.
7 New
Sec. 46. The commissioner may issue rules and regulations
gov-
8 erning issuance of the following
licenses:
9 (a) Insurance
producer. (1) An applicant who has met the require-
10 ments of section 44 shall be issued a
biennial insurance producer license.
11 (2) Each insurance
producer license shall remain in effect until the
12 producer's next biennial due date. The
biennial fee required by this act
13 shall not be required of a licensed
insurance producer who enters the
14 military service of the United States. This
waiver shall continue in effect
15 until such time as the insurance producer
is discharged from military
16 service. Proof of compliance with
continuing education requirements
17 shall be waived for the first 15 months of
military service.
18 (3) An insurance
producer who does not maintain an insurance pro-
19 ducer license in effect pursuant to this
section may, within 24 months
20 from the due date of the unpaid biennial
fee, make application for the
21 same license without the necessity of
passing a written examination. Pay-
22 ment of the fee required by section 61 and
proof an E&O liability policy
23 is in force must accompany the application.
In addition, proof of compli-
24 ance with continuing education requirements
must accompany the ap-
25 plication, where applicable.
26 (b) Limited insurance
representative. (1) An applicant who has met
27 the requirements of section 10 shall be
issued a limited insurance rep-
28 resentative license.
29 (2) Each limited
insurance representative license shall remain in ef-
30 fect until the representative's next
biennial due date. Failure to pay the
31 license fee or to submit the required
documents shall cause immediate
32 termination of the limited insurance
representative license. Limited in-
33 surance representatives shall report proof
of continuing education com-
34 pliance in accordance with section 44.
35 (3) Each limited
insurance representative license may be terminated
36 by the insurance company, agency or
registered firm employing the rep-
37 resentative.
38 (c) License content.
Each license shall contain the name, residential
39 address and personal identification number
of the licensee, the date the
40 license was issued, general conditions
relative to the license's expiration
41 or termination, the class or classes of
insurance covered by the license,
42 and any other information the commissioner
considers proper.
43 New Sec. 47. (a) A
nonresident may apply for an insurance producer
HB 2741
52
1 license or limited insurance
representative license, without testing, if the
2 applicant holds a similar license
from the state of residence, provided the
3 public official having supervision of
insurance in the applicant's state of
4 residence certifies the applicant is
qualified under that state's law to be
5 licensed for the classes of insurance
applied for. If the nonresident ap-
6 plicant holds no such license, the
applicant shall be required to complete
7 the appropriate examinations required
by section 44.
8 (b) A nonresident
applicant shall file with the commissioner an affi-
9 davit appointing the commissioner and
the commissioner's successor in
10 office as such applicant's agent upon whom
all lawful process in any ac-
11 tion, suit or legal proceeding against the
applicant may be served, and
12 shall agree that any such lawful process is
of the same legal force and
13 validity as personal service of process
upon such applicant. The commis-
14 sioner, within 10 days after receiving
process, shall forward a copy of such
15 process by registered or certified mail to
the individual for whom the
16 commissioner has received such process at
the individual's address of
17 record.
18 New Sec. 48. (a)
Any individual holding a valid license issued prior
19 to July 1, 1998, is exempt from the
examination requirements regarding
20 the classes of insurance for which the
individual's license is held.
21 (b) An applicant who
becomes a resident of this state and who files
22 with the commissioner certification by the
public official having super-
23 vision of insurance in the applicant's
prior state of residence affirming the
24 applicant has an insurance license in good
standing in that state during
25 the prior 12 months shall be required by
the commissioner to take only
26 that portion of the examination pertaining
to Kansas law and any classes
27 of insurance as to which the applicant has
applied for a license, which
28 classes are not covered under the license
the applicant held in the other
29 state.
30 New Sec. 49. (a)
Any corporation, sole proprietorship or partnership
31 transacting insurance business as an
insurance agency shall register with
32 the commissioner before transacting
insurance business in this state. Such
33 registration shall remain in effect as long
as the firm pays the biennial fee
34 required by section 43 by the due date,
unless the registration is revoked
35 or suspended pursuant to this act.
36 (b) Each firm required
to register before acting as a registered firm
37 pursuant to this act shall appoint one or
more licensed insurance pro-
38 ducers who are owners, officers, directors
or partners in the firm to be
39 responsible for the firm's compliance with
the insurance laws of this state.
40 Such individual or individuals shall submit
to the commissioner a regis-
41 tration form and the fees required by
section 61. The commissioner shall
42 prescribe the registration form and may
require any documents reason-
43 ably necessary to verify the information
contained in the registration form.
HB 2741
53
1 Within 30 days of a change in
officers, directors or partners who are
2 appointed to be responsible for the
firm's compliance with the insurance
3 laws of this state, the firm shall
report the change to the department.
4 (c) The
registered firm shall inform the commissioner in writing of
5 a change in its business address
within 30 days of such change.
6 (d) Each
registered firm shall disclose its members, officers or direc-
7 tors who are authorized to act as
insurance producers, and report any
8 changes in such personnel to the
commissioner within 30 days of such
9 changes.
10 (e) Failure to register
or provide required information under this sec-
11 tion shall subject the registered firm or
producer to a monetary penalty
12 of $10 per day for each working day the
required information or regis-
13 tration is late, subject to a maximum of
$50 per calendar year.
14 New Sec. 50. (a)
The commissioner may grant a temporary insurance
15 producer license to an applicant, without
requiring an examination, for a
16 period of 90 days, in the following cases:
(1) To the executor or admin-
17 istrator of the estate of a licensed
insurance producer, or the surviving
18 next of kin of such person, if no executor
or administrator has been ap-
19 pointed; (2) to the designee of a licensed
agent who shall enter upon
20 active service in the armed forces of the
United States; or (3) to the
21 designee of a licensed agent who becomes
disabled because of sickness
22 or injury. The commissioner in the
commissioner's discretion may renew
23 such licenses for an additional term or
terms of 90 days each, not ex-
24 ceeding 15 months in the aggregate.
25 (b) Before any temporary
insurance producer license may be ap-
26 proved by the commissioner, there shall be
filed with the commissioner
27 an application and the fee required by
section 61.
28 New Sec. 51. A
temporary insurance producer license issued under
29 section 50 authorizes the person named
therein to renew any business of
30 the insurance producer or the registered
firm whose business is being
31 conducted thereunder which would expire
during the term of such li-
32 cense, to collect premiums due and payable
to the estate, producer or
33 registered firm, and to perform such other
acts of an insurance producer
34 as are incidental to the continuance of any
insurance business of the
35 producer or registered firm.
36 No person so licensed, by
virtue of such license, shall be authorized to
37 solicit, negotiate or procure new
insurance, unless they also hold a valid
38 producer or limited insurance
representative license for the solicited busi-
39 ness.
40 New Sec. 52. (a)
Any insurance company or registered firm which
41 terminates an agency contract or agreement
with an insurance producer
42 or limited insurance representative, if the
cause for such termination is
43 any of the causes for revocation or
suspension of a license listed in section
HB 2741
54
1 56, shall notify the commissioner of
such termination within 30 days
2 thereafter. The insurance company or
registered firm shall provide the
3 commissioner with information,
documents, records or statements per-
4 taining to the termination which may
be used by the commissioner in any
5 action taken pursuant to section 56.
There shall be no liability on the part
6 of, nor shall a cause of action of
any nature arise against, the commis-
7 sioner, the insurance company,
registered firm or an authorized repre-
8 sentative of them for any
information, documents, records or statements
9 provided pursuant to this section.
The commissioner shall terminate
10 forthwith the license of a limited
insurance representative whose termi-
11 nated appointment has been reported by the
terminating insurance com-
12 pany or registered firm under this
section.
13 (b) Failure of any
insurance company or registered firm to comply
14 with the requirements of paragraph (a)
results in a civil penalty of $1,000
15 for each violation, in addition to such
other penalties as may be provided
16 by the insurance laws of Kansas.
17 New Sec. 53. Any
individual who, while licensed as an insurance pro-
18 ducer, limited insurance representative or
temporary insurance producer,
19 is convicted of a felony, shall report such
conviction to the commissioner
20 within 30 days of the entry date of the
judgment. Within that 30 day
21 period, the individual shall also provide
the commissioner with a copy of
22 the judgment, the probation or commitment
order and any other relevant
23 documents.
24 New Sec. 54. (a)
Any person, partnership, association or corporation
25 licensed by the commissioner who due to
employment with the depart-
26 ment is required to surrender such license
pursuant to K.S.A. 40-110,
27 and amendments thereto, shall be allowed to
reapply for a license upon
28 termination of service with the
commissioner and the payment of appli-
29 cable fees. Such applicants shall not be
required to take an examination,
30 except for any new class of insurance for
which the applicant was not
31 previously licensed, or certify completion
of continuing education
32 requirements for the period of such
service.
33 (b) Any licensee may
apply for inactive producer status. All requests
34 for inactive status shall be made in
writing to the commissioner. After a
35 license has been inactive for four years or
more, the licensee must meet
36 all the standards of a new applicant before
the license may be restored
37 to active status. If requests for inactive
status are not renewed as set forth
38 above, the license will be taken off the
inactive status and the license will
39 lapse immediately.
40 New Sec. 55. An
insurance producer may place insurance business
41 for which the insurance producer is
licensed with any insurer for which
42 the insurance producer is not a producer,
so long as a contract authorizing
43 that producer to place business with such
insurer has been signed before
HB 2741
55
1 receipt of commission for that
business.
2 New
Sec. 56. License suspension, revocation or denial. (a)
Any li-
3 cense issued under this act may be
suspended or revoked, and any ap-
4 plication for a license may be
denied, if the commissioner finds the li-
5 censee or applicant has:
6 (1) Willfully
violated any provision of the insurance laws of Kansas or
7 any rule or regulation promulgated by
the commissioner;
8 (2) intentionally
made a material misstatement in an application for
9 a license;
10 (3) obtained or
attempted to obtain a license through misrepresen-
11 tation or fraud;
12 (4) misappropriated or
converted or improperly withheld money re-
13 quired to be held in a fiduciary
capacity;
14 (5) intentionally
misrepresented the terms of any actual or proposed
15 insurance policy;
16 (6) in the transaction
of business under such license, used fraudulent,
17 coercive or dishonest practices, or has
demonstrated incompetence, un-
18 trustworthiness or financial
irresponsibility;
19 (7) been, within the
past 3 years, convicted of a felony, unless the
20 individual demonstrates to the commissioner
sufficient rehabilitation to
21 warrant the public trust;
22 (8) knowingly accepted
insurance business from an individual who is
23 not licensed;
24 (9) failed to appear
without reasonable cause or excuse in response
25 to a subpoena lawfully issued by the
commissioner;
26 (10) had such license
suspended or revoked or application denied in
27 any other state, district, territory or
province on grounds similar to those
28 stated in this section;
29 (11) violated any of the
provisions of this act;
30 (12) failed to report a
felony conviction; or
31 (13) knowingly employed,
contracted or engaged in any insurance
32 related capacity any person whose license
as an insurance producer or
33 limited insurance representative or
insurance consultant has been re-
34 voked within the previous three years or
whose request for a license has
35 been refused or suspended pursuant to this
section at the time of such
36 employment, engaging or contracting.
37 (b) Suspension or
revocation of a license or the denial of an appli-
38 cation pursuant to this act shall be by
written order sent to the licensee
39 or applicant by certified or registered
mail at the address specified in the
40 records of the department. The licensee or
applicant may in writing re-
41 quest a hearing within 30 days of the date
of mailing. If no written request
42 is made, such order shall be final upon the
expiration of the 30 days.
43 (c) If the licensee or
applicant requests a hearing pursuant to this
HB 2741
56
1 section the commissioner shall issue
a written notice of hearing sent to
2 the licensee or applicant by
certified or registered mail and the licensee's
3 or applicant's address, as specified
in the records of the department, stat-
4 ing:
5 (1) The grounds,
charges or conduct which justifies suspension or
6 revocation or denial;
7 (2) a specific
time for the hearing, which may not be less than 20 nor
8 more than 30 days after mailing of
notice of the hearing; and
9 (3) a specific
place for the hearing.
10 (d) Upon the suspension
or revocation of a license, the licensee or
11 other person having possession or custody
of such license shall promptly
12 deliver it to the department in person or
by mail.
13 (e) Any individual whose
license is revoked or whose application is
14 denied pursuant to this section shall be
ineligible to apply for any license
15 for three years. No person whose license as
an insurance producer or
16 limited representative has been revoked,
suspended or denied shall be
17 employed, contracted or engaged in any
insurance related capacity during
18 the time the revocation, suspension or
denial is in effect.
19 (f) In addition to or
instead of a denial, suspension or revocation or
20 a license pursuant to this section, the
licensee may be subjected to a civil
21 penalty of up to $1,000 for each cause for
denial, suspension or revoca-
22 tion.
23 New Sec. 57. (a)
The commissioner may investigate any applicant
24 for or holder of an insurance producer
license, limited insurance repre-
25 sentative license, temporary insurance
producer license or any registered
26 firm.
27 (b) All persons being
investigated, as well as their officers, directors,
28 insurance producers, limited insurance
representatives and temporary in-
29 surance producers, shall provide to the
commissioner convenient and free
30 access, at all reasonable hours at their
offices, to all books, records, doc-
31 uments and other papers relating to such
persons' insurance business
32 affairs. The officers, directors, insurance
producers, limited insurance
33 representatives, temporary insurance
producers and employees shall fa-
34 cilitate and aid the commissioner in such
examinations as much as it is in
35 their power to do so.
36 (c) The commissioner may
designate an investigator or investigators
37 to conduct any investigation pursuant to
this section. The commissioner
38 or the commissioner's designee may
administer oaths and examine under
39 oath any individual relative to the
business of the person being investi-
40 gated.
41 (d) The investigators
designated by the commissioner pursuant to this
42 section may make reports to the
commissioner. Any report alleging sub-
43 stantive violations of law or rules and
regulations of the commissioner
HB 2741
57
1 shall be in writing and be based on
facts ascertained from the books,
2 records, documents, papers,
statements and other evidence obtained by
3 the examiners. The report of an
investigation shall be verified by the
4 investigators.
5 (e) If a report is
made, the commissioner shall either deliver a du-
6 plicate thereof to the person being
investigated or send such duplicate
7 by certified or registered mail to
the person's address of record. The
8 commissioner shall afford the person
an opportunity to demand a hearing
9 pursuant to the Kansas administrative
procedures act with reference to
10 the facts and other evidence contained in
the report.
11 (f) Any person who
violates or aids and abets any violation of a written
12 order issued under this section shall be
guilty of a class A nonperson
13 misdemeanor and such person's license may
be revoked or suspended
14 pursuant to this act.
15 New Sec. 58. No
insurance company, insurance producer, limited
16 insurance representative, insurance
consultant or registered firm shall
17 pay, directly or indirectly, any
commission, service fee, brokerage or other
18 valuable consideration to any person for
services as an insurance pro-
19 ducer, temporary insurance producer or
limited insurance representative,
20 or for such services by the person's
members, officers, directors or em-
21 ployees, unless the person, and any member,
officer, director or employee
22 performing such service held a valid
license regarding the class of insur-
23 ance as to which such service was rendered,
or unless the person was a
24 properly registered firm at the time such
service was performed. No per-
25 son, other than a person properly licensed
or registered in accordance
26 with this act at the time the person
performs services as an insurance
27 producer, temporary insurance producer,
insurance consultant or limited
28 insurance representative shall accept any
commission, service fee, bro-
29 kerage or other valuable consideration for
such services. This section shall
30 not prevent payment or receipt of renewal
or other deferred commissions
31 to or by any person entitled thereto.
32 Except for commissions
deductible from premiums on insurance pol-
33 icies or contracts for insurance, no
insurance producer, limited insurance
34 representative, insurance consultant, or
registered firm has any right to
35 compensation from any insured or
prospective insured for or on account
36 of the transaction of insurance business,
except for fees properly charged
37 by an insurance consultant pursuant to this
act.
38 New Sec. 59. A
producer who negotiates, renews or continues a con-
39 tract of insurance, including any type of
annuity by an insurance company
40 lawfully doing business in this state, and
who receives any money or sub-
41 stitute for money as a premium for such a
contract from the insured,
42 whether the producer is entitled to any
interest in the premium, shall be
43 deemed to hold such premium in trust for
the company. If such producer
HB 2741
58
1 fails to pay the same to the company
after written demand made upon
2 such producer, less such producer's
commission and any deductions per-
3 mitted by contract with that company,
such failure shall be prima facie
4 evidence such producer has used or
applied the premium for a purpose
5 other than paying the same over to
the company. A producer who violates
6 this section shall be guilty of a:
(a) severity level 7, nonperson felony if
7 the value of the premium is $25,000
or more; (b) severity level 9, non-
8 person felony if the value of the
premium is at least $500 but less than
9 $25,000; or (c) class A nonperson
misdemeanor if the value of the pre-
10 mium is less than $500, except if the value
of the premium is less than
11 $500 and such producer has been convicted
of violating this section two
12 or more times within five years immediately
preceding commission of the
13 crime, shall be guilty of a severity level
9, nonperson felony.
14 New Sec. 60. (a)
Each licensed producer, surplus line producer, lim-
15 ited insurance representative, insurance
consultant and registered firm
16 shall maintain in force, while licensed, an
errors and omissions liability
17 policy covering the individual producer or
registered firm in an amount
18 of not less than $100,000 total liability
limit per occurrence, subject to
19 not less than $500,000 annual aggregate for
all claims made during the
20 policy period or covering the individual or
registered firm under blanket
21 liability policy or policies, which policy
or policies can include other cov-
22 erage on an excess basis over $100,000
primary insuring other insurance
23 producers in an amount of not less than
$100,000 total liability limit per
24 occurrence subject to not less than
$500,000 annual aggregate for all
25 claims made during the policy period. Such
policy shall be issued by an
26 admitted insurance company or authorized
surplus lines insurer for errors
27 and omissions of the producer or registered
firm. Self-retention shall be
28 permitted on liability policies covering a
producer or registered firm. This
29 section shall not apply to limited
insurance representatives, except that
30 registered firms or insurers may include
such representatives as covered
31 persons in policies covering producers and
others in the firm or company.
32 (b) Authorized insurance
producers of a registered firm may meet
33 the requirements of this section with a
policy in the name of the registered
34 firm.
35 (c) The policy required
by this section shall not be required for pro-
36 ducers who are on inactive status or for
temporary licensees.
37 New Sec. 61. (a)
The fees required by this act are as follows:
38 (1) An initial license
fee of $30 for filing an initial application for
39 producer, limited insurance representative,
or temporary insurance pro-
40 ducer licensed together with the first
biennial registration of $60;
41 (2) a biennial
registration fee of $60 at the biennial due date of each
42 producer or limited insurance
representative;
43 (3) a fee of $150 for
the initial issuance of an insurance consultant
HB 2741
59
1 licensed
2 (4) a biennial
registration fee of $50 at the biennial due date of each
3 insurance consultant;
4 (5) an initial fee
$60 for a business firm to register and a biennial
5 registration fee of $60 at each
biennial due date for the firm;
6 (6) an annual
registration fee of $100 for a continuing education pro-
7 vider to register;
8 (7) an annual
registration fee of $50 for each continuing education
9 course registered, or $250 per year
for all courses, whichever is less; and
10 (8) a license
reinstatement fee of $100 for reinstating a license which
11 lapsed because the applicant failed to
comply with continuing education
12 certification or because the registered
firm's biennial registration fee was
13 not received.
14 (b) Every domestic
insurer, fraternal benefit society or health main-
15 tenance organization which contract with an
insurance producer or lim-
16 ited insurance representative in this state
shall be required to pay an
17 annual fee of $2 for every such producer or
representative contracted
18 with in the state of Kansas in the year
preceding their report of that
19 contract. Every foreign or alien insurer,
fraternal benefit society or health
20 maintenance organization which contracts
with an insurance producer or
21 limited insurance representative in this
state shall be required to pay an
22 annual fee of $5 for every such producer or
representative contracted
23 with in the state of Kansas in the year
preceding their report.
24 (c) Foreign, domestic
and alien insurers, fraternal benefit societies,
25 and health maintenance organizations shall
report the number of pro-
26 ducers contracted with on the returns
required by K.S.A. 40-252, and
27 amendments thereto.
28 New
Sec. 62. Exemptions. The provisions of this act shall not
apply
29 to:
30 (a) Any regularly
salaried officer or employee of an insurance com-
31 pany who is engaged in the performance of
usual and customary execu-
32 tive, administrative or clerical duties,
other than the solicitation of insur-
33 ance;
34 (b) salaried employees
of any property and casualty insurance pro-
35 ducer or registered firm, who devote their
full time to clerical and ad-
36 ministrative services, including the
soliciting of appointments with poten-
37 tial insureds for licensed producers, to
include asking the potential
38 insured for the expiration dates of their
current insurance, and receipt of
39 premiums in the office of their employer,
as long as such employees do
40 not solicit insurance, provide insurance
advice to insureds, receive any
41 commissions on such applications and their
compensation is not varied
42 by the volume of applications or premium
taken or received. Soliciting of
43 appointments on behalf of licensed
insurance producers is not soliciting
HB 2741
60
1 insurance or transacting the business
of insurance;
2 (c) persons who
secure and furnish information for the purpose of
3 group life insurance, group
annuities, group or blanket accident and
4 health insurance, or for the purpose
of enrolling individuals under such
5 plans, issuing certificates under
such plans or otherwise assisting in the
6 administering such plans, where no
commission is paid for such service;
7 (d) officers or
employees of advisory organizations, employee trust
8 plans or insurance companies who are
engaging in the inspection, rating
9 or classification of risks, or in the
supervision of the training of insurance
10 producers, limited insurance
representatives or temporary insurance pro-
11 ducers, and who are not individually
engaged in the solicitation or ne-
12 gotiation of policies or contracts for
insurance.
13 New Sec. 63. A
person who acts or holds oneself out as an insurance
14 producer, limited insurance representative,
surplus lines producer, in-
15 surance consultant or temporary insurance
producer without holding a
16 valid and current license under this act is
engaged in the unauthorized
17 business of insurance. An action in
injunction or quo warranto may be
18 brought by the commissioner in the name of
the state of Kansas to enjoin
19 the person from performing any such
unauthorized acts. The attorney
20 general of the state or the district or
county attorney of any county, at
21 the request of the commissioner, shall
render such assistance as may be
22 necessary in carrying out the provisions of
this section.
23 The court, if satisfied by
affidavit or otherwise that such person has
24 been engaged in the unauthorized business
of insurance, may enter a
25 temporary restraining order without notice
or bond, enjoining the defend-
26 ant from further engaging in such conduct.
A copy of the verified com-
27 plaint shall be served on the defendant and
the proceedings shall there-
28 after be conducted as in other civil cases.
If it is established the defendant
29 has been or is engaged in any such unlawful
business, the court may enter
30 an order of judgment perpetually enjoining
the defendant from further
31 engaging in such conduct. The court, in its
discretion, may apportion the
32 costs among the parties, including the
commissioner's cost of investigat-
33 ing, the cost of filing the complaint,
service of process, witness fees and
34 expenses, court reporter charges, and
reasonable attorney fees. The in-
35 junctive relief available under this
section is in addition to, and not in lieu
36 of, all other penalties and remedies
provided in this act.
37 The authority conferred by
this statute shall be in addition to, and not
38 in lieu of, authority to prosecute
criminally any person unlawfully engaged
39 in the business of insurance.
40 It shall be a class A
misdemeanor for any person to engage in the
41 unauthorized business of insurance. For
purposes of this act, the person
42 shall be construed as being engaged in the
unauthorized business insur-
43 ance if such person acts as or hold oneself
out as an insurance producer,
HB 2741
61
1 limited insurance representative,
surplus lines producer, insurance con-
2 sultant, temporary insurance producer
or titles of similar import, without
3 a valid and current license to
conduct the business of insurance issued by
4 the department. The attorney general
of the state or the district or county
5 attorney of any county, at the
request of the commissioner, shall initiate
6 criminal proceedings in the county in
which the prohibited acts occurred.
7 New
Sec. 64. (a) ``Insurance consultant'' means any person
who, for
8 a fee, engages in the business of
offering to the public any advice, counsel,
9 opinion or service with respect to
insurable risks, or concerning the ben-
10 efits, coverages or provisions under any
policy of insurance that could be
11 issued in this state, or involving the
advantages or disadvantages of any
12 such policy of insurance, or any formal
plan of managing pure risk or the
13 investigation and adjustment of property
and casualty losses in this state.
14 (b) ``Risk manager''
means any person who is a full-time employee
15 who deals with matters of insurance within
the scope of such employ-
16 ment, including the supervision of employee
benefits.
17 (c) ``Person'' means any
individual, corporation, partnership, limited
18 liability company or other entity.
19 (d) ``Pure risk'' means
any risk that involves the chance of loss or no
20 loss only with no possibility of gain.
21 New Sec. 65. No
person, in or on advertisements, cards, signs, cir-
22 culars, letterheads, or elsewhere or in any
other manner by which public
23 announcements are made, shall use the title
insurance consultant, risk
24 manager, adjuster or any similar title or
any title, word, combination of
25 words or abbreviation indicating that such
person gives or is engaged in
26 the business of offering to the public any
advice, counsel, opinion, or
27 service with respect to insurable risks,
concerning the benefits, coverages
28 or provisions under any policy of insurance
that could be issued in this
29 state, or involving the advantages or
disadvantages of any such policy of
30 insurance, or the investigation and
adjustment of losses unless such per-
31 son holds a license as an insurance
consultant under this act.
32 No person shall act as an
insurance consultant until such person has
33 been licensed as provided by this act. Any
person violating this section
34 shall be guilty of a class A
misdemeanor.
35 A person shall not be deemed
to be acting as an insurance consultant
36 under the following circumstances:
37 (a) A licensed insurance
producer gives advice incidental to the nor-
38 mal course of the producer's insurance
business and does not charge a
39 fee other than commissions received from
insurance written;
40 (b) any attorney,
actuary, certified public accountant, teacher of in-
41 surance or trust officer of a bank consults
during the normal course of
42 such person's usual business, and only
incidental to such business;
43 (c) any person adjusts a
claim as a salaried employee of an insurance
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62
1 company, third-party administrator or
other entity licensed by the com-
2 missioner or who exclusively
contracts with insurance companies or other
3 entities licensed by the
commissioner; or
4 (d) a person
employed as a risk manager consults during the normal
5 course of such person's full-time
employment to the company by which
6 such person is employed.
7 New
Sec. 66. Any person, sole proprietorship, corporation,
partner-
8 ship, or limited liability company
engaged in the business of insurance
9 consulting may become licensed as an
insurance consultant. No license
10 shall be granted to a corporation,
partnership or limited liability company
11 unless the corporation, partnership or
limited liability company designates
12 a licensed consultant who shall have full
responsibility for all insurance
13 consulting transactions of the corporation,
partnership or limited liability
14 company within the state. Such designated
consultant shall be an officer
15 of the corporation or a member of the
partnership or limited liability
16 company and shall have a substantial
interest in or be an active participant
17 in the management of the corporation,
partnership or limited liability
18 company. If a corporation, partnership or
limited liability company has
19 more than one office it shall designate a
consultant for each office. In the
20 event a designated consultant of a licensed
corporation, partnership or
21 limited liability company shall either
leave the corporation, partnership
22 or limited liability company or have such
consultant's license terminated,
23 the corporation, partnership or limited
liability company shall have 60
24 days after such termination in which to
designate another qualified li-
25 censed consultant or have its license
terminated. Any individual associated
26 with a licensed corporation, partnership or
limited liability company who
27 acts as an insurance consultant shall be a
licensed consultant.
28 New Sec. 67. A
nonresident applicant may qualify for a license under
29 this act as a nonresident consultant. A
license shall be issued to a non-
30 resident insurance consultant without
examination where the applicant's
31 resident supervisory insurance official
certifies that the applicant is a li-
32 censed insurance consultant, or a license
deemed substantially equivalent
33 by the commissioner, in good standing for
at least 12 months. The com-
34 missioner shall accept compliance with
continuing education require-
35 ments of this section by nonresident
insurance consultants if the produc-
36 ers submit certification from the insurance
supervisory authority in the
37 consultant's home state affirming that the
nonresident insurance con-
38 sultant is in compliance the continuing
education requirements of that
39 jurisdiction. Any nonresident applicant
whose resident state does not li-
40 cense insurance consultants may qualify for
a license as a nonresident
41 consultant in this state only upon
examination, except as provided in this
42 act.
43 Obtaining a nonresident
license shall constitute sufficient contact with
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63
1 this state for the exercise of
personal jurisdiction over such a person in
2 any action, suit or proceeding
instituted by or on behalf of any interested
3 person arising out of the applicant's
consulting business in this state.
4 New
Sec. 68. Every individual applicant for a license under
this act
5 shall have attained the age of 18,
shall be competent, trustworthy, finan-
6 cially responsible, and of good
personal and business reputation, and shall
7 have been licensed as an agent,
broker, producer or consultant in this
8 state or another state for the three
years immediately preceding the date
9 of application or have successfully
completed a specific program of in-
10 surance study which has a broad national or
regional recognition as de-
11 termined by the commissioner. Application
shall be made to the com-
12 missioner on forms prescribed by the
commissioner and shall be
13 accompanied by the license fee required by
section 43. If the applicant
14 is an individual, the application shall
include the applicant's social security
15 number. The commissioner may issue an
insurance consultant's license
16 in the following areas: Property and
casualty insurance; claims adjusting;
17 and life, health, and annuities. A person
may become licensed in one or
18 more of such areas.
19 All individual applicants for
licensure under this act shall be examined
20 by the commissioner in such manner and form
as the commissioner pre-
21 scribes. The applicant shall pass the
examination with a grade determined
22 by the commissioner to indicate
satisfactory knowledge and understand-
23 ing of the area of insurance for which the
applicant seeks qualification as
24 a consultant.
25 An applicant for a license
under this act shall pay or cause to be paid
26 an examination fee as established by the
commissioner in advance of such
27 examination. The fee shall cover all of the
examinations given to the ap-
28 plicant at the same time and place. The fee
shall not be refunded to the
29 applicant. Examination fees collected under
this act shall be remitted to
30 the commissioner, unless the commissioner
contracts with an independ-
31 ent testing organization, in which case the
applicant shall pay the exam-
32 ination fee directly to such independent
testing organization and the fee
33 shall be the amount charged by the testing
organization.
34 The commissioner may require
a consultant, after notice and hearing
35 and a finding that the consultant lacks
competency, to submit to reex-
36 amination if the commissioner has reason to
believe the consultant lacks
37 competence.
38 New Sec. 69. The
commissioner may refuse to issue a consultant's
39 license to an applicant if such applicant
has failed to comply with any
40 prerequisite for the issuance of such
license, has made a material mis-
41 statement in the application for license,
or has demonstrated untrust-
42 worthiness, financial irresponsibility or
incompetency.
43 New Sec. 70. Every
insurance consultant who is an individual shall
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64
1 biennially complete a minimum of 10
continuing education credits in
2 courses certified by the commissioner
to contain educational material
3 relevant to the business of an
insurance consultant. CECs shall be in
4 addition to any CECs the insurance
consultant may be required to com-
5 plete by virtue of an insurance
producer license, except insurance con-
6 sultant licensees who hold both
insurance consultant and producer li-
7 censes may apply up to five hours of
CECs toward satisfying both
8 producer and insurance consultant
continuing education requirements.
9 Such compliance shall be reported as
required for producers' licenses
10 under this act and rules and regulations
promulgated by the commis-
11 sioner.
12 New Sec. 71. The
license shall state the name and resident address
13 of the licensee, date of issuance, whether
the licensee is qualified to con-
14 sult in property and casualty, claims
adjusting, life, health and annuities
15 and such other information as the
commissioner considers proper. All
16 sole proprietor, corporate, partnership and
limited liability company li-
17 censes shall expire two years after their
issuance or renewal, and all in-
18 dividual licenses shall expire on the
biennial due date of the applicant or
19 licensee. Such individual licenses may be
reissued within the ninety-day
20 period before their expiration dates. The
department shall establish pro-
21 cedures for the reissuance of licenses.
Every licensed consultant shall
22 notify the department within thirty days of
any change in such consultant's
23 residential or business address.
24 New Sec. 72. A
person holding a license issued under this act shall
25 biennially pay to the department the
required license fee as prescribed
26 by this act. The department shall not issue
a license to any person who
27 fails to pay the required license fee when
it becomes due.
28 New Sec. 73. A
consultant is obligated, under license, to serve with
29 objectivity and complete loyalty the
interests of the consultant's client and
30 to render the client such information,
counsel, and service as within the
31 knowledge, understanding and opinion, in
good faith of the licensee, best
32 serves the client's insurance needs and
interest.
33 No contract or agreement with
an insurance consultant shall be en-
34 forceable by such consultant unless it is
in writing and executed in du-
35 plicate by the person to be charged or by
the authorized representative
36 of such person. The agreement shall define
the subject matter of the
37 consulting services, outline the nature of
the work to be performed by
38 the consultant, and state the fee for the
work. One copy of the executed
39 agreement shall be provided to the customer
and the consultant shall
40 retain the other copy of the agreement for
not less than five years after
41 completion of the services.
42 It shall be unlawful for any
consultant, or any agency or sales organi-
43 zation with which the consultant is
connected, to receive any part of any
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65
1 commission or compensation paid by an
insurer or agent of an insurer in
2 connection with the sale or writing
of any insurance which is within the
3 subject matter of any consulting
service performed prior to the sale of
4 insurance and for which such
consultant has contracted to receive a fee.
5 For purposes of this section a
renewal of insurance shall not be considered
6 a sale of insurance.
7 It shall be unlawful to
charge a fee for consulting services for services
8 that are already or shall be
compensated for by an insurance commission
9 or other compensation for procuring
or servicing any insurance or annuity
10 contract.
11 It shall be unlawful for any
consultant, or any agency or sales organi-
12 zation with which the consultant is
connected, to charge a contingency
13 fee.
14 Any person may request the
commissioner to review the provisions of
15 any insurance consultant agreement to
determine whether it complies
16 with this act. The insurance consultant
shall provide the commissioner
17 with a copy of that agreement and any other
papers or records pertaining
18 to that agreement, if requested.
19 New Sec. 74. The
commissioner may revoke, suspend, fine, or place
20 on probation, for such period as the
commissioner may determine, the
21 license of any consultant if, after notice
and hearing, the commissioner
22 determines the licensee has:
23 (a) Violated any of the
provisions of this act, any insurance laws or
24 any lawful rule, regulation, or order of
the commissioner or the laws of
25 another state or province;
26 (b) recommended the
purchase of insurance, annuities or securities
27 from any authorized insurer in which the
consultant or any member of
28 the consultant's immediate family holds an
executive position or holds a
29 substantial interest;
30 (c) received
compensation in any form from any agency or other in-
31 surance organization for recommending such
agency or organization to
32 the consultant's client or entered into any
contingency fee contract;
33 (d) knowingly and
willfully misrepresented the terms of any actual or
34 proposed insurance contract;
35 (e) been found guilty of
any unfair trade practice or of fraud;
36 (f) been convicted of
any felony, or convicted of a class A or B mis-
37 demeanor evidencing such licensee is not
worthy of the public trust;
38 (g) had a consultant's,
producer's or agent's license suspended, re-
39 voked or placed on probation in any other
state;
40 (h) failed to submit to
a reexamination for competence or failed to
41 pass such examination;
42 (i) demonstrated
incompetency, untrustworthiness or failure to com-
43 ply with the provisions of the insurance
consultant's contract; or
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66
1 (j) obtained the
license through misrepresentation, fraud or any cause
2 for which issuance could have been
refused had it been known to the
3 commissioner at the time of
issuance.
4 New
Sec. 75. The commissioner is hereby authorized to adopt
such
5 rules and regulations as may be
necessary to carry out the provisions of
6 this act, to include outsourcing
agent licensing examinations, continuing
7 education requirements, licensing and
administration of any of these
8 functions.
9
Sec. 76. K.S.A. 40-214, 40-240g, 40-241a, 40-241b,
40-241c, 40-
10 241e, 40-241f, 40-241g, 40-241h, 40-241j,
40-241k, 40-244, 40-245, 40-
11 246a, 40-246c, 40-246d, 40-246e, 40-246f,
40-282, 40-299, 40-2,106, 40-
12 2,107, 40-2,131, 40-2,132, 40-2,133,
40-741, 40-1612, 40-1613, 40-2209l,
13 40-2209m, 40-2406, 40-2508, 40-2612,
40-3608, 40-3618, 40-3701, 40-
14 3702, 40-3703, 40-3704, 40-3705, 40-3707,
40-3708, 40-3709, 40-3710,
15 40-3711, 40-3712, 40-3713, 40-3714,
40-37a01, 40-37a02, 40-37a04, 40-
16 37a05, 40-37a06, 40-4103, 40-4109, 40-4117,
40-4119 and 44-592 and
17 K.S.A. 1997 Supp. 40-239, 40-240, 40-240f,
40-241, 40-241i, 40-242,
18 40-246, 40-246b, 40-247, 40-2,118,
40-2,125, 40-2,135, 40-2c21, 40-1909,
19 40-19a10, 40-19c09, 40-2404 and 40-3706 are
hereby repealed.
20 Sec. 77. This act
shall take effect and be in force from and after its
21 publication in the statute book.
22
23