31A-23a-501 - Licensee compensation.
31A-23a-501. Licensee compensation.
(1) As used in this section:
(a) "Commission compensation" includes funds paid to or credited for the benefit of alicensee from:
(i) commission amounts deducted from insurance premiums on insurance sold by orplaced through the licensee; or
(ii) commission amounts received from an insurer or another licensee as a result of thesale or placement of insurance.
(b) (i) "Compensation from an insurer or third party administrator" means commissions,fees, awards, overrides, bonuses, contingent commissions, loans, stock options, gifts, prizes, orany other form of valuable consideration:
(A) whether or not payable pursuant to a written agreement; and
(B) received from:
(I) an insurer; or
(II) a third party to the transaction for the sale or placement of insurance.
(ii) "Compensation from an insurer or third party administrator" does not meancompensation from a customer that is:
(A) a fee or pass-through costs as provided in Subsection (1)(e); or
(B) a fee or amount collected by or paid to the producer that does not exceed an amountestablished by the commissioner by administrative rule.
(c) (i) "Customer" means:
(A) the person signing the application or submission for insurance; or
(B) the authorized representative of the insured actually negotiating the placement ofinsurance with the producer.
(ii) "Customer" does not mean a person who is a participant or beneficiary of:
(A) an employee benefit plan; or
(B) a group or blanket insurance policy or group annuity contract sold, solicited, ornegotiated by the producer or affiliate.
(d) (i) "Noncommission compensation" includes all funds paid to or credited for thebenefit of a licensee other than commission compensation.
(ii) "Noncommission compensation" does not include charges for pass-through costsincurred by the licensee in connection with obtaining, placing, or servicing an insurance policy.
(e) "Pass-through costs" include:
(i) costs for copying documents to be submitted to the insurer; and
(ii) bank costs for processing cash or credit card payments.
(2) A licensee may receive from an insured or from a person purchasing an insurancepolicy, noncommission compensation if the noncommission compensation is stated on aseparate, written disclosure.
(a) The disclosure required by this Subsection (2) shall:
(i) include the signature of the insured or prospective insured acknowledging thenoncommission compensation;
(ii) clearly specify the amount or extent of the noncommission compensation; and
(iii) be provided to the insured or prospective insured before the performance of theservice.
(b) Noncommission compensation shall be:
(i) limited to actual or reasonable expenses incurred for services; and
(ii) uniformly applied to all insureds or prospective insureds in a class or classes ofbusiness or for a specific service or services.
(c) A copy of the signed disclosure required by this Subsection (2) must be maintainedby any licensee who collects or receives the noncommission compensation or any portion of thenoncommission compensation.
(d) All accounting records relating to noncommission compensation shall be maintainedby the person described in Subsection (2)(c) in a manner that facilitates an audit.
(3) (a) A licensee may receive noncommission compensation when acting as a producerfor the insured in connection with the actual sale or placement of insurance if:
(i) the producer and the insured have agreed on the producer's noncommissioncompensation; and
(ii) the producer has disclosed to the insured the existence and source of any othercompensation that accrues to the producer as a result of the transaction.
(b) The disclosure required by this Subsection (3) shall:
(i) include the signature of the insured or prospective insured acknowledging thenoncommission compensation;
(ii) clearly specify the amount or extent of the noncommission compensation and theexistence and source of any other compensation; and
(iii) be provided to the insured or prospective insured before the performance of theservice.
(c) The following additional noncommission compensation is authorized:
(i) compensation received by a producer of a compensated corporate surety who underprocedures approved by a rule or order of the commissioner is paid by surety bond principaldebtors for extra services;
(ii) compensation received by an insurance producer who is also licensed as a publicadjuster under Section 31A-26-203, for services performed for an insured in connection with aclaim adjustment, so long as the producer does not receive or is not promised compensation foraiding in the claim adjustment prior to the occurrence of the claim;
(iii) compensation received by a consultant as a consulting fee, provided the consultantcomplies with the requirements of Section 31A-23a-401; or
(iv) other compensation arrangements approved by the commissioner after a finding thatthey do not violate Section 31A-23a-401 and are not harmful to the public.
(4) (a) For purposes of this Subsection (4), "producer" includes:
(i) a producer;
(ii) an affiliate of a producer; or
(iii) a consultant.
(b) Beginning January 1, 2010, in addition to any other disclosures required by thissection, a producer may not accept or receive any compensation from an insurer or third partyadministrator for the placement of a health benefit plan, other than a hospital confinementindemnity policy, unless prior to the customer's purchase of the health benefit plan the producer:
(i) except as provided in Subsection (4)(c), discloses in writing to the customer that theproducer will receive compensation from the insurer or third party administrator for theplacement of insurance, including the amount or type of compensation known to the producer atthe time of the disclosure; and
(ii) except as provided in Subsection (4)(c):
(A) obtains the customer's signed acknowledgment that the disclosure under Subsection(4)(b)(i) was made to the customer; or
(B) (I) signs a statement that the disclosure required by Subsection (4)(b)(i) was made tothe customer; and
(II) keeps the signed statement on file in the producer's office while the health benefitplan placed with the customer is in force.
(c) If the compensation to the producer from an insurer or third party administrator is forthe renewal of a health benefit plan, once the producer has made an initial disclosure thatcomplies with Subsection (4)(b), the producer does not have to disclose compensation receivedfor the subsequent yearly renewals in accordance with Subsection (4)(b) until the renewal periodimmediately following 36 months after the initial disclosure.
(d) (i) A licensee who collects or receives any part of the compensation from an insurer orthird party administrator in a manner that facilitates an audit shall, while the health benefit planplaced with the customer is in force, maintain a copy of:
(A) the signed acknowledgment described in Subsection (4)(b)(i); or
(B) the signed statement described in Subsection (4)(b)(ii).
(ii) The standard application developed in accordance with Section 31A-22-635 shallinclude a place for a producer to provide the disclosure required by this Subsection (4), and ifcompleted, shall satisfy the requirement of Subsection (4)(d)(i).
(e) Subsection (4)(b)(ii) does not apply to:
(i) a person licensed as a producer who acts only as an intermediary between an insurerand the customer's producer, including a managing general agent; or
(ii) the placement of insurance in a secondary or residual market.
(5) This section does not alter the right of any licensee to recover from an insured theamount of any premium due for insurance effected by or through that licensee or to charge areasonable rate of interest upon past-due accounts.
(6) This section does not apply to bail bond producers or bail enforcement agents asdefined in Section 31A-35-102.
Amended by Chapter 10, 2010 General Session