1997 Regular Session
To: Insurance; Business and Financial Institutions
By: Senator(s) Kirby
Senate Bill 2787
AN ACT TO CREATE THE MISSISSIPPI INSURANCE LICENSEE SALES ACT; TO DEFINE CERTAIN TERMS; TO AUTHORIZE THE COMMISSIONER OF INSURANCE TO PROMULGATE ADMINISTRATIVE REGULATIONS TO EFFECTUATE THE PURPOSES OF THE ACT; TO ENABLE FINANCIAL INSTITUTIONS TO ENGAGE IN THE SALE OF INSURANCE SUBJECT TO THE REQUIREMENTS AND CONDITIONS OF THIS ACT AND ALL OTHER INSURANCE LAWS OF THE STATE OF MISSISSIPPI; TO REQUIRE LICENSURE OF PERSONS OR ENTITIES WHO SOLICIT OR WHO RECEIVE COMPENSATION FOR THE PURCHASE OR SALE OF ANY INSURANCE PRODUCT; TO PROHIBIT THE TYING OF BANKING PRODUCTS OR SERVICES WITH THE PURCHASE OF INSURANCE PRODUCTS; TO REQUIRE FINANCIAL INSTITUTIONS TO MAKE CERTAIN DISCLOSURES WHEN SOLICITING THE PURCHASE OF OR SELLING INSURANCE; TO PROHIBIT FINANCIAL INSTITUTIONS FROM ENGAGING IN CERTAIN MISLEADING ADVERTISING WHEN SELLING INSURANCE; TO PROHIBIT FINANCIAL INSTITUTIONS FROM DISCRIMINATING AGAINST NON-AFFILIATED AGENTS; TO PROVIDE THAT CERTAIN NONPUBLIC CUSTOMER INFORMATION SHALL NOT BE USED WITHOUT THE CUSTOMER'S CONSENT; TO PLACE CERTAIN RESTRICTIONS ON THE PHYSICAL LOCATION OF INSURANCE ACTIVITIES OF FINANCIAL INSTITUTIONS; TO PROVIDE PENALTIES FOR VIOLATIONS OF THE ACT; TO PROVIDE FOR THE CORPORATE STRUCTURE AND RECORD-KEEPING REQUIREMENTS OF INSURANCE ACTIVITIES OF FINANCIAL INSTITUTIONS; TO GRANT ENFORCEMENT POWERS TO THE DEPARTMENT OF INSURANCE; TO AMEND SECTION 83-17-101, MISSISSIPPI CODE OF 1972, IN CONFORMITY THERETO; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Short Title. Sections 1 through 22 of this act may be cited as the Mississippi Insurance Licensee Sales Act.
SECTION 2. Purpose. For the purpose of regulating the business of insurance in Mississippi and protecting the interests of insurance policyholders in this state, the following provisions are required to regulate the sale of insurance by, and on the premises of, financial institutions in this state.
SECTION 3. Definitions. For the purposes of this act:
(a) "Commissioner" means the Commissioner of Insurance of the State of Mississippi.
(b) "Financial institution" means a bank holding company, as defined in the Bank Holding Company Act of 1956, as amended, 12 U.S.C. Section 1841, a bank, savings bank, savings and loan association, trust company, or any depository institution as defined by the Federal Deposit Insurance Act, as amended, 12 U.S.C. Section 1813(c)(1), any affiliate or subsidiary of any of the above, and any other individual, corporation, partnership or association authorized to take deposits and make loans in this state. The term financial institution does not include an insurance company.
(c) The term "insurance" includes all products defined or regulated as insurance by Title 83, Mississippi Code of 1972, except:
(i) Credit life, credit accident and health, and credit involuntary unemployment insurance;
(ii) Insurance placed by a financial institution in connection with collateral pledged as security for a loan when the debtor breaches the contractual obligation to provide that insurance; and
(iii) Private mortgage insurance.
(d) "Insurance company" means a company that possesses a certificate of authority to transact insurance business in Mississippi.
(e) "Qualifying location" means any place the population of which does not exceed seven thousand (7,000) inhabitants, as shown by the last preceding decennial census.
(f) "Financial institution agent" means an agent as defined in this section which is a corporation located and doing business in a qualifying location, organized for the purpose of insurance sales and which is owned either solely by a financial institution located and doing business in a qualifying location, or jointly by such a financial institution and one or more individual agents.
(g) "Annuity agent" means an agent as defined in this section who is an officer or employee of a financial institution which is not located in a qualifying location and whose actions as agent shall be limited to dealing with annuity contracts.
(h) "Financial institution annuity agent" means an agent as defined in this section which is a corporation not located and doing business in a qualifying location, organized for the purpose of selling annuities, securities or investments and which is owned either solely by a financial institution not located and doing business in a qualifying location or jointly by such a financial institution and one or more individual agents or annuity agents.
(i) "Licensee" means any individual, partnership, professional corporation, financial institution agent or financial institution annuity agent holding a license under this title to serve as agent, broker or solicitor.
SECTION 4. Authorization For Implementing Regulations. The Commissioner of Insurance shall promulgate administrative regulations to effectuate the purposes of Sections 1 through 22 of this act.
SECTION 5. Authorization To Sell. All financial institutions, and branches thereof, which are located in any qualifying location are authorized to engage in the solicitation and sale of insurance products subject to the requirements and conditions of Sections 1 through 22 of this act, all other insurance laws of the State of Mississippi, and administrative regulations as authorized by Section 4 of this act. All financial institutions and officers and employees thereof are prohibited from promoting, soliciting or selling insurance products other than annuities from any branch or facility of the financial institution located in any municipal corporation of this state which has a population of seven thousand (7,000) persons or more according to the last preceding federal census.
SECTION 6. Licensure Requirement. Solicitation for the purchase or sale of any insurance product by, or on the premises of, any licensee shall be conducted only by persons or entities who have complied with all applicable state insurance licensing and appointment laws and regulations and who have been issued an agent or broker's license pursuant to Section 83-17-1 et seq., Mississippi Code of 1972.
SECTION 7. Sales Force. Solicitation for the purchase or sale of insurance by a licensee shall be conducted only by persons whose responsibilities do not include loan transactions or other transactions involving the extension of credit, or the taking of deposits.
SECTION 8. Referrals By Unlicensed Persons. (1) No person who is not licensed as an agent or broker shall directly or indirectly receive any compensation or consideration from an agent, broker, insurance agency, insurer or the financial institution, based upon referral of potential purchasers to or making appointments with a licensed agent or broker.
(2) A non-licensed person may refer a customer who seeks to purchase, or seeks an opinion or advice on, any insurance product to a licensee, or the phone number of a licensee, who sells or provides opinions or advice on such product only if:
(a) The customer expressly requests such referral; and
(b) The person making the referral:
(i) Does not solicit such a request; and
(ii) Discloses to the customer that such product is not insured by the institution or the Federal Deposit Insurance Corporation; and
(iii) Does not receive any compensation for the referral.
SECTION 9. Anti-tying Provisions. (1) No financial institution may offer a banking product or service, or fix or vary the conditions of such offer, on a condition or requirement that the customer obtain insurance from the financial institution, or any particular agent or broker.
(2) No person shall require or imply that the purchase of an insurance product from a financial institution by a customer or prospective customer of the institution is required as a condition of, or is in any way related to, the lending of money or extension of credit, the establishment or maintenance of a trust account, the establishment or maintenance of a checking, savings or deposit account, or the provision of services related to any such activities.
(3) No financial institution may offer an insurance product in combination with banking products unless the insurance products and banking products are available separately from the institution at the same cost to the customer.
SECTION 10. Anti-Rebating Provision. No licensee shall offer any inducement to any customer to purchase insurance from the licensee, other than as plainly expressed in the insurance policy. Multi-level marketing programs, investment programs, memberships, or other programs, designed or represented to waive, reduce, pay, produce or provide funds to pay all or any part of the cost of insurance, constitute an illegal inducement.
SECTION 11. Disclosures. (1) A financial institution, and any person soliciting the purchase of or selling insurance on the premises of a financial institution, shall prominently disclose in writing, in clear and concise language, to the institution's customers, including in any advertisement or promotional material, pursuant to regulations prescribed by the commissioner, that:
(a) Insurance offered, recommended, sponsored or sold by the financial institution, or on the premises of the financial institution:
(i) Is not a deposit;
(ii) Is not insured by the Federal Deposit Insurance Corporation;
(iii) Is not guaranteed by the financial institution or an affiliated insured depository institution; and
(iv) Where appropriate, involves investment risk, including potential loss of principal.
(b) The product may be purchased from an agent or broker of the customer's choice, and the customer's choice of another insurance provider will not affect the customer's relationship with the financial institution.
(2) Any financial institution or other person required under subsection (1) of this section to make disclosures to a customer shall obtain a written acknowledgement of receipt by the customer of such disclosures, including the date of receipt and the customer's name, address and account number, prior to any application for insurance sold by the financial institution. Such acknowledgement shall be in a separate document.
SECTION 12. Misleading Advertising. No financial institution may employ any advertisement that would mislead or otherwise cause a reasonable person to believe mistakenly that the State of Mississippi or the federal government is responsible for the insurance sales activities of an affiliate of the financial institution, or stands behind the affiliate's credit, or that the institution, the State of Mississippi, or the federal government guarantees any returns on insurance products, or is a source of payment of any insurance obligation of or sold by the affiliate.
SECTION 13. Timing of Solicitation. No financial institution may, directly or indirectly:
(a) Specify conditions, relating to the purchase of insurance, of a loan or extension of credit to a customer; or
(b) Solicit the consent from a customer, who has applied for a loan or extension of credit from the institution, for the institution to perform or deliver such conditions;
before such time as the customer has received a written commitment from the financial institution with respect to such loan or extension of credit or, in the event that no written commitment has or will be issued in connection with the loan or extension of credit, before such time as the customer receives notification of approval of the loan or extension of credit by the financial institution and that entity creates a written record of the loan or extension of credit approval.
SECTION 14. Insurance in Connection With A Loan. (1) If insurance is required by a financial institution as a condition of obtaining a loan, the credit and insurance transactions shall be completed independently and through separate documents.
(2) A loan for premiums on required insurance shall not be included in the primary credit without the written consent of the customer.
SECTION 15. No Discrimination Against Non-Affiliated Agents. No financial institution may:
(a) Require as a condition of providing any product or service to any customer, or any renewal of any contract for providing such product or service, that the customer acquire, finance or negotiate any policy or contract of insurance through a particular insurer, agent or broker;
(b) In connection with a loan or extension of credit that requires a borrower to obtain insurance, reject an insurance policy because such policy has been issued or underwritten by any person who is not associated with such institution;
(c) Impose any requirement on any insurance agent or broker who is not associated with the financial institution that is not imposed on any insurance agent who is associated with such institution; or
(d) Unless otherwise authorized by any applicable federal or state law, require any debtor, insurer, broker or agent to pay a separate charge in connection with the handling of insurance that is required under a contract.
SECTION 16. Customer Privacy. (1) As used in this section, unless the context requires otherwise:
(a) "Customer" means a person with an investment, security, deposit, trust or credit relationship with a financial institution; and
(b) "Nonpublic customer information" means information regarding a person that has been derived from a record of a financial institution. "Nonpublic customer information" does not include customer names, addresses and telephone numbers; and, in all events, "nonpublic customer information" shall include information concerning insurance premiums, the terms and conditions of insurance coverage, insurance expirations, insurance claims and insurance history of an individual.
(2) No person shall use any nonpublic customer information for the purpose of selling or soliciting the purchase of insurance or provide nonpublic customer information to a third party for the purpose of another's sale or solicitation of the purchase of insurance, unless it is clearly and conspicuously disclosed that the information may be so used and the customer has provided prior written consent to the use for this purpose, subject to subsection (4) of this section.
(3) Consent under subsection (2) of this section must be obtained in a separate document, distinct from any other transaction, and shall not be required as a condition for performance of other services for the customer.
(4) Nonpublic customer information obtained as a result of insurance required by a financial institution for the purpose of granting a loan or extending credit shall not be used for any other purpose.
SECTION 17. Physical Location of Insurance Activities. The place of solicitation or sale of insurance by any financial institution or on the premises of any financial institution shall be:
(a) Physically separated and substantially distinct from the banking activities of the institution; and
(b) Clearly and conspicuously signed so as to be easily distinguishable by the public as separate and distinct from the banking activities of the institution.
SECTION 18. Signage. Signs and other informational material concerning the availability of insurance products from the financial institution or a third party soliciting the purchase of or selling insurance on the premises of a financial institution shall not be displayed in an area where applications for loans or other extensions of credit are being taken or closed.
SECTION 19. Corporate Structure and Records. (1) Any financial institution, agent or financial institution annuity agent shall have an officer or director who is licensed as an insurance agent or broker, and all persons licensed pursuant to this act shall be officers, directors or employees of the financial institution agent or financial institution annuity agent corporation.
(2) Corporate books and records relating to the insurance transactions of the financial institution agent or financial institution annuity agent corporation, including all files relating to and reflecting customer complaints, shall be kept separate and apart from all records relating to the banking transactions of the financial institution.
(3) No insurer shall pay directly or indirectly any compensation or other consideration to a licensee for activities relating to the licensee's marketing or effectuation of insurance unless the licensee complies with subsections (1) and (2), and the compensation or other consideration relates solely to insurance sold by licensed employees, directors or officers of such licensee.
SECTION 20. Penalties. Any person who violates the provisions of Sections 1 through 22 of this act, or who fails to perform any duties imposed by Sections 1 through 22 of this act, or who violates any administrative regulation promulgated pursuant to Sections 1 through 22 of this act, shall be liable for a civil penalty not to exceed the sum of One Thousand Dollars ($1,000.00) for each day which such violation continues, and in addition, may be concurrently enjoined from any further violations.
SECTION 21. Enforcement. (1) In general. Any person violating the provisions of Sections 1 through 22 of this act shall be subject to any and all enforcement procedures either currently employed or subsequently promulgated by the Department of Insurance including, but not limited to, the issuance of a cease and desist order requiring such a person to cease all insurance sales and solicitation activities or the imposition of any other administrative penalty the department deems appropriate.
(2) Private cause of action. Any customer of a licensee who is subjected to any violation of Sections 1 through 22 of this act, any licensee who is placed at a competitive disadvantage by any violation of Sections 1 through 22 of this act, and any association representing the interests of either, shall have a cause of action against such licensee for violation of Sections 1 through 22 of this act in any Mississippi state court of competent jurisdiction, provided that only injunctive relief shall be available in any such action.
(3) Testers. The Department of Insurance may implement procedures to conduct testing of financial institution practices with regard to insurance activities, policies or practices using testers who, without intention to purchase such products, pose as prospective purchasers of such products for the purpose of collecting evidence of violations of this subsection and regulations proscribed hereunder.
SECTION 22. Severability. The provisions of Sections 1 through 22 of this act and the changes made to existing statutory law by this act are severable.
SECTION 23. Section 83-17-101, Mississippi Code of 1972, is amended as follows:
83-17-101. Whenever used in this article, certain terms shall be defined as follows:
(a) The term "agent" shall include all individuals, partnerships and any corporation incorporated pursuant to Title 79, Chapter 9, Mississippi Code of 1972, being the Mississippi Professional Corporation Law, except as otherwise limited by Sections 83-17-105 or 83-17-227 through 83-17-231, who act in any manner, directly or indirectly, as such in the solicitation of, negotiation for, or procurement or making of a contract of life, health or accident insurance, or making of an annuity contract, and includes hospital service association agents; except that the term "agent" shall not include any regular salaried officer or employee of a licensed insurer or of a licensed insurance agent who does not solicit or accept from the public applications for any such contract. A regular salaried officer or employee of an insurer authorized to do business in this state shall not be deemed to be an "agent" by reason of rendering assistance to or on behalf of a licensed insurance agent, provided that such salaried officer or employee devotes substantially all of his time to activities other than the solicitation of applications for life, health or accident insurance or annuity contracts and receives no commission or other compensation directly dependent upon the amount of business obtained. The possessor of an insurable interest in any risk or subject of insurance shall not be deemed an agent by reason of procuring or maintaining, or agreeing to procure or maintain, insurance extending to such interests, together with the interest or interests of others in such risk or subject of insurance, however the cost may be borne.
(b) The term "supervising general agent" as used in this article refers to and includes any person, partnership, association or corporation, having authority to serve as trustees, managers or administrators, except attorneys at law, for such licensed insurance companies or their insureds in the handling of insurance programs underwritten by such licensed insurance companies, or in which they may be participating.
(c) The term "insurance contract" shall mean any contract or policy affecting life, health or accident insurance or any annuity contract on behalf of any company or insurer engaged in the business of writing life, health or accident insurance or annuity contracts.
(d) The term "excess risk" shall mean all or any portion of a life, health or accident insurance risk or contract of annuity for which application is made to an agent and which exceeds the amount of insurance or annuity which will be provided by the insurer for which such agent is licensed.
(e) The term "rejected risk" shall mean a life, health or accident insurance risk or annuity contract for which application has been made to an agent and which insurance or annuity contract is declined by the insurer for which such agent is licensed.
(f) The term "commissioner" shall mean the Commissioner of Insurance of the State of Mississippi.
(g) The terms "company" and "insurer" shall mean a corporation, association, hospital and/or medical service association, exchange, order or society writing life, health and accident and/or hospital insurance or annuity contracts, but shall not include fraternal societies as defined in Section 83-29-1.
(h) The term "person" shall mean any individual, partnership or corporation incorporated pursuant to Title 79, Chapter 9, Mississippi Code of 1972, Sections 79-10-1 through 79-10-117, being the Mississippi Professional Corporation Law, except as otherwise limited by Sections 83-17-105 or 83-17-227 through 83-17-231.
(i) The term "qualifying location" shall mean any place the population of which does not exceed seven thousand (7,000) inhabitants, as shown by the last preceding decennial census.
(j) The term "financial institution agent" shall mean an agent as defined in this section which is a corporation located and doing business in a qualifying location, organized for the purpose of insurance sales and which is owned either solely by a financial institution located and doing business in a qualifying location, or jointly by such a financial institution and one or more individual agents.
(k) The term "annuity agent" shall mean an agent as defined in this section who is an officer or employee of a financial institution which is not located in a qualifying location and whose actions as agent shall be limited to dealing with annuity contracts.
(l) The term "financial institution annuity agent" shall mean an agent as defined in this section which is a corporation not located and doing business in a qualifying location, organized for the purpose of selling annuities, securities or investments and which is owned either solely by a financial institution not located and doing business in a qualifying location or jointly by such a financial institution and one or more individual agents or annuity agents.
(m) The term "licensee" shall mean any individual, partnership, professional corporation, financial institution agent or financial institution annuity agent holding a license under this title to serve as agent, broker or solicitor.
SECTION 24. This act shall take effect and be in force from and after July 1, 1997.