Bill Text: HI SB1212 | 2019 | Regular Session | Amended
Bill Title: Relating To Regulatory Authority Of The Insurance Commissioner.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2019-06-12 - Act 072, 06/07/2019 (Gov. Msg. No. 1173). [SB1212 Detail]
Download: Hawaii-2019-SB1212-Amended.html
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THE SENATE |
S.B. NO. |
1212 |
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THIRTIETH LEGISLATURE, 2019 |
S.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO REGULATORY AUTHORITY OF THE INSURANCE COMMISSIONER.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION
1. Chapter 431, Hawaii Revised Statutes,
is amended by adding a new article to be appropriately designated and to read
as follows:
"ARTICLE
THIRD
PARTY ADMINISTRATORS
§431: ‑101 Definitions.
For purposes of this article:
"Administrator"
or "third party administrator" means a person who collects charges or
premiums from, or who adjusts or settles claims on, residents of this State in
connection with self-insurance, stop-loss, or life insurance coverage, accident
and health or sickness insurance coverage, or article 1 of chapter 432, except
the following:
(1) An employer on behalf of its employees or the
employees of a subsidiary or an affiliated corporation of the employer;
(2) A union on behalf of its members;
(3) An insurer authorized to transact insurance in
this State with respect to a policy lawfully issued and delivered in and
pursuant to the laws of this State or another state;
(4) A producer licensed to sell life insurance
coverage or accident and health or sickness insurance coverage in this State,
whose activities are limited exclusively to the sale of insurance;
(5) A managing general agent licensed in this
State whose activities are limited exclusively to the scope of activities
conveyed under that license;
(6) An individual adjuster licensed in this State
whose activities are limited exclusively to the scope of activities conveyed
under that license;
(7) An individual who adjusts or settles claims in
the normal course of practice or employment as an attorney at law and who does
not collect charges or premiums in connection with life insurance coverage or
accident and health or sickness insurance coverage;
(8) A creditor on behalf of its debtors with
respect to insurance covering a debt between the creditor and its debtors;
(9) A trust established in conformity with title 29
United States Code section 186 and trustees, agents, and employees acting under
that trust;
(10) A trust exempt from taxation under title 26 United
States Code section 501(a) and trustees and employees acting under that trust,
or a custodian and the custodian's agents and employees acting under a
custodian account that meets the requirements of title 26 United States Code
section 401(f);
(11) A financial institution subject to supervision
or examination by federal or state banking authorities, or a mortgage lender
that collects and remits premiums to licensed producers or authorized insurers
in connection with loan payments;
(12) A credit card issuing company advancing for
and collecting premiums or charges from its credit card holders who have
authorized collection, provided the company does not adjust or settle claims;
and
(13) A person who acts solely as an administrator
of one or more employee benefit plans established by an employer or an employee
organization.
"Commissioner"
means the insurance commissioner.
"Insurance
producer" or "producer" has the same meaning as in section
431:9A-102.
"Insurer"
has the same meaning as in section 431:1-202.
"Person"
has the same meaning as in section 431:1-212.
"Stop-loss
insurance" means an insurance protecting an employer or other person
responsible for an otherwise self-insured health or life benefit plan against
obligations under the plan, but does not include reinsurance written for an
insurance company.
§431: ‑102 License required; application. (a) No person shall act as or hold out to be an
administrator in this State without a license as an administrator issued by the
commissioner.
(b) An administrator shall apply to the
commissioner on a form prescribed by the commissioner. The application shall include the following:
(1) A nonrefundable fee as set forth in section
431:7-101;
(2) All basic organizational documents of the
administrator, including any articles of incorporation, articles of
association, partnership agreement, trade name certificate, trust agreement,
shareholder agreement, and other applicable documents and all amendments to the
documents;
(3) The bylaws, rules, regulations, or similar
documents regulating the internal affairs of the administrator;
(4) The names, addresses, official positions, and
professional qualifications of the individuals responsible for the conduct of
affairs of the administrator, including but not limited to all members of the
board of directors, board of trustees, executive committee, or other governing
board or committee; the principal officers in the case of a corporation; or the
partners in the case of a partnership;
(5) Annual audited financial statements for the
two most recent years that prove the applicant is solvent and information the
commissioner may require to review the current financial condition of the
applicant; and
(6) Any other pertinent information the
commissioner may require.
(c) An administrator licensee or applicant for
licensure shall notify the commissioner within thirty days of any material
change in its ownership, control, contact person for the administrator, or any
other fact or circumstance affecting the licensee's or applicant's
qualification for licensure.
(d) If an administrator employs or has contracted
individuals to adjust claims for the administrator, the employees or contracted
individuals shall first be licensed as individual adjusters.
(e) If an administrator employs or has contracted
individuals to sell, solicit, or negotiate insurance business, the employees or
contracted individuals shall first be licensed as producers. An administrator who intends to directly
solicit insurance contracts or otherwise act as a producer shall first be
licensed as an insurance producer.
(f) The commissioner may refuse to issue a
license if the commissioner determines, after notice and hearing pursuant to
section 431:2-308 and chapter 91, that the administrator is not competent,
trustworthy, financially responsible, or of good personal and business reputation,
or has had an application for an insurance license denied or revoked for cause
within the past five years.
(g) The license shall be renewable or extendable
biennially. The renewal or extension
date for a license issued to a natural person shall be the sixteenth day of the
licensee's birth month. The renewal or
extension date for a license issued to an artificial person shall be April 16
for a nonresident licensee, and July 16 for a resident licensee. The license shall remain in effect so long as
the fees set forth in section 431:7-101 are paid.
(h) The commissioner may contract with
nongovernmental entities, including the National Association of Insurance
Commissioners or any affiliations or subsidiaries that the National Association
of Insurance Commissioners oversees, to perform any ministerial functions
relating to the licensure of administrators.
§431: ‑103 Surety bond required. Prior to the issuance of the
administrator license, the administrator shall file with the commissioner, and maintain
in force while so licensed, a surety bond of at least $300,000, in the form and
penal sum acceptable to the commissioner, and shall provide that the bond may
not be canceled or otherwise terminated until two years have elapsed from the
last day the applicant was an administrator, unless the commissioner has given
prior written consent. The surety bond
shall be undertaken and may be enforced in the name of "Commissioner of
Insurance, State of Hawaii".
§431: ‑104 Written agreement required. (a) An administrator shall have a written
agreement between the administrator and insurer that contains all requirements
of this article, except those that do not apply to administrator functions.
(b) The written agreement shall include a
provision with respect to underwriting or other standards pertaining to the
business underwritten by the insurer.
(c) The written agreement shall be retained as
part of the official records of the administrator and the insurer for the
duration of their agreement and five years thereafter.
(d) When an insurance policy is issued to a
trustee, the administrator shall furnish the insurer a copy of the trust
agreement and any amendments to it. The
trust agreement shall be retained as part of the official records of the administrator
and the insurer for the duration of the insurance policy and five years
thereafter.
§431: ‑105 Effect of payments to administrator. (a)
Payment to the administrator of any insurance premiums or charges by or
on behalf of the insured shall be deemed received by the insurer.
(b) Payment of return premiums or claims by the
insurer to the administrator shall not be deemed payment to the insured until
the insured receives the payment.
(c) This section shall not limit any right of the
insurer against the administrator resulting from failure of the administrator
to make payments to the insurer or insured.
§431: ‑106 Recordkeeping required; commissioner's access
to records. (a) An administrator shall maintain and make
available to the insurer complete books and records of all transactions between
the administrator, insurers, and insureds.
The books and records shall be maintained in accordance with prudent
standards of insurance recordkeeping and for the duration of the written
agreement and five years thereafter.
(b) The commissioner shall have access to the
books and records for examination, audit, and inspection. Trade secrets in the books and records,
including the identity and addresses of insureds, shall be confidential and
privileged; provided that the commissioner may use the information in
proceedings brought against the administrator.
(c) An administrator shall retain the right to
continuing access to the books and records to fulfill its contractual
obligations to the insurer and insureds, subject to any restrictions in the
written agreement.
§431: ‑107 Advertising by administrator. An administrator shall use only the
advertising pertaining to the business an insurer has underwritten and approved
in advance of its use.
§431: ‑108 Fiduciary duties of administrator; payment of
claims by administrator. (a) The administrator shall hold in a fiduciary
capacity all charges, claim payments, or premiums that the administrator
collects for or on behalf of an insurer and all return premiums that the
administrator receives from the insurer.
These funds shall be immediately remitted to the person entitled to them
or shall be deposited promptly in a fiduciary account established and
maintained by the administrator in a federally insured financial institution.
(b) If charges, claim payments, or premiums
deposited in a fiduciary account have been collected for or on behalf of more
than one insurer, the administrator shall keep records clearly recording the
deposits in and withdrawals from the account for or on behalf of each
insurer. The administrator shall keep
copies of the records and, upon request of an insurer, shall furnish the
insurer with copies of records pertaining to the deposits and withdrawals.
(c) An administrator shall not pay claims by
withdrawals from the fiduciary account in which premiums or charges are
deposited.
(d) The written agreement shall provide that
withdrawals from the fiduciary account shall be made only for:
(1) Remittance to an insurer entitled to remittance;
(2) Deposit in an account maintained in the name
of the insurer;
(3) Transfer to and deposit in a claims-paying
account, with claims to be paid as provided in subsection (e);
(4) Payment to a group policyholder for remittance
to the insurer entitled to remittance;
(5) Payment to the administrator of its
commission, fees, or charges; and
(6) Remittance of return premiums to the person
entitled to return premiums.
(e) All claims the administrator pays from funds
collected for or on behalf of an insurer shall be paid only as authorized by
the insurer.
§431: ‑109 Compensation of administrator. Compensation to an administrator for
adjusting or settling claims shall not be contingent on claim experience. This section shall not prevent the compensation
of an administrator from being based on premiums or charges collected or number
of claims paid or processed.
§431: ‑110 Written notice to insureds required. (a) When the services of an administrator are
used, the administrator shall provide written notice approved by the insurer to
insureds, advising the insureds of the identity of and relationship between the
administrator, insurer, and insured.
(b) When an administrator collects funds, the
administrator shall identify the reason for collecting each item and show each
item separately from the premium.
Additional charges shall not be made for services to the extent the
insurer has already paid for those services.
(c) The administrator shall disclose to the
insurer all charges, fees, and commissions that the administrator receives from
services the administrator provides to the insurer, including any fees or
commissions paid by insurers providing reinsurance.
§431: ‑111 Delivery of written information to insured. Any policies, certificates, booklets,
termination notices, or other written communications delivered by the insurer
to the administrator for delivery to the insured, shall be delivered by the
administrator promptly after receipt of instructions from the insured to
deliver them.
§431: ‑112 Annual report required. (a)
An administrator shall file an annual report for the preceding calendar
year with the commissioner on or before March 1 of each year, in a form and
manner prescribed by the commissioner.
(b) The annual report shall include the names and
addresses of all insurers with which the administrator had an agreement during
the preceding calendar year.
§431: ‑113 License denial, nonrenewal, suspension, or
revocation; fines. (a) After notice and hearing, the commissioner
shall impose a fine pursuant to section 431:2-203 and issue a cease and desist
order against any person who acts or holds out as an administrator without a
license.
(b) After notice and hearing, the commissioner
shall deny, refuse to renew, suspend, or revoke the license of an administrator
if the commissioner finds that the administrator:
(1) Is in an unsound financial condition;
(2) Is using methods or practices in the conduct
of business that renders the administrator's further transaction of business in
this State hazardous or injurious to insureds or the public; or
(3) Has failed to pay a judgment rendered against
the administrator in this State within sixty days after the judgment has become
final.
(c) The commissioner may deny, refuse to renew,
suspend, or revoke the license of an administrator if the commissioner finds that
the administrator:
(1) Has violated any lawful rule or order of the
commissioner or this chapter;
(2) Has refused examination or production of the
administrator's accounts, records, and files for examination, or if any
individual responsible for or who exercises control or influence over the
affairs of the administrator has refused to give information about the
administrator's affairs, or has refused to perform any other legal obligation
as to an examination, when required by the commissioner;
(3) Has, without just cause:
(A) Refused to pay proper claims or perform
services arising under the administrator's contracts;
(B) Caused insureds to accept less than the amount
due to the insureds; or
(C) Caused insureds to employ attorneys or bring
suit against the administrator to secure full payment or settlement of claims;
(4) Has failed at any time to meet any
qualification for which issuance of the license could have been refused, had
the failure then existed and been known to the commissioner;
(5) Has been convicted of, or has entered a plea
of guilty or nolo contendere to, a felony without regard to whether
adjudication was withheld;
(6) Is under suspension or has a license revoked
in another state; or
(7) Has failed to timely file the annual report
pursuant to section 431: ‑112.
(d) The commissioner may immediately suspend the
license of an administrator, without advance notice or hearing, if the
commissioner finds the following:
(1) The administrator is insolvent or impaired;
(2) A proceeding for receivership,
conservatorship, rehabilitation, or other delinquency proceeding regarding the
administrator has been commenced in any state; or
(3) The financial condition or business practices
of the administrator otherwise are an imminent threat to the public health,
safety, or welfare of the residents of this State.
(e) If the commissioner finds one or more grounds
exist for the denial, nonrenewal, suspension, or revocation of the license, the
commissioner may additionally impose a fine upon the administrator pursuant to
section 431:2-203.
§431: ‑114 Rules.
The commissioner may adopt rules to implement and enforce this
article."
SECTION
2. Section 431:7-101, Hawaii Revised
Statutes, is amended by amending subsections (a) and (b) to read as follows:
"(a) The commissioner shall collect, in advance,
the following fees:
(1) Certificate of authority:
(A) Application
for certificate of authority..... $900
(B) Issuance
of certificate of authority......... $600
(C) Application
for motor vehicle self-insurance. $300
(2) Organization of domestic insurers and
affiliated corporations:
(A) Application
for solicitation permit........ $1,500
(B) Issuance
of solicitation permit............. $150
(3) Producer's license:
(A) Issuance
of regular license.................. $50
(B) Issuance
of temporary license................ $50
(4) Nonresident
producer's license: Issuance.......... $75
(5) Independent
adjuster's license: Issuance.......... $75
(6) Public
adjuster's license: Issuance.............. $75
(7) Claims
adjuster's limited license: Issuance....... $75
(8) Administrator's
license: Issuance ............... $150
[(8)] (9) Independent bill reviewer's license:
Issuance......................................... $80
[(9)] (10) Limited producer's license: Issuance........ $60
[(10)] (11) Managing general agent's license: Issuance.. $75
[(11)] (12) Reinsurance intermediary's license: Issuance. $75
[(12)] (13) Surplus lines broker's license: Issuance... $150
[(13)] (14) Service contract provider's
registration:
Issuance......................................... $75
[(14)] (15) Approved course provider certificate:
Issuance........................................ $100
[(15)] (16) Approved continuing education course
certificate: Issuance $30
[(16)] (17) Vehicle protection product warrantor's
registration: Issuance $75
[(17)] (18) Criminal history record check;
fingerprinting: For each criminal
history record check and fingerprinting check, a fee to be established by the
commissioner.
[(18)] (19) Limited line motor vehicle rental company
producer's license: Issuance $1,000
[(19)] (20) Legal service plan certificate of
authority:
Issuance
before July 1, 2014................... $1,000
Issuance on or after July 1, 2014................ $500
[(20)] (21) Life settlement provider's license:
Issuance before July 1, 2014..................... $150
Issuance on or after July 1, 2014................. $75
[(21)] (22)
Life settlement broker's license:
Issuance before July 1, 2014..................... $150
Issuance on or after July 1, 2014................. $75
[(22)] (23) Examination for license: For each examination, a fee to be established
by the commissioner.
(b) The fees for services of the department of
commerce and consumer affairs subsequent to the issuance of a certificate of
authority, license, or other certificate are as follows:
(1) $600 per year for all services (including
extension of the certificate of authority) for an authorized insurer;
(2) $50 per year for all services (including
extension of the license) for a regularly licensed producer;
(3) $75 per year for all services (including
extension of the license) for a regularly licensed nonresident producer;
(4) $45 per year for all services (including
extension of the license) for a regularly licensed independent adjuster;
(5) $45 per year for all services (including
extension of the license) for a regularly licensed public adjuster;
(6) $45 per year for all services (including
extension of the license) for a claims adjuster's limited license;
(7) $150 per year for all services (including
extension of the license) for an administrator's license;
[(7)] (8)
$60 per year for all services (including extension of the license) for a
regularly licensed independent bill reviewer;
[(8)] (9)
$45 per year for all services (including extension of the license) for a
producer's limited license;
[(9)] (10)
$75 per year for all services (including extension of the license) for a
regularly licensed managing general agent;
[(10)] (11)
$75 per year for all services (including extension of the license) for a
regularly licensed reinsurance intermediary;
[(11)] (12)
$45 per year for all services (including extension of the license) for a
licensed surplus lines broker;
[(12)] (13) $75 per year for all services (including
renewal of registration) for a service contract provider;
[(13)] (14)
$65 per year for all services (including extension of the certificate)
for an approved course provider;
[(14)] (15)
$20 per year for all services (including extension of the certificate)
for an approved continuing education course;
[(15)] (16)
$75 per year for all services (including renewal of registration) for a
vehicle protection product warrantor;
[(16)] (17)
A fee to be established by the commissioner for each criminal history
record check and fingerprinting;
[(17)] (18)
$600 per year for all services (including extension of the license) for
a regularly licensed limited line motor vehicle rental company producer;
[(18)] (19)
$1,000 per year for all services provided before July 1, 2014,
(including extension of the certificate) for an authorized legal service plan;
[(19)] (20)
$500 per year for all services provided on or after July 1, 2014,
(including extension of the certificate) for an authorized legal service plan;
[(20)] (21)
$1,200 per year for all services (including extension of the license)
for a regularly licensed life settlement provider; and
[(21)] (22)
$150 per year for all services (including extension of the license) for
a regularly licensed life settlement broker.
The services referred to in paragraphs
(1) to [(21)] (22) shall not include services in connection with
examinations, investigations, hearings, appeals, and deposits with a depository
other than the department of commerce and consumer affairs."
SECTION
3. Section 432:1-102, Hawaii Revised
Statutes, is amended to read as follows:
"§432:1-102 Applicability of other laws. (a)
Part III of article 10A, and article 10H of chapter 431 shall apply to
nonprofit medical indemnity or hospital service associations. Such associations
shall be exempt from the provisions of part I of article 10A; provided that
such exemption is in compliance with applicable federal statutes and
regulations.
(b) Article 2, article 2D, parts II and IV of
article 3, article 6, part III of article 7, article 9A, article 13, article
14G, and article 15 of chapter 431, sections 431:3-301, 431:3-302, 431:3-303,
431:3-304, 431:3-305, 431:10-102, 431:10-225, 431:10-226.5, and 431:10A-116(1)
and (2), and the powers granted by those provisions to the commissioner, shall
apply to managed care plans, health maintenance organizations, or medical
indemnity or hospital service associations that are owned or controlled by
mutual benefit societies so long as the application in any particular case is
in compliance with and is not preempted by applicable federal statutes and
regulations.
(c) Article of
chapter 431 shall apply to mutual benefit societies.
[(c)]
(d) The commissioner may adopt rules
pursuant to chapter 91 for the implementation and administration of this
chapter."
SECTION
4. Statutory material to be repealed is
bracketed and stricken. New statutory
material is underscored.
SECTION 5. This Act shall take effect on January 1, 2020.
Report Title:
Administrator; Third Party Administrator; License; Insurance
Description:
Requires third party administrators to be licensed and regulated by the Insurance Commissioner. Effective 1/1/2020. (SD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
