Bulletin #19: New Changes to the Law
General Bulletin #19
NEW CHANGES TO THE LAW
On August 16, 2001, the Governor signed
Public Act 92-0386
into law. This new
law, which goes into effect on January 1, 2002, will make many significant changes to the producer licensing and surplus line
sections of the Illinois Insurance Code. Below is a synopsis of some of
the changes that will affect surplus line producers. You are encouraged to
review the entire bill, or consult with your attorney to see exactly how the
changes in the law
affect you.
Policy Fees / Broker Fees
In the current law, except for
commissions, no insurance producer may receive any compensation (for example,
"Policy Fees" or "Broker Fees") from any insured unless the producer gives a
separate, prior written notice to the insured. A copy of that notice,
signed by the insured, must be maintained in file by any producer that collects
or receives any portion of that compensation.
Beginning January 1, 2002, under the new law, the producer's copy of the
notice must only be signed by the insured if the compensation exceeds 10% of the
premium amount, or the potential premium amount, of the policy.
Additionally, if the policy is canceled within the first half of the policy
period, the compensation must be returned to the insured at a prorated amount.
The pro rata return of the compensation must be based on the length of time the
policy was in force, compared to the entire term of the policy. No
compensation or processing fee may be assessed or received for processing the
cancellation.
Nonresident Producer & Surplus Line Licenses
The changes to the
producer licensing section of the Insurance Code were prompted by the passage of
the federal Gramm-Leach-Bliley Act of 1999. It mandated that a majority of
states enact a uniform or reciprocal licensing standard within three years or
relinquish licensing to a single, national authority. The states decided
that a reciprocal approach would be easier to achieve within the three year
deadline.
The new Illinois law provides that, effective January 1, 2002, any nonresident can obtain a license in
Illinois if (i) they are licensed in good standing in their home state, and (ii)
they submit the proper request together with the proper fee, and (iii) they
submit their home state application or the Uniform Application, and (iv) their
home state awards nonresident licenses to Illinois producers on the same basis.
The same four standards apply to nonresident surplus line licenses.
Surplus Line Prelicensing Course
Effective January 1, 2002,
before receiving a new surplus line license, an applicant must
complete a prelicensing course. No course is required for renewing a
license you already have.
Surplus Line Producer Records
Effective January 1, 2002, the
surplus line law has been amended to include a provision requiring a
surplus line licensee to keep a complete copy of each surplus line policy
procured under their license, on paper or by electronic means.
Surplus Line Electronic Filing
Effective January 1, 2002, the
surplus line law has been amended to include a provision allowing for the
possibility of filing surplus line documents with the SLAI through
electronic means. As we explore this possibility and how we can
implement it, we will keep you informed. Until then, the procedure
of filing original documents, on paper, with the Association remains
unchanged.
Surplus Line Service of Suit
For all surplus line policies
with an effective date of January 1, 2002 or later, the Service of Suit or
Service of Process clause or endorsement will no longer need to contain
the name and address of an Illinois resident. The requirement that
the insurer name the Director of Insurance as their attorney for Service
of Suit remains intact.
Other Changes
We will not be eliminating Firm Memberships in the Association as
previously reported.
Currently the SLAI generates tax returns for all surplus line licensees. Although not
part of the changes to the law, the Department is working on implementing a system whereby surplus line
taxes are billed directly to the producer based on a data file provided to
the Department by the SLAI. They do not expect to begin with this new system
at the end of this year, but rather sometime within the next 12 — 18
months. We will
keep you advised as we know more about the new procudures.
24-Sep-2001
Rev. 17-Oct-2001
| 
