2012 -- S 2389

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LC01456

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO INSURANCE - PRODUCER LICENSING ACT

     Introduced By: Senator Roger Picard

     Date Introduced: February 15, 2012

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 27-2.4-20 of the General Laws in Chapter 27-2.4 entitled "Producer

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Licensing Act" is hereby amended to read as follows:

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     27-2.4-20. Revocation or modification of insurance producer's contract --

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Procedures. -- (a) No company shall cancel the authority of an insurance producer, if the

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insurance producer is not an employee of the company, and no company shall modify a contract

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with that insurance producer unless the company gives written notice of its intent to cancel that

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insurance producer or its intent to modify the contract at least one hundred eighty (180) days

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before the proposed effective date of any cancellation or at least one hundred eighty (180) days

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before the proposed effective date of any modification. No company shall allow the license of

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that insurance producer to expire unless the company gives written notice of its intent to do so at

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least one hundred eighty (180) days before the proposed effective date of expiration because of

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cancellation. Except as otherwise provided in this section, any insurance producer receiving

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notice of cancellation, modification, or expiration may, within sixty (60) days after receipt of the

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notice, make a written demand for reference to three (3) referees of the question as to whether or

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not the cancellation, modification, or expiration will affect the renewal, continuation, or

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replacement of any policies placed with the company through the efforts of the insurance

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producer, or the services needed by any policyholder doing business with the company as a result

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of the efforts of the insurance producer, as to justify renewal or continuation of any policies then

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in effect having been placed with the company by that insurance producer. In the event the

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referees find that the cancellation, modification, or expiration will affect the renewal,

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continuation, or replacement of any policies placed with the company through the efforts of the

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insurance producer, or the services needed by any policyholders doing business with the company

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as a result of the efforts of the insurance producer, then the referees shall order continuance or

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renewal of any policies expiring within a period of twelve (12) months of the issuance of the

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notice, at a rate of compensation to the insurance producer equal to that as provided in the

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agreement expiring or being cancelled or modified, for one additional policy period equal in

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length to the most recent policy period of the expiring policy, but in no event for more than one

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year. The referees shall not order continuance or renewal of any policies if they find that the

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reason for the cancellation or expiration of the agreement by the company was legitimately based

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upon one of the following grounds:

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      (1) The insurance producer was convicted of a dishonest act related to his or her

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occupation as an insurance agent;

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      (2) The insurance producer's license to engage as an insurance producer was revoked; or

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      (3) The company surrendered its license to do business in the state.

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      (b) An insurance producer making a written demand for a reference shall accompany the

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written demand with the names and addresses of three (3) persons, where the company shall,

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within fifteen (15) days, notify the insurance producer of its choice of one of the persons to act as

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one of the referees and at the same time submit the names and addresses of three (3) persons to

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the insurance producer, who shall, within fifteen (15) days after receiving these names, notify the

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company in writing of his her choice of one of the persons to act as a second referee. At the same

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time the insurance producer shall notify the commissioner, the notice to be on a form prescribed

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by the commissioner, that both the company and insurance producer have chosen referees. Within

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ten (10) days of the receipt of this notice the commissioner shall appoint a person to serve as third

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referee, and shall notify that person, the insurance producer, and the company in writing of this

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appointment. Each person nominated or appointed as a referee shall be a disinterested person,

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shall be a resident of the state, and shall be willing to act as a referee. Within ten (10) working

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days of the appointment of the third referee, who shall serve as chairperson, the three (3) referees

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shall meet, hear evidence, and reduce their decisions to writing and sign it, and shall deliver a

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copy of the decision to the insurance producer, to the company, and to the commissioner. In the

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event any company receiving a written demand for a reference fails to comply with the provisions

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of this subsection, then the insurance producer shall have the authority to renew or continue any

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policies placed with that company through the efforts of the insurance producer expiring within a

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period of thirteen (13) months from the date of the notice of cancellation, modification, or

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expiration of the agreement, at a rate of compensation to the insurance producer equal to that as

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provided in the agreement expiring or being cancelled or modified, for one additional policy

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period equal in length to the most recent policy period of the expiring policy, but in no event for

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more than one year.

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      (c) Any insurance company and any insurance producer may by written contract agree to

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modify the provisions of subsections (a) and (b) of this section other than the requirement of a

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one hundred eighty (180) day notice in the event of cancellation or a one hundred eighty (180)

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day notice in the event of modification of a contract or of intent to allow the expiration of a

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license, by provisions presented to and approved by the commissioner which he or she finds after

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due hearing and investigation will adequately protect both the right of the policyholder to a

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continuance of insurance and the services of any insurance producer of his or her own choosing

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and the right of the insurance producer to fair compensation for the insurance placed with a

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company as a result of the insurance producer's efforts. The commissioner may make reasonable

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rules of general application regarding these modified provisions.

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      (d) The decision of the referees may provide for the renewal or continuance of any or all

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policies expiring within a period of twelve (12) months of the issuance of any notice, at a rate of

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compensation to the insurance producer equal to that as provided in the agreement expiring or

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being cancelled or modified, for one additional policy period equal in length to the most recent

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policy period of the expiring policy, but in no event for more than one year. The decision of the

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referees may also provide for the continuance of previous contractual provisions, if the referees,

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or a majority of them, find that the decision will best protect the right of a policyholder to a

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continuance of insurance and the services of an insurance producer of his or her own choosing

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and the right of any insurance producer to compensation for the insurance placed with a company

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as a result of his or her efforts, giving due consideration to the possibility the affected insurance

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producer has of obtaining similar coverage for policyholders affected from other companies at

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reasonable compensation. The decisions rendered in accordance with the provisions of this

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section providing for reference shall be binding on all companies and insurance producer affected

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by those decisions. If a decision orders the renewal or continuance of any policies, policyholders

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and the affected insurance producer shall be entitled in all respects to the same services and

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practices as were in effect prior to reference insofar as amounts and types of coverage, credit

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terms, commissions paid to the insurance producer, and insurance producer services are also

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continued.

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      (e) All policies expiring within twelve (12) months of the notice may be renewed for the

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policy periods as provided in subsection (d) of this section, but no insurance producer or company

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relying on this section shall again refer the same issue to referees. Where other provisions of the

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general laws require notice to policyholders before non-renewal of any coverage, the company

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shall, at the request of the insurance producer who is unable to replace any policy which has been

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renewed for one or more policy periods in accordance with this section, comply with those

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provisions of law.

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      (f) An insurance producer initiating reference under this section and the company

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receiving written demand shall each be liable for the payment of the reasonable charges and

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expenses of his or her nominee for referee and one-half ( 1/2) of the compensation for the

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reasonable charges and expenses of the third referee. The third referee shall upon the execution of

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the decision furnish the insurance producer and the company with a written statement specifying

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in detail his or her charges for compensation and expenses. The insurance producer or the

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company, if aggrieved by these charges, may petition the commissioner for review. The petition

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shall set forth with particularity the specific item or charges in dispute. The commissioner shall,

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within ten (10) days of receipt of the petition, notify the interested parties of the date established

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for a hearing on the petition and, after the hearing, the commissioner shall approve or disapprove

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the charges in whole or in part, his or her findings and decisions shall be final and conclusive .

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and no company shall modify a contract with that insurance producer, unless the company gives

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written notice of its intent to cancel or modify the contract at least one year before the proposed

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effective date.

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     (b) The provisions of this section do not apply to an insurance producer:

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     (1) Convicted of a dishonest act related to his or her occupation as an insurance agent; or

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     (2) Whose license to engage as an insurance producer was revoked.

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     (c) When an insurer cancels the authority of an insurance producer under the provisions

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of this section, the insurer shall continue to renew the expiring policies that meet their

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underwriting guidelines for a period of twelve (12) months of the issuance of the notice at a rate

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of compensation to the insurance producer equal to that provided in the expiring contract.

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     (d) No company shall cancel the authority of an insurance producer due to adverse loss

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ratio unless prior to termination the insurance company makes a reasonable attempt to rehabilitate

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the insurance producer’s book of business by:

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     (1) Notifying the insurance producer that it is being placed in a rehabilitation program.

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     (2) Such notice shall state the reasonable goals and objectives for the insurance

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producer’s loss ratio during the rehabilitation program.

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     (3) Such notice shall inform the insurance producer that failure to attain the goals and

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objectives for the insurance producer’s loss ratio specified in the rehabilitation program may

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result in cancellation of the authority of the insurance producer.

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     (iv) The rehabilitation program of an insurance producer under this section shall be for a

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period of not less than one year.

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     (v) Compliance with the rehabilitation program and attainment of the rehabilitation goals

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for the insurance producer loss ratio shall bar termination of the authority of the insurance

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producer for loss ratio reasons. Any increase in reserves from previous years’ losses shall not be

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included in determining the proper loss ratio.

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     (vi) If the insurance producer fails to achieve the rehabilitation program goals and

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objectives, the insurer may terminate the authority of the insurance producer but shall continue to

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renew the expiring policies that meet their underwriting guidelines for a period of fourteen (14)

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months from the issuance of the notice at a rate of compensation to the insurance producer equal

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to that provided in the expiring contract.

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     (e) Nothing in this section shall apply to an insurance producer who is an employee of the

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company.

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     SECTION 2. This act shall take effect upon passage.

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LC01456

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO INSURANCE - PRODUCER LICENSING ACT

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     This act would amend the procedures for modifying or revoking an insurance producer’s

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contract.

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     This act would take effect upon passage.

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LC01456

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