Pennsylvania Act 2018-22 — INSURANCE DEPARTMENT ACT OF 1921 - REBATES PROHIBITED AND INDUCEMENTS PROHIBITED

Act text

Session of 2018

No. 2018-22

SB 877

AN ACT

Amending the act of May 17, 1921 (P.L.789, No.285), entitled "An act relating to insurance; establishing an insurance department; and amending, revising, and consolidating the law relating to the licensing, qualification, regulation, examination, suspension, and dissolution of insurance companies, Lloyds associations, reciprocal and inter-insurance exchanges, and certain societies and orders, the examination and regulation of fire insurance rating bureaus, and the licensing and regulation of insurance agents and brokers; the service of legal process upon foreign insurance companies, associations or exchanges; providing penalties, and repealing existing laws," in insurance producers, further providing for rebates prohibited and for inducements prohibited.

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Sections 645-A and 646-A of the act of May 17, 1921 (P.L.789, No.285), known as The Insurance Department Act of 1921, are amended to read:

Section 645-A. Rebates prohibited.

(a) Prohibition.--[No] Except as otherwise provided in this section, no insurance producer shall, directly or indirectly, offer, promise, allow, give, set off or pay a rebate of, or part of, a premium payable on the contract of insurance or on the insurance producer's commission, earnings, profits, dividends or other benefit founded, arising, accruing or to accrue thereon, or any special advantage in date of policy or age of issue, or any paid employment or contract for services of any kind, or any other valuable consideration or inducement, to or for insurance on a risk in this Commonwealth which is not specified in the contract of insurance.

(a.1) Exception.--An insurance producer may offer or give to an insured or a prospective insured, on an annual aggregate basis, any favor, advantage, object, valuable consideration or anything other than money that has a cost of or a redeemable value of less than or equal to $100, which is not specified in the contract of insurance. The commissioner may increase this amount upon publication of notice in the Pennsylvania Bulletin.

(a.2) Receipt contingent on purchase.--Notwithstanding any other provision of this section to the contrary, an insurance producer may not make receipt of anything of value contingent on the purchase of insurance.

(b) Penalty.--A person that violates subsection (a) commits a misdemeanor of the third degree.

(c) Construction.--Nothing in this section shall be construed as:

(1) permitting any unfair method of competition or an unfair or deceptive act or practice under the act of July 22, 1974 (P.L.589, No.205), known as the Unfair Insurance Practices Act; or

(2) prohibiting an insurance producer from offering or giving to an insured, for free or at a discounted price, services or other offerings that relate to loss control of the risks covered under the policy.

Section 646-A. Inducements prohibited.

(a) Prohibition.--[No] Except as otherwise provided in this section, no insurance producer shall, directly or indirectly, offer, promise, give, option, sell or purchase any stocks, bonds, securities or property, or any dividends or profits accruing or to accrue thereon, or other thing of value whatsoever, as an inducement to purchase a contract of insurance. Nothing in this section shall be construed to prevent the taking of a bona fide obligation, with legal interest, in payment of any premium. This section shall not prohibit payment or receipt of referral fees in accordance with this act.

(a.1) Exception.--An insurance producer may offer or give to an insured or a prospective insured, on an annual aggregate basis, any favor, advantage, object, valuable consideration or anything other than money that has a cost of or a redeemable value of less than or equal to $100. The commissioner may increase this amount upon publication of notice in the Pennsylvania Bulletin.

(a.2) Receipt contingent on purchase.--Notwithstanding any other provision of this section to the contrary, an insurance producer may not make receipt of anything of value contingent on the purchase of insurance.

(b) Penalty.--A person that violates subsection (a) commits a misdemeanor of the third degree.

(c) Construction.--Nothing in this section shall be construed as:

(1) permitting any unfair method of competition or an unfair or deceptive act or practice under the act of July 22, 1974 (P.L.589, No.205), known as the Unfair Insurance Practices Act; or

(2) prohibiting an insurance producer from offering or giving to an insured, for free or at a discounted price, services or other offerings that relate to loss control of the risks covered under the policy.

Section 2. This act shall take effect in 60 days.

APPROVED--The 4th day of May, A.D. 2018.

TOM WOLF