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Sale, Solicitation and Negotiation of Insurance; Department Notice 2013-09

[43 Pa.B. 6740]
[Saturday, November 9, 2013]

 The Federal Affordable Care Act (ACA) requires that all individuals obtain health insurance coverage. To help individuals navigate the health insurance market, the ACA created consumer assistance functions to educate consumers and help them explore their health insurance options. The Insurance Department (Department) protects the insurance purchasing consumer by enforcing State laws. As such, the Department distinguishes between professionals who have undergone training about health insurance and the background check required for licensure (that is, insurance producers) and individuals who perform general customer service/assistance functions. This Department notice will help provide clarity regarding activities that may require a producer license and those that typically do not.

 To protect Pennsylvania insurance consumers, the Pennsylvania General Assembly has limited the sale, solicitation and negotiation of insurance to those who are licensed under Article VI-A of The Insurance Department Act of 1921 (act) (40 P. S. §§ 310.1—310.99a), regarding insurance producers. The act establishes various consumer protections including requiring producers to maintain an awareness of current insurance issues by taking education courses on an ongoing basis.

 In general, the act prohibits a person from selling, soliciting or negotiating a contract of insurance or receiving commissions from these activities unless the person is licensed as an insurance producer. The terms ''sell,'' ''solicit'' and ''negotiate'' are defined broadly by the act. See 40 P. S. § 310.1. Under Commonwealth law partaking in unlicensed producer activity can be subject to both civil and criminal penalties, depending on the circumstances under which the unlicensed activity was conducted and whether the person knowingly engaged in unlicensed producer activity.

 A license is generally not required for a person performing only the following services, provided that no commission is paid for the services: secures and furnishes written information for the purpose of group or blanket accident and health insurance; performs administrative services related to the enrollment of individuals under plans; issues certificates under plans or otherwise assists in administering plans. See 40 P. S. § 310.3(b)(4).

 The Department provides the following lists of activities that require a producer license and activities that do not require a producer license. Note that the Department reserves the right to determine compliance with the act on a case-by-case basis in accordance with the particular circumstances presented in each case.

Licensed producer activities:

 1. Discussing the effect of age, health or other risk-related conditions of the prospective policy holder.

 2. Urging or advising any prospective purchaser to buy any particular policy or to insure with any particular company.

 3. Initiating sales over the telephone or otherwise.

 4. Collecting premiums in person at other than a recorded place of business.

 5. Making or proposing to make an insurance contract.

 6. Disseminating information as to specific coverages or for any particular policy, except that this does not prohibit the dissemination of buyer's guides or applications for coverage in response to requests from prospective policyholders.

 7. Disseminating information as to rates in general or for any particular policy when the rate cannot be secured by referring to a published or printed list of standard rates.

 8. Initiating an inquiry as to the terms of existing coverage, except exclusively in the course of clerical duties.

 9. Discussing or describing the specific coverages or terms of a proposed contract of insurance with a prospective policyholder, including counseling as to which coverages to buy.

Example: If an insured or prospective insured requests advice in any communication with an unlicensed employee, the response must be made by a licensed producer.

 10. Recommending or independently initiating additions or deletions to an insured's policy.

 11. Signing binders, endorsements and insurance policies.

 12. Authorizing the issuance or delivery of certificates of insurance, endorsements, binders or insurance policies or insurance identification cards.

 13. Responding to a policyholder's request for advice or counsel regarding policy provisions or coverage.

Example: In the course of requesting an application form or a change to an existing policy, if a policyholder or prospective policyholder, while speaking to an unlicensed person, requests an opinion about the terms of the proposed insurance contract or the proposed change to the existing contract, the response must be made by a licensed producer.

Nonlicensed clerical and CSR activities:

 1. Receiving requests for coverage for transmittal to a licensed insurance producer or for processing through an automated system developed and maintained under the supervision of an insurer or licensed insurance producer.

 2. Mailing billings and opening mail.

 3. Scheduling appointments for and with insurance producers.

 4. Office filing.

 5. Marketing research or prospecting so long as no attempt is made to solicit or to discuss a specific insurance product or to encourage replacement of an existing policy.

 6. Receiving and recording information from an applicant or policyholder and preparing for an insurance producer's review and signature all binders, certificates, endorsements, identification cards or policies pursuant to instructions from the insurance producer.

 7. Receiving and recording information from an applicant or policyholder and preparing an application for insurance pursuant to instructions from and for the review of an insurance producer.

 8. Receiving and recording information from a policyholder or prospective policyholder to give to an insurance producer for his response or transmitting information to a policyholder or prospective policyholder under the supervision of an insurance producer.

Example:  An unlicensed sales representative in a car dealership collects information from a car buyer that is given to a licensee to complete a credit insurance transaction.

 9. Receiving and recording an insured's request concerning any additions or deletions to an existing policy and preparing the appropriate endorsements or processing the appropriate changes through an automated system developed and maintained under the supervision of an insurer or licensed insurance producer and notifying the insurance producer of the endorsements or changes.

Example: An unlicensed person may receive and process a request from an insured to delete an automobile on an existing policy and to add a replacement automobile or may receive and process a request to delete physical damage coverage on a particular automobile or receive and process a request for similar routine policy changes initiated by an insured. An unlicensed person may not, however, initiate a change by, for example, telephoning a life insurance policyholder and suggesting that the insured increase the face amount of the policy. Should these changes require a producer license, the unlicensed person should advise the consumer they are being transferred to a licensee.

 10. Provide general information on the availability of insurance products and hold educational seminars on insurance products providing no attempt to sell, solicit or negotiate insurance with a consumer is made at the presentation.

 11. Receiving premiums at the recorded place of business where the payment is being made on a binder, endorsement or existing policy.

 12. Taking factual information relative to a claim.

 13. Communicating with the policyholder or prospective policyholder to obtain factual information necessary for an insurance producer to complete a review.

Example: An unlicensed person may call an applicant to request the submission of additional documents.

 14. Informing the insured as to his or her coverages as indicated in policy records.

 15. Communicating with a prospective or existing insured for the purpose of auditing records or providing loss control on underwriting verifications and inspections.

 16. Disseminating buyer's guides, applications for coverage, coverage selection forms or other similar forms in response to a request from a prospective or current policyholder.

Example: An unlicensed person may receive a request for an application and respond by mailing or giving an application for insurance and other related literature. The unlicensed person may not, however, initiate the conversation.

 17. Disseminating information as to rates secured by reference to a published or printed list or computer data base of standard rates.

Example: An unlicensed person may respond to a specific request for the cost of a specific coverage from a rate manual published in print or in an electronic format. However, an unlicensed person may not provide advice or suggestions concerning the benefits or drawbacks or a particular coverage, deductible, limit, and the like, in the course of disseminating this information.

 Questions or comments applicable to this bulletin should be directed to Jack Yanosky, Director, Bureau of Licensing and Enforcement, 1227 Strawberry Square, Harrisburg, PA 17120, jyanosky@pa.gov.

MICHAEL F. CONSEDINE, 
Insurance Commissioner

[Pa.B. Doc. No. 13-2127. Filed for public inspection November 8, 2013, 9:00 a.m.]



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