A1638

ASSEMBLY, No. 1638

STATE OF NEW JERSEY

INTRODUCED MARCH 4, 1996

By Assemblymen FELICE and DORIA

An Act concerning financial institutions and certain insurance producers and amending P.L.1987, c.293, P.L.1985, c.179 and P.L.1947, c.379.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. Section 2 of P.L.1987, c.293 (C.17:22A-2) is amended to read as follows:

2. As used in this act:

a. "Applicant" means a person who has applied for, or who intends to apply for, a license in accordance with this act.

b. "Commissioner" means the Commissioner of Insurance.

c. "Days" means calendar days.

d. "Department" means the Department of Insurance.

e. "Insurance," "insurance policy" or "insurance contract" includes contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, surety, guaranty and title insurance.

f. "Insurance agent" means a person authorized, in writing, by any insurance company to act as its agent to solicit, negotiate or effect insurance contracts on its behalf or to collect insurance premiums and who may be authorized to countersign insurance policies on its behalf.

g. "Insurance broker" means a person who, for a commission, brokerage fee, or other consideration, acts or aids in any manner concerning negotiation, solicitation or effectuation of insurance contracts as the representative of an insured or prospective insured; or a person who places insurance in an insurance company that he does not represent as an agent.

h. "Insurance consultant" means a person who, for a fee, commission or other consideration, acts or holds himself out to the public or any licensee as offering any advice, counsel, opinion or service with respect to the benefits, advantages or disadvantages under any insurance policy or contract that is or could be issued in this State, but shall not include bank trust officers, attorneys-at-law and certified public accountants who negotiate contracts on behalf of others or provide general financial counsel if no commission or brokerage fee is paid for those services.

i. "Insurance company" includes any company that underwrites or issues an insurance policy or contract including fraternal benefit societies as defined in P.L.1959, c.167 (C.17:44A-1 et seq.) and risk retention groups and purchasing groups as defined in 15 U.S.C. § 3901.

j. "Insurance producer" means any person engaged in the business of an insurance agent, insurance broker or insurance consultant.

k. "License" means any license issued pursuant to the provisions of this act or any act which is superseded by this act.

l. "Licensee" means any person holding an insurance producer license issued pursuant to this act.

m. "Limited insurance representative" means a person who is authorized to solicit, negotiate or effect contracts for a particular line of insurance as an agent for an insurance company authorized to write that line in this State which by the nature of the line of business and the manner by which it is marketed to the public does not require the professional competency demanded for an insurance producer license.

n. "Organization" means any corporation, partnership or other legal entity.

o. "Person" means any individual, corporation, partnership or other legal entity.

p. "State, other than this State," includes any other state, the District of Columbia, the Commonwealth of Puerto Rico, any territory of the United States and the Provinces of Canada.

q. "Customer information" means any and all information a financial institution holds on its customers as a result of its lending and other banking activities.

r. "Financial institution" means any state or federal banking institution, bank holding company, credit union, savings and loan association, finance company, mortgage loan company or any other institution, association, partnership, company, corporation, individual or individuals whose principal business is the lending of money or the extension of credit.

(cf: P.L.1987, c.293, s.2)

2. Section 17 of P.L.1987, c.293 (C.17:22A-17) is amended to read as follows:

17. a. The commissioner may refuse to issue or renew a license, or may revoke or suspend a license if he finds after notice and an opportunity for hearing in accordance with the "Administrative Procedure Act," P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules or regulations adopted thereunder, that the person has:

(1) Willfully violated any provision of the insurance laws of this State;

(2) Intentionally withheld material information or made a material misstatement in an application for a license;

(3) Obtained or attempted to obtain a license by fraud or misrepresentation;

(4) Committed any fraudulent act;

(5) Misappropriated or converted to his own use, or has illegally withheld, moneys which were received in the conduct of business and belonged to insurers, policyholders or others;

(6) Used the license not for the purpose of engaging in the insurance business with the general public, but primarily for the purpose of soliciting or negotiating insurance contracts or policies covering himself, members of his family, members or employees of any organization of which he is an officer, or officers or employees of an organization in which the licensee or members of his immediate family own a controlling interest, or the property or interests of those persons. A license shall be deemed to have been used principally for this purpose if the commissioner finds that during any 12-month period the aggregate commissions or other compensation accruing or to accrue from that business have exceeded or will exceed the aggregate commissions or other compensation accruing or to accrue on other business written by the applicant or licensee during the same period;

(7) Materially misrepresented the terms or conditions of insurance contracts or policies to any policyholder, insurance company, insurance producer or member of the general public;

(8) Paid a rebate to any person or paid a commission, brokerage fee or other compensation to a person who is not licensed as an insurance producer in this State, or any state other than this State, for services rendered as an insurance producer;

(9) Aided, abetted or assisted another person in violating any of the insurance laws of this State;

(10) Has been convicted of a crime involving moral turpitude or any crime reflecting on the insurance producer's fitness for licensure;

(11) Failed to file or maintain with the commissioner a complete and accurate business and home mailing address or to immediately notify the commissioner of any change in the business or home mailing address;

(12) Failed to file and maintain with the commissioner the name or names of licensed employers or employees or to immediately notify the commissioner of a change of employer or of licensed employees in a manner prescribed by rule or regulation of the commissioner;

(13) Failed to pay any fine imposed or restitution ordered by the commissioner;

(14) Failed to appear in response to any subpena issued by the commissioner or his authorized designee; failed to produce any documents or other material requested in such a subpena; or refused or failed to cooperate with an investigation by the commissioner of the activities of the person or any other licensee;

(15) Failed to keep, maintain or make available for inspection by the commissioner those records that the commissioner shall require to be kept and maintained by rule or regulation;

(16) Failed to notify the commissioner within 30 days of his conviction for any crime, indictment or the filing of any formal criminal charges, or the suspension or revocation of any insurance license or authority by a state, other than this State, or the initiation of formal disciplinary proceedings in a state, other than this State, affecting the producer's insurance license; or failed to supply any documentation that the commissioner may request in connection therewith;

(17) Failed at any time to possess cash and accounts receivable for insurance premiums in an amount equal to or in excess of the accounts payable by the licensee for insurance premiums. Those accounts receivable shall not include insurance premiums owing the licensee more than 120 days after the last day of the month during which the insurance coverage became effective. As used in this section, "insurance premiums" include unearned premiums or premiums to be refunded to policyholders and both written and earned premiums whether actually collected from policyholders or not. The filing, within the preceding 10 years, of a petition in bankruptcy, a deed of assignment for the benefit of creditors pursuant to N.J.S.2A:19-1 et seq., or any similar filing acknowledging at the time of that filing that the licensed insurance producer owed to one or more insurance companies, insurance producers, policyholders, premium finance companies or other persons any insurance premiums, including any unearned or return premiums due policyholders in an aggregate amount of $5,000.00 or more, shall create a presumption that there has been a violation of this subsection;

(18) Collected from an insured or prospective insured any fee or other compensation other than a commission deductible from an insurance premium, except when acting as an insurance broker or insurance consultant and:

(a) The fee or other compensation is based upon a written memorandum signed by the party to be charged, which memorandum specifies or defines the amount of compensation; and

(b) The amount of the fee or other compensation bears a reasonable relationship to the services rendered and is not discriminatory.

(19) Failed willfully or repeatedly to comply with standards and practices established pursuant to the plan of operation of any statutory mechanism for providing insurance coverage in this State, including, but not limited to, any automobile insurance plan operating pursuant to P.L.1970, c.215 (C.17:29D-1) [, the New Jersey Automobile Full Insurance Underwriting Association operating pursuant to P.L.1983, c.65 (C.17:30E-1 et seq.)] and the New Jersey Insurance Underwriting Association operating pursuant to P.L.1968, c.129 (C.17:37A-1 et seq.);

(20) Demonstrated unworthiness, lack of integrity, bad faith, dishonesty, financial irresponsibility or incompetency to transact business as an insurance producer.

(21) Solicited, negotiated or effected any policy of insurance covering real or personal property when:

(a) Acting as:

(i) A financial institution licensed as an insurance producer or registered as a limited insurance representative, or

(ii) A licensed insurance producer or limited insurance representative employed, owned or controlled, directly or indirectly, by a financial institution, and

(b) The real or personal property covered by the policy of insurance was the subject matter of or security for, a loan or extension of credit made by the financial institution or by any other financial institution which was owned or controlled, directly or indirectly, by such financial institution.

(22) Leased space or acquired customer information from a financial institution, except when:

(a) The amount of rent payable to the financial institution was on a square footage basis; and

(b) The rental space was separated from the financial institution's retail area by a wall or other permanent partition having its own entry and establishing separation and privacy from all other activities of the financial institution; and

(c) The customer information consists only of the customer's name and address and the customer has consented in writing to its release by the financial institution.

b. In addition or as an alternative to any other penalty, the commissioner may impose a fine of up to $5,000.00 for the first violation of any provision of this act, and not exceeding $10,000.00 for each subsequent violation, and in appropriate circumstances may order restitution of moneys owed any person and reimbursement of the costs of investigation and prosecution.

No person whose license has been revoked shall be issued a license unless the costs assessed pursuant to this subsection are paid.

c. The commissioner may promulgate rules or regulations necessary to implement the provisions of this section.

(cf: P.L.1987, c.293, s.17)

3. Section 2 of P.L.1985, c.179 (C.17:23A-2) is amended to read as follows:

2. Definitions. As used in this act:

a. "Adverse underwriting decision" means:

(1) Any of the following actions with respect to insurance transactions involving insurance coverage which is individually underwritten for an individual:

(a) A declination of insurance coverage,

(b) A termination of insurance coverage,

(c) Failure of an agent to apply for insurance coverage with a specific insurance institution which the agent represents and which is requested by an applicant,

(d) In the case of a property or casualty insurance coverage:

(i) Placement by an insurance institution or agent of a risk with a residual market mechanism or an unauthorized insurer, or

(ii) The charging of a higher rate on the basis of information which differs from that which the applicant or policyholder furnished,

(e) In the case of a life, health or disability insurance coverage, an offer to insure at a higher rate than the insurance institution's table of premium rates applicable to the age and class of risk of each person to be covered under that coverage and to the type and amount of insurance provided.

(2) Notwithstanding paragraph (1) above, the following actions, if permitted by law, shall not be considered adverse underwriting decisions but the insurance institution or agent responsible for their occurrence shall nevertheless provide the applicant or policyholder with the specific reason or reasons for their occurrence:

(a) The termination of an individual policy form on a class or Statewide basis,

(b) A declination of insurance coverage solely because such coverage is not available on a class or Statewide basis, or

b. "Affiliate" or "affiliated" means a person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is under common control with another person.

c. "Agent" means any person defined in [chapter 22 of Title 17 of the Revised Statutes, chapter 22 of Title 17B of the New Jersey Statutes] subsection f. of section 2 of P.L.1987, c.293 (C.17:22A-2) and in R.S.17:35-23.

d. "Applicant" means a person who seeks to contract for insurance coverage other than a person seeking group insurance that is not individually underwritten.

e. "Commissioner" means the Commissioner of Insurance.

f. "Consumer report" means any written, oral or other communication of information bearing on a natural person's creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics or mode of living which is used or expected to be used in connection with an insurance transaction.

g. "Consumer reporting agency" means any person who:

(1) Regularly engages, in whole or in part, in the practice of assembling or preparing consumer reports, for a monetary fee, and

(2) Obtains information primarily from sources other than insurance institutions, and

(3) Furnishes consumer reports to other persons.

h. "Control," including the terms "controlled by" or "under common control with," means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract of goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.

i. "Declination of insurance coverage" means a denial, in whole or in part, by an insurance institution or agent of requested insurance coverage.

j. "Individual" means any natural person who:

(1) In the case of property or casualty insurance, is a past, present or proposed named insured or certificateholder;

(2) In the case of life, health or disability insurance, is a past, present or proposed principal insured or certificateholder;

(3) Is a past, present or proposed policyowner;

(4) Is a past or present applicant; or

(5) Is a past or present claimant; or

(6) Derived, derives or is proposed to derive insurance coverage under an insurance policy or certificate subject to this act.

k. "Institutional source" means any person or governmental entity that provides information about an individual to an agent, insurance institution or insurance support organization, other than:

(1) An agent,

(2) The individual who is the subject of the information, or

(3) A natural person acting in a personal capacity rather than in a business or professional capacity.

l. "Insurance institution" means any corporation, association, partnership, reciprocal exchange, interinsurer, Lloyd's insurer, fraternal benefit society or other person engaged in the business of insurance, including health maintenance organizations, medical service corporations, hospital service corporations, health service corporations, dental service corporations [,] and automobile insurance plans [and the New Jersey Automobile Full Insurance Underwriting Association] as defined in section 2 of P.L.1973, c.337 (C.26:2J-2), section 1 of P.L.1940, c.74 (C.17:48A-1), [section 1 of P.L.1960, c.1 (C.17:48B-1)] section 1 of P.L.1938, c.366 (C.17:48-1), section 1 of P.L.1985, c.236 (C.17:48E-1), section 2 of P.L.1968, c.305 (C.17:48C-2) [,] and P.L.1970, c.215 (C.17:29D-1 [et seq.]) [and P.L.1983, c.65 (C.17:29A-33 et al.)], respectively. "Insurance institution" shall not include agents or insurance-support organizations.

m. "Insurance-support organization" means:

(1) Any person who regularly engages, in whole or in part, in the practice of assembling or collecting information about natural persons for the primary purpose of providing the information to an insurance institution or agent for insurance transactions, including:

(a) The furnishing of consumer reports or investigative consumer reports to an insurance institution or agent for use in connection with an insurance transaction, or

(b) The collection of personal information from insurance institutions, agents or other insurance-support organizations for the purpose of detecting or preventing fraud, material misrepresentation or material nondisclosure in connection with insurance underwriting or insurance claim activity.

(2) Notwithstanding paragraph (1) of this subsection, the following persons shall not be considered "insurance-support organizations" for the purposes of this act: agents, government institutions, insurance institutions, medical-care institutions, medical professionals and rating organizations as defined in section 1 of P.L.1944, c.27 (C.17:29A-1).

n. "Insurance transaction" means any transaction involving insurance primarily for personal, family or household needs rather than business or professional needs which entails:

(1) The determination of an individual's eligibility for an insurance coverage, benefit or payment, or

(2) The servicing of an insurance application, policy, contract or certificate.

o. "Investigative consumer report" means a consumer report or portion thereof in which information about a natural person's character, general reputation, personal characteristics or mode of living is obtained through personal interviews with the person's neighbors, friends, associates, acquaintances or others who may have knowledge concerning those items of information.

p. "Medical-care institution" means a facility or institution that is licensed to provide health care services to natural persons, including but not limited to hospitals, skilled nursing facilities, nursing facilities, home-health agencies, medical clinics, rehabilitation agencies, public health agencies or health maintenance organizations.

q. "Medical professional" means any person providing health care services to natural persons, including but not limited to a physician, podiatrist, dentist, nurse, optometrist, chiropractor, physical therapist, occupational therapist, pharmacist, psychologist, dietitian, psychiatric social worker or speech therapist.

r. "Medical-record information" means personal information which:

(1) Relates to an individual's physical or mental condition, medical history or medical treatment, and

(2) Is obtained from a medical professional or medical-care institution, from the individual, or from the individual's spouse, parent or legal guardian.

s. "Person" means any natural person, corporation, association, partnership or other legal entity.

t. "Personal information" means any individually identifiable information gathered in connection with an insurance transaction from which judgments can be made about an individual's character, habits, avocations, finances, occupation, general reputation, credit, health or any other personal characteristics. "Personal information" includes an individual's name and address and medical-record information but does not include privileged information.

u. "Policyholder" means any person who:

(1) In the case of individual property or casualty insurance, is a present named insured;

(2) In the case of individual life, health or disability insurance, is a present policyowner; or

(3) In the case of group insurance which is individually underwritten, is a present group certificateholder.

v. "Pretext interview" means an interview whereby a person, in an attempt to obtain information about a natural person, performs one or more of the following acts:

(1) Pretends to be someone he is not,

(2) Pretends to represent a person he is not in fact representing,

(3) Misrepresents the true purpose of the interview, or

(4) Refuses to identify himself upon request.

w. "Privileged information" means any individually identifiable information that:

(1) Relates to a claim for insurance benefits or a civil or criminal proceeding involving an individual, and

(2) Is collected in connection with or in reasonable anticipation of a claim for insurance benefits or civil or criminal proceeding involving an individual; except that information otherwise meeting the requirements of this subsection shall nevertheless be considered personal information under this act if it is disclosed in violation of section 13 of this act.

x. "Residual market mechanism" means any insurance pooling mechanism, joint underwriting association, or reinsurance facility created pursuant to law or regulation which provides insurance coverage for any risk that is not insurable in the voluntary market.

y. "Termination of insurance coverage" or "termination of an insurance policy" means either a cancellation or nonrenewal of an insurance policy, in whole or in part, for any reason other than the failure to pay a premium as required by the policy.

z. "Unauthorized insurer" means an insurance institution that has not been granted a certificate of authority by the commissioner to transact the business of insurance in this State.

aa. "Customer information" means any and all information a financial institution holds on its customers as a result of its lending and other banking activities.

bb. "Financial institution" means any state or federal banking institution, bank holding company, credit union, savings and loan association, finance company, mortgage loan company, individual or individuals whose principal business is the lending of money or the extension of credit.

(cf: P.L.1985, c.179, s.2)

4. Section 13 of P.L.1985, c.179 (C.17:23A-13) is amended to read as follows:

13. Disclosure limitations and conditions. An insurance institution, agent or insurance-support organization shall not disclose any personal [or] , privileged or customer information about an individual collected or received in connection with an insurance transaction unless the disclosure is:

a. With the written authorization of the individual, provided:

(1) If the authorization is submitted by another insurance institution, agent or insurance-support organization, the authorization meets the requirements of section 6 of this act, or

(2) If the authorization is submitted by a person other than an insurance institution, agent or insurance-support organization, the authorization is:

(a) Dated,

(b) Signed by the individual, and

(3) If the authorization is for the disclosure of customer information, it is:

(a) Only for the customer's name and address, and

(b) Submitted only by the individual himself;

b. To a person other than an insurance institution, agent or insurance-support organization, provided the disclosure is reasonably necessary:

(1) To enable the person to perform a business, professional or insurance function for the disclosing insurance institution, agent or insurance-support organization, and the person agrees not to disclose the information further without the individual's written authorization unless the further disclosure:

(a) Would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization, or

(b) Is reasonably necessary for the person to perform its function for the disclosing insurance institution, agent or insurance-support organization; or

(2) To enable the person to provide information to the disclosing insurance institution, agent or insurance-support organization for the purpose of:

(a) Determining an individual's eligibility for an insurance benefit or payment, or

(b) Detecting or preventing criminal activity, fraud, material misrepresentation or material nondisclosure in connection with an insurance transaction;

c. To an insurance institution, agent, insurance-support organization or self-insurer, if the information disclosed is limited to that which is reasonably necessary:

(1) To detect or prevent criminal activity, fraud, material misrepresentation or material nondisclosure in connection with insurance transactions, or

(2) For either the disclosing or receiving insurance institution, agent or insurance-support organization to perform its functions in connection with an insurance transaction involving the individual and neither the disclosing or receiving insurance institution, agent or insurance-support organization is a financial institution or employed, owned or controlled, directly or indirectly, by a financial institution;

d. To a medical-care institution or medical professional for the purpose of:

(1) Verifying insurance coverage or benefits;

(2) Informing an individual of a medical problem of which the individual may not be aware; or

(3) Conducting an operations or services audit, provided only that information is disclosed as is reasonably necessary to accomplish the foregoing purposes; or

e. To an insurance regulatory authority; or

f. To a law enforcement or other governmental authority:

(1) To protect the interests of the insurance institution, agent or insurance-support organization in preventing or prosecuting the perpetration of fraud upon it, or

(2) If the insurance institution, agent or insurance-support organization reasonably believes that illegal activities have been conducted by the individual;

g. Otherwise permitted or required by law;

h. In response to a facially valid administrative or judicial order, including a search warrant or subpena;

i. Made for the purpose of conducting actuarial or research studies, provided:

(1) No individual may be identified in any actuarial or research report,

(2) Materials allowing the individual to be identified are returned or destroyed as soon as they are no longer needed, and

(3) The actuarial or research organization agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;

j. To a party or a representative of a party to a proposed or consummated sale, transfer, merger or consolidation of all or part of the business of the insurance institution, agent or insurance-support organization, except that:

(1) Prior to the consummation of the sale, transfer, merger or consolidation only such information is disclosed as is reasonably necessary to enable the recipient to make business decisions about the purchase, transfer, merger or consolidation, and

(2) The recipient agrees not to disclose the information unless the disclosure would otherwise be permitted by this section if made by an insurance institution, agent or insurance-support organization;

k. To a person whose only use of such information will be in connection with the marketing of a product or service, if:

(1) No medical-record information, privileged information, or personal information relating to an individual's character, personal habits, mode of living or general reputation is disclosed, and no classification derived from that information is disclosed,

(2) The individual has been given an opportunity to indicate that he does not want personal or customer information disclosed for marketing purposes and has given no indication that he does not want the information disclosed, and in the case of customer information has consented in writing and the customer information consists of only the customer's name and address, and

(3) The person receiving the information agrees not to use it except in connection with the marketing of a product or service;

l. To an affiliate whose only use of the information will be in connection with an audit of the insurance institution or agent or the marketing of an insurance product or service, if [the] :

(1) The affiliate agrees not to disclose the information for any other purpose or to unaffiliated persons, and

(2) Neither the affiliate nor the insurance institution, agent or insurance-support organization is a financial institution or employed, owned or controlled, directly or indirectly, by a financial institution;

m. By a consumer reporting agency, if the disclosure is to a person other than an insurance institution or agent;

n. To a group policyholder for the purpose of reporting claims experience or conducting an audit of the insurance institution's or agent's operations or services, if the information disclosed is reasonably necessary for the recipient to conduct the review or audit;

o. To a professional peer review organization for the purpose of reviewing the services or conduct of a medical-care institution or medical professional;

p. To a governmental authority for the purpose of determining the individual's eligibility for health benefits for which the governmental authority may be liable;

q. To a certificateholder or policyholder for the purpose of providing information regarding the status of an insurance transaction; or

r. To a lienholder, mortgagee, assignee, lessor or other person shown on the records of an insurance institution or agent as having a legal or beneficial interest in a policy of insurance, provided:

(1) No medical-record information is disclosed unless the disclosure would otherwise be permitted by this section of this act; and

(2) The information disclosed is limited to that reasonably necessary to permit the person to protect its interests in the policy; and

(3) The information disclosed is not used by the lienholder, mortgagee or assignee or by any insurance producer or limited insurance representative as defined in subsections j. and m. of section 2 of P.L.1987, c.293 (C.17:22A-2) employed, owned or controlled, directly or indirectly, by the lienholder, mortgagee or assignee to solicit negotiate or effect any policy of insurance covering real or personal property which is the subject matter of the lien or mortgage.

(cf: P.L.1985, c.179, s.13)

5. Section 2 of P.L.1947, c.379 (C.17:29B-2) is amended to read as follows:

2. Definitions. When used in this act:

(a) "Person" shall mean any individual, corporation, association, partnership, reciprocal exchange, inter-insurer, Lloyds insurer, fraternal benefit society, and any other legal entity engaged in the business of insurance, including agents, brokers and adjusters.

(b) "Commissioner" shall mean the Commissioner of [Banking and] Insurance of this State.

(c) "Customer information" means any and all information a financial institution holds on its customers as a result of its lending and other banking activities.

(d) "Financial institution" means any state or federal banking institution, bank holding company, credit union, savings and loan association, finance company, mortgage loan company or any other institution, association, partnership, company, corporation, individual or individuals whose principal business is the lending of money or the extension of credit.

(cf: P.L.1947, c.379, s.2)

6. Section 4 of P.L.1947, c.379 (C.17:29B-4) is amended to read as follows:

4. The following are hereby defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:

(1) Misrepresentations and false advertising of policy contracts. Making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued or the benefits or advantages promised thereby or the dividends or share of the surplus to be received thereon, or making any false or misleading statement as to the dividends or share of surplus previously paid on similar policies, or making any misleading representation or any misrepresentation as to the financial condition of any insurer, or as to the legal reserve system upon which any life insurer operates, or using any name or title of any policy or class of policies misrepresenting the true nature thereof, or making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder to lapse, forfeit, or surrender his insurance.

(2) False information and advertising generally. Making, publishing, disseminating, circulating, or placing before the public, or causing, directly or indirectly, to be made, published, disseminated, circulated, or placed before the public, in a newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station, or in any other way, an advertisement, announcement or statement containing any assertion, representation or statement with respect to the business of insurance or with respect to any person in the conduct of his insurance business, which is untrue, deceptive or misleading.

(3) Defamation. Making, publishing, disseminating, or circulating, directly or indirectly, or aiding, abetting or encouraging the making, publishing, disseminating or circulating of any oral or written statement or any pamphlet, circular, article or literature which is false, or maliciously critical of or derogatory to the financial condition of an insurer, and which is calculated to injure any person engaged in the business of insurance.

(4) Boycott, coercion and intimidation. Entering into any agreement to commit, or by any concerted action committing, any act of boycott, coercion or intimidation resulting in or tending to result in unreasonable restraint of, or monopoly in, the business of insurance.

(5) False financial statements. Filing with any supervisory or other public official, or making, publishing, disseminating, circulating or delivering to any person, or placing before the public, or causing directly or indirectly, to be made, published, disseminated, circulated, delivered to any person, or placed before the public, any false statement of financial condition of an insurer with intent to deceive.

Making any false entry in any book, report or statement of any insurer with intent to deceive any agent or examiner lawfully appointed to examine into its condition or into any of its affairs, or any public official to whom such insurer is required by law to report, or who was authority by law to examine into its condition or into any of its affairs, or, with like intent, willfully omitting to make a true entry of any material fact pertaining to the business of such insurer in any book, report or statement of such insurer.

(6) Stock operations and advisory board contracts. Issuing or delivering or permitting agents, officers, or employees to issue or deliver, agency company stock or other capital stock, or benefit certificates or shares in any common-law corporation, or securities or any special or advisory board contracts or other contracts of any kind promising returns and profits as an inducement to insurance.

(7) Unfair discrimination. (a) Making or permitting any unfair discrimination between individuals of the same class and equal expectation of life in the rates charged for any contract of life insurance or of life annuity or in the dividends or other benefits payable thereon, or in any other of the terms and conditions of such contract.

(b) Making or permitting any unfair discrimination between individuals of the same class and of essentially the same hazard in the amount of premium, policy fees, or rates charged for any policy or contract of accident or health insurance or in the benefits payable thereunder, or in any of the terms or conditions of such contract, or in any other manner whatever.

(c) Making or permitting any discrimination against any person or group of persons because of race, creed, color, national origin or ancestry of such person or group of persons in the issuance, withholding, extension or renewal of any policy of insurance, or in the fixing of the rates, terms or conditions therefor, or in the issuance or acceptance of any application therefor.

(d) Making or permitting discrimination in the use of any form of policy of insurance which expresses, directly or indirectly, any limitation or discrimination as to race, creed, color, national origin or ancestry or any intent to make any such limitation or discrimination.

(e) Making or permitting any unfair discrimination solely because of age in the issuance, withholding, extension or renewal of any policy or contract of automobile liability insurance or in the fixing of the rates, terms or conditions therefor, or in the issuance or acceptance of any application therefor, provided, that nothing herein shall be construed to interfere with the application of any applicable rate classification filed with and approved by the commissioner pursuant to P.L.1944, c.27 (C.17:29A-1 to 17:29A-28), or any amendment or supplement thereof, which is in effect with respect to such policy or contract of insurance.

(8) Rebates. (a) Except as otherwise expressly provided by law, knowingly permitting or offering to make or making any contract of life insurance, life annuity or accident and health insurance, or agreement as to such contract other than as plainly expressed in the contract issued thereon, or paying or allowing, or giving or offering to pay, allow, or give, directly or indirectly, as inducement to such insurance, or annuity, any rebate of premiums payable on the contract, or any special favor or advantage in the dividends or other benefits thereon, or any valuable consideration or inducement whatever not specified in the contract; or giving, or selling, or purchasing or offering to give, sell, or purchase as inducement to such insurance or annuity or in connection therewith, any stocks, bonds, or other securities of any insurance company or other corporation, association, or partnership, or any dividends or profits accrued thereon, or anything of value whatsoever not specified in the contract.

(b) Nothing in clause 7 or paragraph (a) of this clause 8 shall be construed as including within the definition of discrimination or rebates any of the following practices (i) in the case of any contract of life insurance or life annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance; provided, that any such bonuses or abatement of premiums shall be fair and equitable to policyholders and for the best interests of the company and its policyholders; (ii) in the case of life insurance policies issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount which fairly represents the saving in collection expense; (iii) readjustment of the rate of premium for a group policy based on the loss or expense experience thereunder, at the end of the first or any subsequent policy year of insurance thereunder, which may be made retroactive only for such policy year.

(9) Unfair claim settlement practices. Committing or performing with such frequency as to indicate a general business practice any of the following:

(a) Misrepresenting pertinent facts or insurance policy provisions relating to coverages at issue;

(b) Failing to acknowledge and act reasonably promptly upon communications with respect to claims arising under insurance policies;

(c) Failing to adopt and implement reasonable standards for the prompt investigation of claims arising under insurance policies;

(d) Refusing to pay claims without conducting a reasonable investigation based upon all available information;

(e) Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements have been completed;

(f) Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims in which liability has become reasonably clear;

(g) Compelling insureds to institute litigation to recover amounts due under an insurance policy by offering substantially less than the amounts ultimately recovered in actions brought by such insureds;

(h) Attempting to settle a claim for less than the amount to which a reasonable man would have believed he was entitled by reference to written or printed advertising material accompanying or made part of an application;

(i) Attempting to settle claims on the basis of an application which was altered without notice to, or knowledge or consent of the insured;

(j) Making claims payments to insureds or beneficiaries not accompanied by a statement setting forth the coverage under which the payments are being made;

(k) Making known to insureds or claimants a policy of appealing from arbitration awards in favor of insureds or claimants for the purpose of compelling them to accept settlements or compromises less than the amount awarded in arbitration;

(l) Delaying the investigation or payment of claims by requiring an insured, claimant or the physician of either to submit a preliminary claim report and then requiring the subsequent submission of formal proof of loss forms, both of which submissions contain substantially the same information.

(m) Failing to promptly settle claims, where liability has become reasonably clear, under one portion of the insurance policy coverage in order to influence settlements under other portions of the insurance policy coverage;

(n) Failing to promptly provide a reasonable explanation of the basis in the insurance policy in relation to the facts or applicable law for denial of a claim or for the offer of a compromise settlement.

(10) Failure to maintain complaint handling procedures. Failure of any person to maintain a complete record of all the complaints which it has received since the date of its last examination. This record shall indicate the total number of complaints, their classification by line of insurance, the nature of each complaint, the disposition of these complaints, and the time it took to process each complaint. For purposes of this subsection, "complaint" shall mean any written communication primarily expressing a grievance.

(11) Financial institution coercion. Committing or performing any of the following:

(a) Soliciting, negotiating or effecting any policy of insurance covering real or personal property when:

(i) Acting as a financial institution licensed as an insurance producer or registered as a limited insurance representative as defined in subsections j. and m. of section 2 of P.L.1987, c.293 (C.17:22A-2), or as a licensed insurance producer or limited insurance representative employed, owned or controlled, directly or indirectly, by a financial institution, and

(ii) The real or personal property covered by the policy of insurance is the subject matter of or security for, a loan or extension of credit made by the financial institution or by any other financial institution which is owned or controlled, directly or indirectly, by such financial institution;

(b) Leasing space or acquiring customer information from a financial institution, except when;

(i) The amount of rent payable to the financial institution is on a square footage basis; and

(ii) The rental space is separated from the financial institution's retail area by a wall or other permanent partition having its own entry and establishing separation and privacy from all other activities of the financial institution; and

The customer information consists only of the customer's name and address and the customer has consented in writing to its release by the financial institution.

The enumeration of this act of specific unfair methods of competition and unfair or deceptive acts and practices in the business of insurance is not exclusive or restrictive or intended to limit the powers of the commissioner or any court of review under the provisions of section 9 of this act.

(cf: P.L.1975, c.100, s.1)

7. This act shall take effect immediately .

STATEMENT

This bill would restrict certain activities of a financial institution licensed as an insurance producer or registered as a limited insurance representative, or a licensed insurance producer or limited insurance representative employed, owned or controlled, directly or indirectly, by a financial institution. The bill defines "financial institution" as any state or federal banking institution, bank holding company, credit union, savings and loan association, finance company, mortgage loan company or any other institution, association, partnership, company, corporation, individual or individuals whose principal business is the lending of money or the extension of credit.

The bill provides that a financial institution licensed as an insurance producer may be subject to suspension or revocation of its license if it is found by the Commissioner of Insurance to have solicited, negotiated or effected any policy of insurance covering real or personal property when acting as a financial institution and the real or personal property covered by the policy of insurance was the subject matter of, or security for, a loan or extension of credit made by the financial institution or by any other financial institution which was owned or controlled, directly or indirectly, by such financial institution.

The bill also prohibits an insurance producer from leasing space or acquiring customer information from a financial institution except when the amount of rent payable to the financial institution is on a square footage basis; and the rental space is separated from the financial institution's retail area by a wall or other permanent partition having its own entry and establishing separation and privacy from all other activities of the financial institution; and the customer information consists only of the customer's name and address and the customer has consented in writing to its release by the financial institution.

The bill restricts the use of customer information, as defined in the bill, collected and held by a financial institution on its customers as a result of its lending and other banking activities. A financial institution may not disclose customer information collected or received in connection with an insurance transaction unless the disclosure consists only of the customer's name and address and is authorized by the customer himself. The bill would also prohibit disclosure of customer information, in connection with an insurance transaction, between financial institutions or entities employed, owned or controlled, directly or indirectly, by a financial institution.

Finally, under the provisions of the bill, it would be an unfair trade practice for a financial institution to engage in many of the activities enumerated above.

Limits insurance sales activities of financial institutions and certain insurance producers.