ASSEMBLY INSURANCE COMMITTEE

STATEMENT TO

ASSEMBLY COMMITTEE SUBSTITUTE FOR

ASSEMBLY, No. 1638

STATE OF NEW JERSEY

DATED: MARCH 3, 1997

      The Assembly Insurance Committee reports without recommendation, Assembly Committee Substitute for Assembly Bill No. 1638.

      This bill, a committee substitute for Assembly Bill No. 1638, is entitled the "Insurance Sales Consumer Protection Act," and concerns insurance sales by financial institutions. The bill defines "financial institution" as any federally or state chartered bank, savings bank, savings and loan association or credit union, or any finance company, mortgage loan company, insurance agency owned by a financial institution 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 the solicitation, negotiation or effectuation of insurance by, or on the premises of, any financial institution shall be conducted only by insurance producers licensed pursuant to P.L.1987, c.293 (C.17:22A-1 et seq.) whose responsibilities do not include loan transactions or other transactions involving the extension of credit. However, an exception to this second requirement is allowed for a financial institution location having three or less persons with lending authority so long as the person primarily responsible for making the specific loan or extension of credit is not the same person engaged in the solicitation for the purchase or sale of insurance for that same transaction.

      In addition, the bill provides that any insurance sales conducted on the premises of a financial institution must be transacted in a separate area, physically distinct from other areas where retail deposits are taken and lending services are conducted.

      The bill prohibits a financial institution from requiring or implying that the purchase of insurance by a customer or prospective customer of the financial institution is required as a condition of, or is in any way related to, receiving any other product or service offered by the financial institution. In addition, a financial institution is prohibited from offering any inducement designed or represented to waive, reduce, pay, produce or provide funds to pay all or any part of the cost of insurance to any customer to purchase insurance from the institution, other than as plainly expressed in an insurance policy.

      The bill also places restrictions on a financial institution soliciting the purchase of insurance from a customer who has applied for a loan or extension of credit from the institution. Under the bill, the financial institution is required to wait 30 days from the date the customer receives a commitment or notification of approval of the loan or extension of credit by the financial institution before the financial institution may solicit the purchase of insurance from the customer.

      Finally, the bill requires specific disclosures by any person soliciting the purchase of insurance or selling insurance on the premises of a financial institution insured by the Federal Deposit Insurance Corporation ("FDIC").