You asked the following questions:

1. what is the definition of an insurance producer;

2. what is the process for becoming a producer for health insurance;

3. what reporting or filing requirements do health insurance producers have and what is the purpose of them;

4. has there been legislation to require such individuals to publicly disclose their commissions, beyond the requirements of PA 05-61;

5. do other states require health insurance producers or brokers to publicly disclose their commissions; and

6. are there any laws that prohibit such disclosure requirements.

While your questions referred to insurance “brokers” as well as producers, PA 96-193 and PA 94-160 replaced the terms “broker” and “agent” with “producer. ”

SUMMARY

Under CGS § 38a-702, an insurance producer is anyone required to be licensed under Connecticut law to sell, solicit, or negotiate insurance. The licensing requirements are contained in CGS §§ 38a-702a to 38a-702r, inclusive.

Connecticut residents generally must pass an examination to be licensed as producers. Nonresidents must be licensed in a state that grants reciprocity to Connecticut residents. All applicants must pay an application fee.

A producer must report to the Insurance commissioner (1) any administrative action taken against him or her in another jurisdiction or by another governmental agency in Connecticut and (2) any criminal prosecution taken against him or her in any jurisdiction.

PA 05-61 (CGS § 38a-707a) requires an insurance producer to make certain disclosures to his customer if he or she receives compensation directly from the customer for an insurance sale while also receiving compensation from an insurer or other third party for the sale. The law provides several exemptions from this requirement, such as producers who only serve as an intermediary between the insurer and the customer's producer. In addition, CGS § 38a-707 requires that a producer's compensation from an insured or prospective insured be based on a written memorandum, signed by the party to be charged that specifies or clearly defines the amount or extent of the compensation.

According to staff at the National Association of Insurance Commissioners, 13 other states have compensation disclosure requirements in their insurance statutes, regulations, or administrative bulletins that apply to health insurance producers. In most cases, the requirements are similar to those in PA 95-61, which was based on model legislation developed by the National Conference of Insurance Legislators. The 13 states are: Arizona, Arkansas, California, Georgia, Illinois, Indiana, Nevada, New Jersey, Oregon, Rhode Island, Texas, Washington, and Wisconsin. We have found no laws that prohibit such disclosure requirements.

PROCESS FOR BECOMING A PRODUCER FOR HEALTH INSURANCE

An individual who lives in Connecticut who applies for an insurance producer license must pass a written examination unless exempt under CGS § 38a-702h (the exemption covers people licensed as producers in other states). The examination tests the individual's knowledge concerning the lines of authority for which application is made, a producer's duties and responsibilities, and Connecticut insurance laws and regulations.

A nonresident is eligible for Connecticut licensure if he or she (1) is currently licensed as a resident and in good standing in his or her home state, (2) has submitted the proper request for licensure and has paid the required fees, (3) has submitted or transmitted to the commissioner the application for licensure that the person submitted to the person's home state or a completed uniform application, and (4) the person's home state awards nonresident producer licenses to Connecticut residents on a reciprocal basis.

The insurance commissioner may issue a temporary producer license for up to 180 days without requiring an examination under certain circumstances. For example, the commissioner may issue a temporary license to the surviving spouse of a licensed producer who dies or becomes mentally or physically disabled to provide enough time to sell the business, to allow for the recovery or return of the producer to the business, or to provide for the training and licensing of new personnel to operate the business.

An insurance producer may not act as an agent of an insurance company unless the company appoints the producer as its agent. The Insurance Department maintains a list of appointments by company, which can be accessed through www. CT-CLIC. com. An insurance producer who is not acting as an agent of an insurer is not required to become appointed.

For the producer to act as an agent for an insurer, the appointing insurer must file a notice of appointment within 15 days after the date the agency contract is executed or the first insurance application is submitted. An insurer may appoint a producer to all or some of the affiliated companies within the insurer's holding company system or group by filing a single appointment request under certain circumstances.

Under CGS § 38a-11(12), a producer license applicant must pay a $ 7 examination fee for each examination taken (if a testing service is used, it must pay the fee) and a $ 40 fee for each license issued. However, according to CT-CLIC, the license fee is currently $ 75 for an individual and $ 65 for a business entity. The license must indicate the lines of authority granted to the applicant by examination qualification. Licenses are valid for two years.

Anyone who acts as a producer without a license is subject to a fine of up to $ 500, imprisonment for up to three months, or both (CGS § 38a-704).

REPORTING AND FILING REQUIREMENTS

A producer must report to the Insurance commissioner any administrative action taken against the producer in another jurisdiction or by another governmental agency in Connecticut. The producer must file this report within 30 days after the final disposition of the matter. The report must include a copy of the order, consent to order, or other relevant legal documents.

Within 30 days after the initial pretrial hearing date, a producer must report to the commissioner any criminal prosecution taken against the producer in any jurisdiction. The report must include a copy of the initial complaint filed, the order resulting from the hearing, and any other relevant legal documents (CGS § 38a-702o).

DISCLOSURE REQUIREMENTS

Connecticut

In Connecticut, PA 05-61 (CGS § 38a-707a) prohibits an insurance producer or his affiliate who receives compensation directly from a customer for an insurance sale from also receiving compensation from an insurer or other third party for the sale unless, before he delivers the insurance policy to the customer, the producer (1) obtains the customer's acknowledgement that he or his affiliate will receive compensation from the insurer or other third party and (2) discloses the compensation amount. If the amount is unknown, he must give a reasonable estimate, if possible, and describe how the compensation is calculated. The customer's acknowledgement must be in writing, but if the transaction occurs over the telephone or electronically and written consent cannot reasonably be obtained, the producer can document the acknowledgement himself.

These provisions do not apply to a producer (1) whose only compensation is from an insurer (e. g. , an insurance company employee) or (2) who does not receive compensation from the customer and informs the customer before policy delivery that he (a) will receive compensation from the insurer or (b) represents the insurer and can service the customer on the insurer's behalf. It also does not apply to (1) the placement of insurance in surplus lines or residual markets, (2) a person who is a licensed producer but only acts as an intermediary between the insurer and the customer's producer, or (3) a reinsurance intermediary.

Compensation from a customer does not include commissions that are deductible from the customer's premium payment and fees agreed to in writing for certain administrative services authorized by Insurance Department regulation. Compensation from the insurer means payments, commissions, fees, awards, overrides, bonuses, contingent commissions, loans, stock options, gifts, prizes, or other valuable consideration, whether agreed to in writing or not.

In addition to the above requirements, under CGS § 38a-707, a producer's compensation from an insured or prospective insured must be based on a written memorandum, signed by the party to be charged that specifies or clearly defines the amount or extent of the compensation. In addition, the compensation must comply with Insurance Department regulations. These provisions apply to compensation for or on account of the negotiation or procurement of, or other services in connection with, any contract of insurance made or negotiated in Connecticut or for any other services on account of such insurance policies or contracts. On the other hand, they do not apply to commissions that are deductible from premiums on insurance policies or contracts, including adjustment of claims.

There was no other legislation introduced between 2000 and 2007 on compensation disclosures for health insurance producers.

Other States

Table 1 describes producer compensation requirements in other states. Generally, these requirements are similar to Connecticut's but there are variations in the circumstances where disclosure is not required. In addition, several states have disclosure requirements that are less rigorous than Connecticut's. For example, in Arkansas, disclosure of the amount of compensation is only required at the request of the insured. While Wisconsin requires the producer to disclose whether he or she will receive compensation from a source other than the insured, the producer does not have to disclose the amount of compensation. On the other hand, Georgia requires that when a producer provides the insured with a description of the method to be used to determine his or her compensation, this description be in “readable language. ”

Table 1: Other States that Require Health Insurance

Producers to Disclose Compensation

Table 1: -Continued-

Source: National Association of Insurance Commissioners

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