REPORT TITLE:
Independent Insurance Agents


DESCRIPTION:
Prohibits insurance companies from requiring independent
insurance agents to sign anti-competition clauses.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           2693
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.


BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 1      SECTION 1.  The legislature finds that under existing law,
 
 2 insurance companies may require independent insurance agents to
 
 3 sign a covenant that restricts the agent from selling a similar
 
 4 line of insurance coverage from a competing insurance company.
 
 5 These "anti-competition" covenants severely restrict an
 
 6 independent insurance agent's ability to provide the best
 
 7 possible insurance coverage at the best possible price to the
 
 8 client, thereby not only diminishing an independent insurance
 
 9 agent's income capability, but inflicting a disservice upon the
 
10 insurance buying public as well.
 
11      Allowing independent insurance agents to freely offer the
 
12 best possible insurance coverage to the agent's clients,
 
13 regardless of which insurance company underwrites the policy,
 
14 will result in increased policy flexibility and income capacity
 
15 for independent insurance agents, more vigorous competition among
 
16 insurance companies, and most importantly, better coverage for
 
17 the insured.
 
18      The purpose of this Act is to prohibit insurance companies
 
19 from forcing independent insurance agents to enter into anti-
 
20 competition covenants.
 

 
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 1      SECTION  2.  Section 431:13-103, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  The following are defined as unfair methods of
 
 4 competition and unfair or deceptive acts or practices in the
 
 5 business of insurance:
 
 6      (1)  Misrepresentations and false advertising of insurance
 
 7           policies.  Making, issuing, circulating, or causing to
 
 8           be made, issued, or circulated, any estimate,
 
 9           illustration, circular, statement, sales presentation,
 
10           omission, or comparison which:
 
11           (A)  Misrepresents the benefits, advantages,
 
12                conditions, or terms of any insurance policy;
 
13           (B)  Misrepresents the dividends or share of the
 
14                surplus to be received on any insurance policy;
 
15           (C)  Makes any false or misleading statement as to the
 
16                dividends or share of surplus previously paid on
 
17                any insurance policy;
 
18           (D)  Is misleading or is a misrepresentation as to the
 
19                financial condition of any insurer, or as to the
 
20                legal reserve system upon which any life insurer
 
21                operates;
 
22           (E)  Uses any name or title of any insurance policy or
 
23                class of insurance policies misrepresenting the
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                true nature thereof;
 
 2           (F)  Is a misrepresentation for the purpose of inducing
 
 3                or tending to induce the lapse, forfeiture,
 
 4                exchange, conversion, or surrender of any
 
 5                insurance policy;
 
 6           (G)  Is a misrepresentation for the purpose of
 
 7                effecting a pledge or assignment of or effecting a
 
 8                loan against any insurance policy;
 
 9           (H)  Misrepresents any insurance policy as being shares
 
10                of stock;
 
11           (I)  Publishes or advertises the assets of any insurer
 
12                without publishing or advertising with equal
 
13                conspicuousness the liabilities of the insurer,
 
14                both as shown by its last annual statement; or
 
15           (J)  Publishes or advertises the capital of any insurer
 
16                without stating specifically the amount of paid-in
 
17                and subscribed capital.
 
18      (2)  False information and advertising generally.  Making,
 
19           publishing, disseminating, circulating, or placing
 
20           before the public, or causing, directly or indirectly,
 
21           to be made, published, disseminated, circulated, or
 
22           placed before the public, in a newspaper, magazine, or
 
23           other publication, or in the form of a notice,
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1           circular, pamphlet, letter, or poster, or over any
 
 2           radio or television station, or in any other way, an
 
 3           advertisement, announcement, or statement containing
 
 4           any assertion, representation, or statement with
 
 5           respect to the business of insurance or with respect to
 
 6           any person in the conduct of the person's insurance
 
 7           business, which is untrue, deceptive, or misleading.
 
 8      (3)  Defamation.  Making, publishing, disseminating, or
 
 9           circulating, directly or indirectly, or aiding,
 
10           abetting, or encouraging the making, publishing,
 
11           disseminating, or circulating of any oral or written
 
12           statement or any pamphlet, circular, article, or
 
13           literature which is false, or maliciously critical of
 
14           or derogatory to the financial condition of an insurer,
 
15           and which is calculated to injure any person engaged in
 
16           the business of insurance.
 
17      (4)  Boycott, coercion, and intimidation.
 
18           (A)  Entering into any agreement to commit, or by any
 
19                action committing, any act of boycott, coercion,
 
20                or intimidation resulting in or tending to result
 
21                in unreasonable restraint of, or monopoly in, the
 
22                business of insurance; or
 
23           (B)  Entering into any agreement on the condition,
 

 
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 1                agreement, or understanding that a policy will not
 
 2                be issued or renewed unless the prospective
 
 3                insured contracts for another class or an
 
 4                additional policy of the same class of insurance
 
 5                with the same insurer.
 
 6      (5)  False financial statements.
 
 7           (A)  Knowingly filing with any supervisory or other
 
 8                public official, or knowingly making, publishing,
 
 9                disseminating, circulating, or delivering to any
 
10                person, or placing before the public, or knowingly
 
11                causing, directly or indirectly, to be made,
 
12                published, disseminated, circulated, delivered to
 
13                any person, or placed before the public, any false
 
14                statement of a material fact as to the financial
 
15                condition of an insurer; or
 
16           (B)  Knowingly making any false entry of a material
 
17                fact in any book, report, or statement of any
 
18                insurer with intent to deceive any agent or
 
19                examiner lawfully appointed to examine into its
 
20                condition or into any of its affairs, or any
 
21                public official to whom the insurer is required by
 
22                law to report, or who has authority by law to
 
23                examine into its condition or into any of its
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                affairs, or, with like intent, knowingly omitting
 
 2                to make a true entry of any material fact
 
 3                pertaining to the business of the insurer in any
 
 4                book, report, or statement of the insurer.
 
 5      (6)  Stock operations and advisory board contracts.  Issuing
 
 6           or delivering or permitting agents, officers, or
 
 7           employees to issue or deliver, agency company stock or
 
 8           other capital stock, or benefit certificates or shares
 
 9           in any common-law corporation, or securities or any
 
10           special or advisory board contracts or other contracts
 
11           of any kind promising returns and profits as an
 
12           inducement to insurance.
 
13      (7)  Unfair discrimination.
 
14           (A)  Making or permitting any unfair discrimination
 
15                between individuals of the same class and equal
 
16                expectation of life in the rates charged for any
 
17                contract of life insurance or of life annuity or
 
18                in the dividends or other benefits payable
 
19                thereon, or in any other of the terms and
 
20                conditions of the contract;
 
21           (B)  Making or permitting any unfair discrimination in
 
22                favor of particular individuals or persons, or
 
23                between insureds or subjects of insurance having
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                substantially like insuring, risk, and exposure
 
 2                factors, or expense elements, in the term or
 
 3                conditions of any insurance contract, or in the
 
 4                rate or amount of premium charge therefor, or in
 
 5                the benefits payable or in any other rights or
 
 6                privilege accruing thereunder;
 
 7           (C)  Making or permitting any unfair discrimination
 
 8                between individuals or risks of the same class and
 
 9                of essentially the same hazards by refusing to
 
10                issue, refusing to renew, canceling, or limiting
 
11                the amount of insurance coverage on a property or
 
12                casualty risk because of the geographic location
 
13                of the risk, unless:
 
14                (i)  The refusal, cancellation, or limitation is
 
15                     for a business purpose which is not a mere
 
16                     pretext for unfair discrimination; or
 
17               (ii)  The refusal, cancellation, or limitation is
 
18                     required by law or regulatory mandate;
 
19           (D)  Making or permitting any unfair discrimination
 
20                between individuals or risks of the same class and
 
21                of essentially the same hazards by refusing to
 
22                issue, refusing to renew, canceling, or limiting
 
23                the amount of insurance coverage on a residential
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                property risk, or the personal property contained
 
 2                therein, because of the age of the residential
 
 3                property, unless:
 
 4                (i)  The refusal, cancellation, or limitation is
 
 5                     for a business purpose which is not a mere
 
 6                     pretext for unfair discrimination; or
 
 7               (ii)  The refusal, cancellation, or limitation is
 
 8                     required by law or regulatory mandate;
 
 9           (E)  Refusing to insure, refusing to continue to
 
10                insure, or limiting the amount of coverage
 
11                available to an individual because of the sex or
 
12                marital status of the individual; however, nothing
 
13                in this subsection shall prohibit an insurer from
 
14                taking marital status into account for the purpose
 
15                of defining persons eligible for dependent
 
16                benefits;
 
17           (F)  To terminate, modify coverage, or refuse to issue
 
18                or refuse to renew any property or casualty policy
 
19                or contract of insurance solely because the
 
20                applicant or insured or any employee of either is
 
21                mentally or physically impaired; provided that
 
22                this subsection shall not apply to disability
 
23                insurance sold by a casualty insurer; provided
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                further that this subsection shall not be
 
 2                interpreted to modify any other provision of law
 
 3                relating to the termination, modification,
 
 4                issuance, or renewal of any insurance policy or
 
 5                contract;
 
 6           (G)  Refusing to insure, refusing to continue to
 
 7                insure, or limiting the amount of coverage
 
 8                available to an individual based solely upon the
 
 9                individual's having taken a human immunodeficiency
 
10                virus (HIV) test prior to applying for insurance;
 
11                or
 
12           (H)  Refusing to insure, refusing to continue to
 
13                insure, or limiting the amount of coverage
 
14                available to an individual because the individual
 
15                refuses to consent to the release of information
 
16                which is confidential as provided in section
 
17                325-101; provided that nothing in this
 
18                subparagraph shall prohibit an insurer from
 
19                obtaining and using the results of a test
 
20                satisfying the requirements of the commissioner,
 
21                which was taken with the consent of an applicant
 
22                for insurance; provided further that any applicant
 
23                for insurance who is tested for HIV infection
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                shall be afforded the opportunity to obtain the
 
 2                test results, within a reasonable time after being
 
 3                tested, and that the confidentiality of the test
 
 4                results shall be maintained as provided by section
 
 5                325-101.
 
 6      (8)  Rebates.  Except as otherwise expressly provided by
 
 7           law:
 
 8           (A)  Knowingly permitting or offering to make or making
 
 9                any contract of insurance, or agreement as to the
 
10                contract other than as plainly expressed in the
 
11                contract, or paying or allowing, or giving or
 
12                offering to pay, allow, or give, directly or
 
13                indirectly, as inducement to the insurance, any
 
14                rebate of premiums payable on the contract, or any
 
15                special favor or advantage in the dividends or
 
16                other benefits, or any valuable consideration or
 
17                inducement not specified in the contract; or
 
18           (B)  Giving, selling, or purchasing, or offering to
 
19                give, sell, or purchase as inducement to the
 
20                insurance or in connection therewith, any stocks,
 
21                bonds, or other securities of any insurance
 
22                company or other corporation, association, or
 
23                partnership, or any dividends or profits accrued
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                thereon, or anything of value not specified in the
 
 2                contract.
 
 3      (9)  Nothing in paragraphs (7) or (8) shall be construed as
 
 4           including within the definition of discrimination or
 
 5           rebates any of the following practices:
 
 6           (A)  In the case of any contract of life insurance or
 
 7                life annuity, paying bonuses to policyholders or
 
 8                otherwise abating their premiums in whole or in
 
 9                part out of surplus accumulated from
 
10                nonparticipating insurance; provided that any
 
11                bonus or abatement of premiums shall be fair and
 
12                equitable to policyholders and for the best
 
13                interests of the insurer and its policyholders;
 
14           (B)  In the case of life insurance policies issued on
 
15                the industrial debit plan, making allowance to
 
16                policyholders who have continuously for a
 
17                specified period made premium payments directly to
 
18                an office of the insurer in an amount which fairly
 
19                represents the saving in collection expense;
 
20           (C)  Readjustment of the rate of premium for a group
 
21                insurance policy based on the loss or expense
 
22                experience thereunder, at the end of the first or
 
23                any subsequent policy year of insurance
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                thereunder, which may be made retroactive only for
 
 2                the policy year; and
 
 3           (D)  In the case of any contract of insurance, the
 
 4                distribution of savings, earnings, or surplus
 
 5                equitably among a class of policyholders, all in
 
 6                accordance with this article.
 
 7     (10)  Unfair claim settlement practices.  Committing or
 
 8           performing with such frequency as to indicate a general
 
 9           business practice any of the following:
 
10           (A)  Misrepresenting pertinent facts or insurance
 
11                policy provisions relating to coverages at issue;
 
12           (B)  With respect to claims arising under its policies,
 
13                failing to respond with reasonable promptness, in
 
14                no case more than fifteen working days, to
 
15                communications received from:
 
16                (i)  The insurer's policyholder;
 
17               (ii)  Any other persons, including the
 
18                     commissioner; or
 
19              (iii)  The insurer of a person involved in an
 
20                     incident in which the insurer's policyholder
 
21                     is also involved.
 
22                The response shall be more than an acknowledgment
 
23                that such person's communication has been
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                received, and shall adequately address the
 
 2                concerns stated in the communication;
 
 3           (C)  Failing to adopt and implement reasonable
 
 4                standards for the prompt investigation of claims
 
 5                arising under insurance policies;
 
 6           (D)  Refusing to pay claims without conducting a
 
 7                reasonable investigation based upon all available
 
 8                information;
 
 9           (E)  Failing to affirm or deny coverage of claims
 
10                within a reasonable time after proof of loss
 
11                statements have been completed;
 
12           (F)  Failing to offer payment within thirty calendar
 
13                days of affirmation of liability, if the amount of
 
14                the claim has been determined and is not in
 
15                dispute;
 
16           (G)  Failing to provide the insured, or when applicable
 
17                the insured's beneficiary, with a reasonable
 
18                written explanation for any delay, on every claim
 
19                remaining unresolved for thirty calendar days from
 
20                the date it was reported;
 
21           (H)  Not attempting in good faith to effectuate prompt,
 
22                fair, and equitable settlements of claims in which
 
23                liability has become reasonably clear;
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1           (I)  Compelling insureds to institute litigation to
 
 2                recover amounts due under an insurance policy by
 
 3                offering substantially less than the amounts
 
 4                ultimately recovered in actions brought by the
 
 5                insureds;
 
 6           (J)  Attempting to settle a claim for less than the
 
 7                amount to which a reasonable person would have
 
 8                believed the person was entitled by reference to
 
 9                written or printed advertising material
 
10                accompanying or made part of an application;
 
11           (K)  Attempting to settle claims on the basis of an
 
12                application which was altered without notice,
 
13                knowledge, or consent of the insured;
 
14           (L)  Making claims payments to insureds or
 
15                beneficiaries not accompanied by a statement
 
16                setting forth the coverage under which the
 
17                payments are being made;
 
18           (M)  Making known to insureds or claimants a policy of
 
19                appealing from arbitration awards in favor of
 
20                insureds or claimants for the purpose of
 
21                compelling them to accept settlements or
 
22                compromises less than the amount awarded in
 
23                arbitration;
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1           (N)  Delaying the investigation or payment of claims by
 
 2                requiring an insured, claimant, or the physician
 
 3                of either to submit a preliminary claim report and
 
 4                then requiring the subsequent submission of formal
 
 5                proof of loss forms, both of which submissions
 
 6                contain substantially the same information;
 
 7           (O)  Failing to promptly settle claims, where liability
 
 8                has become reasonably clear, under one portion of
 
 9                the insurance policy coverage in order to
 
10                influence settlements under other portions of the
 
11                insurance policy coverage;
 
12           (P)  Failing to promptly provide a reasonable
 
13                explanation of the basis in the insurance policy
 
14                in relation to the facts or applicable law for
 
15                denial of a claim or for the offer of a compromise
 
16                settlement; and
 
17           (Q)  Indicating to the insured on any payment draft,
 
18                check, or in any accompanying letter that the
 
19                payment is "final" or is "a release" of any claim
 
20                if additional benefits relating to the claim are
 
21                probable under coverages afforded by the policy;
 
22                unless the policy limit has been paid or there is
 
23                a bona fide dispute over either the coverage or
 

 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1                the amount payable under the policy.
 
 2     (11)  Failure to maintain complaint handling procedures.
 
 3           Failure of any insurer to maintain a complete record of
 
 4           all the complaints which it has received since the date
 
 5           of its last examination under section 431:2-302.  This
 
 6           record shall indicate the total number of complaints,
 
 7           their classification by line of insurance, the nature
 
 8           of each complaint, the disposition of these complaints,
 
 9           and the time it took to process each complaint.  For
 
10           purposes of this section, "complaint" means any written
 
11           communication primarily expressing a grievance.
 
12     (12)  Misrepresentation in insurance applications.  Making
 
13           false or fraudulent statements or representations on or
 
14           relative to an application for an insurance policy, for
 
15           the purpose of obtaining a fee, commission, money, or
 
16           other benefit from any insurer, agent, broker, or
 
17           individual.
 
18     (13)  Requiring an independent agent to enter into covenants
 
19           that prohibit the independent agent from selling
 
20           insurance from another insurer."
 
21      SECTION 3.  New statutory material is underscored.
 

 
 
 
 
 
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                                     S.B. NO.           2693
                                                        
                                                        

 
 1      SECTION 4.  This Act shall take effect upon its approval.
 
 2 
 
 3                           INTRODUCED BY:  _______________________