Make your own free website on Tripod.com



The "Farmers Insurance News-Alert" website is dedicated to providing the consumer and general public with detailed information concerning the Farmers Insurance Group. This includes fraud reports, consumer complaints, lawsuit's and other legal actions taken against this company. All information contained herein is for educational purposes only. Original sources, when known are sited.

 

Insurance Consumer Protection-Agent Rights Bill

In January 1999, Kansas State Insurance Commissioner Kathleen Sebelius, at the request of insurance agents, to protect insurance buyers and agents from arbitrary termination of their contracts with insurance companies, will introduce a proposal in the Kansas Legislature. While the Commissioner is willing to sponsor this "Just Cause Termination" bill, it will only pass if enough insurance agents and consumers in Kansas let their legislators know why this measure is needed.

The measure would broaden protections now given to independent insurance agents and add exclusive and employee insurance agents to its protections as well. In brief, the bill would:

  • Add exclusive agents (agents who agree by contract to represent only one insurer exclusively) to the law restricting the right of an insurance company to terminate current contracts with agents who produce business for the company. Insurers for an exclusive agent would have to give its agents the same kind of reasonable treatment given to independent agents when their contracts are cancelled. Similar protection would also be given to employee agents of insurers.
  • Require insurers to try rehabilitation of an agent before the agency contract or employment is terminated. The company and the agent must sit down and mutually agree what the company says are the agent’s deficiencies and what action the agent must take to rehabilitate his or her production.
  • Prohibit companies from terminating contracts or employee agents because of adverse loss experience for a single year, the geographic location of the agent’s business, the agent complained to a state agency about violations of law and the agent has performed obligations required under Kansas law.

The bill does not prohibit insurers from terminating agency contracts because of fraud, the agent has abandoned the business, is guilty of willful misconduct or has lost his or her license.

It is important state legislators, insurance companies and other agents be educated about the importance of this bill. This is not a bill to protect under-producing agents or unreasonably restrict the right of insurers to manage their agency force. Some points you will want to make to your legislator:

Does not restrict companies unfairly. Companies who treat their agents fairly have nothing to fear from this bill. Good companies refrain from arbitrary or unfair terminations, provide for rehabilitation of allow an appeal. In fact, the bill allows companies who follow these practices to seek exemption from the bill.

Provides protections to insurance buyers, not just agents. Most insureds are astonished to learn they may not transfer their business from one agent to another in some companies or that an insurance company may transfer their insurance policies to another agent without their involvement. This bill would help prevent the unfair termination of that insured’s relationship with his or her agent.

Arbitrary terminations harm agents, while unfairly benefiting insurers. While it is true insurance companies contribute value to an exclusive agent’s business, especially in the first few years that agent is in business, over time an exclusive agent adds significant value to his or her business. In arbitrary terminations of that agent’s contract the agent is often unable to fully recoup the value he or she created in the business. Arbitrary cancellations of an independent insurance agent’s contract can reduce his or her revenues, if he or she is unable to take appropriate action to minimize that damage. Over time insurance agents develop significant "good will" or other value in their agencies and arbitrary terminations of insurance company agency agreements can make it impossible to preserve that value.

Destroying relationship between insurers and their agents. This bill does not give an agent an unfair advantage over the insurance company he or she contracts with. In fact, it does not even create an equal bargaining position between the agent and company. It simply narrows the gap between the power an insurance company has to dictate terms of agency agreements, to allow an agent to have at least a chance to preserve the investment in his or her business.

AN ACT concerning insurance; minimum notice requirements for cancellation of insurance agents’ contracts by insurance company; rehabilitation and cancellation of agents’ contracts by insurance companies; amending 40-2,106, 40-2,107, 40-2,108 and repealing existing sections.

 

Be it enacted by the Legislature of the State of Kansas:

Section 1. K.S.A. 40-2,106 is hereby amended to read as follows: 40-2,106. Definitions. For the purposes of this act: (1) "Independent insurance agent" means any licensed agent representing an insurance company on an independent contractor basis and not as an employee. This term shall include only those agents not obligated by contract to place insurance accounts with any insurance company or group of companies.

(2) "Insurance company" means any life, health, property or casualty insurance company admitted to the state of Kansas, except the term shall not include any company which requires membership in the company, as contained in the articles of incorporation or bylaws of such company, as a prerequisite to insuring that member.

(3) "Commissioner" means the commissioner of insurance.

(4) "Exclusive insurance agent" means any licensed agent obligated by contract to produce insurance business exclusively or predominately for one insurance company or affiliated group of companies.

(5) "Employee agent" means any employee of an insurance company whose principal compensation is by salary and who is exclusively employed as an insurance agent of the insurance company.

Section 2. K.S.A. 40-2,107 is hereby amended to read as follows: 40-2,107 (a) Insurance companies may contract with independent insurance agents or exclusive insurance agents as to binding authority, policy services, adjusting services, commissions and other subjects of interest between agent and company. Such contracts which have been effective for more than one year shall not be terminated or amended by the company except by mutual agreement or unless 180 days' prior notice has been tendered to the agent, except that this shall not apply to termination for fraud, material misrepresentation or failure to pay such agent's account less the agent's commission and any disputed items within 10 days after written demand by the company. During such notice period all contractual conditions existing prior to such notice shall continue. During the 180 day notice period for an exclusive agent, if mutual rehabilitation of the agent’s business is attempted pursuant to new section 3, the insurance company shall not cancel or nonrenew that agent’s business or reduce coverage to any insured of that agent, except in accordance with underwriting rules applicable to all agents or in accordance with the rehabilitation agreement. An exclusive agent and an insurance company may agree to a different notice period as a part of a mutually agreed upon rehabilitation plan under new section 3.

(b) Any independent insurance agent whose contract with an insurance company has been terminated under the provisions of subsection (a) shall have until the policy renewal date, but not more than one year, to place the business written under such terminated contract with another insurance company.

 

New Section 3. (a) After an independent insurance contractual relationship has been in effect for a period of one year, an insurance company may not terminate the relationship with the agent unless the company has attempted to rehabilitate the agent as provided in subsection (h). The insurance company shall provide written notice of intent to rehabilitate.

(b) After an exclusive or employee agent has been an agent for an insurance company for a period of three years, the insurance company may not terminate his or her contract or employment as an agent unless the company has attempted to rehabilitate the agent as provided in subsection (h). The insurance company shall provide written notice of intent to rehabilitate.

(c) If the agent and company are not able to reach a mutually acceptable plan of rehabilitation, the company may terminate the agency contractual or employment relationship after providing written notice of termination to the agent at least 90 days in advance of the termination.

(d) The notice of termination must include the reasons for termination and a copy of the notice of intent to rehabilitate.

(e) An insurance company may not terminate an agency contract or employee relationship based upon any of the following:

(1) An adverse loss experience for a single year;

(2) the geographic location of the agent's auto and homeowners insurance business

(3) the agent has filed a complaint with or reported violations of law to any insurance department; or

(4) the performance of obligations required of an insurer or agent under Kansas statutes.

(f) The company shall at the request of the agent renew any insurance contract written by the agent for the company for not more than one year for property and casualty loss insurance during a period of nine months after the effective date of the termination, but in the event any risk does not meet current underwriting standards of the company, the company may decline its renewal, provided that the company shall give the agent not less than 60 days notice of its intention not to renew the contract of insurance.

(g) No new insurance or bond contract shall be written by the agent for the company after the effective date of the termination without the written approval of the company. The agent may increase liability on renewal or in force business for not more than one year for the insured after the effective date of the termination if the increased liability meets the current underwriting standards of the company.

(h) Before notice of termination of the agency contract or employment relationship, the company shall negotiate in good faith in an effort to reach mutual agreement with the agent on a written plan for rehabilitation. The rehabilitation plan must be in writing and must contain the following elements:

(1) identification by the company of the problem areas which need rehabilitation;

(2) what the agent must do to avoid termination;

(3) how the company intends to assist the agent to avoid termination;

(4) the mutually agreed upon corrective action to be undertaken by the agent and the specific target dates for accomplishment;

(5) periodic meeting dates at which the status of rehabilitation will be reviewed; and

(6) the term of the written plan which must extend for at least one year.

(i) All agency contracts or employee agent relationships in existence on July 1, 1999 are subject to the rehabilitation requirement under subsection (h). The rehabilitation plan need not be incorporated into the agency contract.

(j) Nothing contained in this section prohibits the earlier termination of an agency agreement or employment relationship, provided the agent agrees in writing to the earlier termination.

(k) During the term of the contract or rehabilitation period the company shall not refuse to renew such business from the agent as would be in accordance with the company's current underwriting standards.

(l) The provisions of this section do not apply to termination of an exclusive or independent agent's contract for insolvency, abandonment, gross and willful misconduct, or failure to pay over to the company money due to the company after receipt by the agent of a written demand therefor, or after revocation of the agent's license by the commissioner.

(m) If it is found, after notice and an opportunity to be heard as determined by the commissioner, that an insurance company has violated this section, the insurance company shall be subject to a civil action by the agent for actual damages suffered because of the premature termination of the contract by the company. The commissioner may employ the department's investigative and enforcement authority if the commissioner has a reason to believe that an insurer has violated this section. An insurer found in violation of this section is subject to a civil penalty imposed by the commissioner not to exceed $10,000 per violation.

(n) In the event that a company's compliance with this section is demonstrated to the satisfaction of the commissioner to represent a hazard or potential hazard to the financial integrity of the company, the commissioner may, after a hearing, issue an order relieving the company from its obligation to provide the renewal policies otherwise required by this section.

(o) Upon termination of an independent agent’s contract, a company is prohibited from soliciting business in the notice of nonrenewal required by K.S.A. 40-276a, 40-277, 40-2,112, 40-2,121, and 40-2,122 .

(p) For purposes of this section, a cancellation or termination of an agent's contract is considered to have occurred if the company cancels a line of insurance business or a volume of insurance business that equals or exceeds 75 percent of the insurance business placed by that agent with the company.

(q) Any insurance company which provides a termination and rehabilitation process substantially similar to subsections (b) through (h) for its agents may petition the commissioner for exemption from the enforcement

 

Attention! All information contained herein is for educational purposes only. No copyright infringement is intended by any material on these pages. The copyrights of the whole multimedia content on these pages are belonging to their originators, authors, creators... etc. All original content is the property of it's originators. Copyrighted material has been used for non-commercial purposes only. This website is best viewed with your monitor resolution set to 800x600 and your video mode set to true color.