Current Status Bill Number:
3996Type of Legislation: General Bill GBIntroducing Body: HouseIntroduced Date: 19950412Primary Sponsor: RichardsonAll Sponsors: Richardson and CatoDrafted Document Number: bbm\10146jm.95Residing Body: HouseCurrent Committee: Labor, Commerce and Industry Committee 26 HLCISubject: Motor vehicle insurance producers
Body Date Action Description Com Leg Involved ______ ________ _______________________________________ _______ ____________ House 19950509 Recommitted to Committee 26 HLCI House 19950509 Objection by Representative Richardson House 19950503 Committee report: Favorable 26 HLCI House 19950412 Introduced, read first time, 26 HLCI referred to CommitteeView additional legislative information at the LPITS web site.
Indicates Matter Stricken
Indicates New Matter
May 3, 1995
S. Printed 5/3/95--H.
Read the first time April 12, 1995.
To whom was referred a Bill (H. 3996), to amend Section 38-77-590, as amended, Code of Laws of South Carolina, 1976, relating to automobile insurance, etc., respectfully
That they have duly and carefully considered the same, and recommend that the same do pass:
HARRY F. CATO, for Committee.
TO AMEND SECTION 38-77-590, AS AMENDED, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO AUTOMOBILE INSURANCE, THE SOUTH CAROLINA REINSURANCE FACILITY, AND DESIGNATED PRODUCERS, SO AS TO DELETE CERTAIN PROVISIONS, AND PROVIDE, AMONG OTHER THINGS, THAT EVERY DESIGNATED PRODUCER SHALL PROVIDE A WRITTEN REPORT TO THE FACILITY GOVERNING BOARD EVERY TWO YEARS, ON THE ANNIVERSARY DATE OF THEIR DESIGNATIONS, OUTLINING ALL EFFORTS MADE TO ATTRACT A VOLUNTARY MARKET IN ORDER TO REDUCE THE PLACEMENT OF AUTOMOBILE INSURANCE IN THE FACILITY; AND TO AMEND THE 1976 CODE BY ADDING SECTION 38-77-596 SO AS TO PROVIDE, AMONG OTHER THINGS, THAT UPON NOTIFICATION TO THE GOVERNING BOARD OF THE REINSURANCE FACILITY, DESIGNATED PRODUCERS MAY CONTRACT WITH A VOLUNTARY MARKET OUTLET FOR ANY TYPE OF AUTOMOBILE INSURANCE CEDEABLE TO THE FACILITY.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Section 38-77-590 of the 1976 Code, as last amended by Sections 821-825 of Act 181 of 1993, is further amended to read:
"Section 38-77-590. (a) Not more than six months after July 9, 1974, or at an earlier time as the director or his designee considers necessary by reason of complaints regarding want of access to automobile insurance in particular areas or want of outlets for producers, the director or his designee shall survey the various areas of the State to ascertain if sufficient marketing outlets exist in all areas or are available to all producers. Upon a finding by the director or his designee that insufficient marketing outlets exist in particular areas or that certain producers have been deprived of a market for risks previously serviced by them, the director or his designee may, after consultation with the facility, designate one or more insurers to service the areas through agents appointed by them or may designate the producers as the agents of any insurer. However, it is not the intention of the State of South Carolina, through the Reinsurance Facility, to guarantee employment or guarantee the viability of any particular business entity and all such designations shall be monitored every two years. Every designated producer shall provide a written report to the facility board every two years, on the anniversary of their designations, outlining all efforts made to attract a voluntary market in order to reduce the placement of automobile insurance in the facility. The report must contain documented evidence from insurance companies stating the reasons for their refusal to place an agency contract with the designated producer. In addition, designated producer status may not be granted for more than five successive years unless there is no other insurance agent or carrier writing private passenger automobile coverage within a five mile radius of the designated producer. However, upon contracting with a voluntary carrier a designated producer shall have three years to transfer all business written under their designated contract. The arrangements shall include provision for one hundred percent quota share reinsurance through the facility of any automobile insurance policy marketed through the arrangements, at the option of the insurer, and the reinsurance is not subject to the statutory provisions or regulations regarding excessive utilization of the facility.
(b) After the effective date of this section, those producers previously designated by the director or his designee may continue to serve in that capacity under the jurisdiction and control of the governing board of the facility, except that any change in the rate of commissions allowed designated producers is subject to the approval of the director or his designee.
(c) A producer may be designated by the governing board of the facility upon application for designation and is eligible for designation upon a finding by the governing board that the applicant meets the following qualifications:
(1) The applicant has been, for ten continuous years, a licensed resident property and casualty insurance agent and agency owner or principal with authority from one or more licensed insurers to write liability and physical damage insurance on private passenger automobiles. However, if the person has previously relinquished designated status after being connected with a voluntary market and again meets all other qualifications for application as a designated producer, the applicant is exempt from complying with the ten continuous years requirement of this item;
(2) At the time of application the applicant is servicing and owns the renewals on private passenger and commercial automobile insurance business, the net premiums on which exceeded seventy-five thousand dollars of potential cedeable automobile insurance during any one of the previous five calendar years preceding the application;
(3) Neither the applicant, nor any employee of the applicant or the applicant's corporate agency, nor any partner or shareholder in any related insurance agency, related premium service company, or related other business, has any direct or indirect connection with any voluntary market outlet for the purpose of writing any type of automobile insurance in this State except for motorcycle insurance and types not cedeable to the facility;
(4) The applicant has not contributed to his termination as agent by any insurer because of any illegal breach of agency agreement or other related, improper, or unethical conduct; and
(5) The books, records, and accounts of the insurance business of the applicant have been audited at the expense of the applicant and found by the governing board to be indicative of a financially sound operation.
(d) Prior to Before designation as a producer, the applicant shall furnish at his expense a bond in an amount of not less than fifty thousand dollars for the faithful performance of the duties as a producer, executed by the applicant as principal and a corporate surety licensed to do business in this State as surety, and shall also have effective errors and omissions insurance by an insurer licensed to do business in this State, with the bond and errors and omissions insurance being subject to approval by the governing board.
(e) The governing board shall assign a specific location to each producer designated. The governing board shall determine from the director or his designee the locations assigned by him to those producers whom the director or his designee has designated. Designated producers may not open or maintain any other locations without the written authorization of the governing board; provided, however, that an applicant maintaining multiple offices on June 4, 1987, is entitled to maintain two locations as a designated agent which he owned and operated at that time and through which premiums in at least the amount of seventy-five thousand dollars were written. The governing board shall terminate the designation, and the director or his designee shall revoke all agents' licenses of any producer who does not comply with this requirement upon demand by the governing board. Upon termination, the producer's expirations on designated business become the property of the facility.
(f) The designation of a producer by the director or his designee or the governing board is transferable to a spouse, child, parent, brother, or sister of the producer upon the designated producer's retirement, incapacity, or death. The duties of a designated producer may be performed by one or more qualified employees of the producer or the producer's corporate agency.
(g) Neither a designated producer, nor any employee of a designated producer or the producer's corporate agency, nor any partner or shareholder in any related insurance agency, related premium service company, or related other business, may have any direct or indirect connection with any voluntary market outlet for the purpose of writing any type of automobile insurance in this State except for motorcycle insurance and types not cedable to the facility. The governing board shall terminate the designation of any producer, and the director or his designee shall revoke all licenses of the producer and of any other insurance agent and premium service company knowingly involved in this connection. Upon termination, the producer's expirations on designated business become the property of the facility.
(h) A designated carrier who fails a claims audit shall have no new designated producer assignments until the time it passes a re-audit within a reasonable time prescribed by the governing board. If this carrier fails two claims audits, including a re-audit, within any three-year period that carrier is disqualified for renewal of its contract with the facility upon expiration of its existing contract."
SECTION 2. The 1976 Code is amended by adding:
"Section 38-77-596. Notwithstanding Section 38-77-590, upon notification to the governing board, designated producers may contract with a voluntary market outlet for any type of automobile insurance cedeable to the facility. Upon the effective date of such a contract, the designated producer may no longer write new business with a designated carrier. The producer is permitted to retain all existing policies in the facility until such time as these policies lapse, cancel, nonrenew, or cease to remain in effect for any reason. For the purposes of this section, vehicles written as an addition to a multi-car policy in the facility do not constitute `new business'."
SECTION 3. This act takes effect upon approval by the Governor.