Pennsylvania Act 2024-62 — INSURANCE (40 PA.C.S.) - REBATES AND INDUCEMENTS AND MAKING REPEALS

Act text

Session of 2024

No. 2024-62

SB 1092

AN ACT

Amending Title 40 (Insurance) of the Pennsylvania Consolidated Statutes, in regulation of insurers and related persons generally, providing for rebates and inducements; and making repeals.

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Title 40 of the Pennsylvania Consolidated Statutes is amended by adding a chapter to read:

CHAPTER 51

REBATES AND INDUCEMENTS

Sec.

5101. Definitions.

5102. Rebates and inducements.

5103. Advertisements.

5104. Pilot or testing program.

5105. Penalties.

5106. Regulations.

§ 5101. Definitions.

The following words and phrases when used in this chapter shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Commissioner." The Insurance Commissioner of the Commonwealth.

"Customer." A policyholder, potential policyholder, certificate holder, potential certificate holder, insured, potential insured or applicant.

"Insurance policy." A certificate, excluding a certificate of liability insurance, or contract of insurance, indemnity, health care, suretyship, title insurance or annuity issued, proposed for issuance or intended for issuance by an insurance producer or insurer.

"Insurance producer." A person licensed or approved by the department to sell, solicit or negotiate insurance policies.

" Insurer." Any of the following that is licensed or approved by the department:

(1) An insurance company, association or exchange.

(2) A reciprocal or interinsurance exchange.

(3) A health maintenance organization.

(4) A preferred provider organization.

(5) A professional health services plan corporation subject to Chapter 63 (relating to professional health services plan corporations).

(6) A hospital plan corporation subject to Chapter 61 (relating to hospital plan corporations).

(7) A fraternal benefits society.

(8) A beneficial association.

(9) A Lloyd's insurer.

(10) An eligible surplus lines insurer.

§ 5102. Rebates and inducements.

(a) Unfair or deceptive acts or practices.--Except as otherwise expressly provided by law, each of the following is deemed to be an unfair or deceptive act or practice in the business of insurance:

(1) Knowingly permitting, offering to make or making an insurance policy, or an agreement as to the insurance policy, other than as plainly expressed in the insurance policy that is issued.

(2) Paying, allowing or giving, or offering to pay, allow or give, directly or indirectly, as inducement to an insurance policy, any of the following not specified in the insurance policy:

(i) A rebate of premiums payable on the insurance policy.

(ii) A special favor or advantage in the dividends or other benefits on the insurance policy.

(iii) Valuable consideration or inducement.

(3) Giving, selling or purchasing, or offering to give, sell or purchase, as inducement to an insurance policy, any of the following not specified in the insurance policy:

(i) Stocks, bonds or other securities of a company or other corporation, association or partnership.

(ii) Any dividends or profits accrued on the items described in subparagraph (i).

(iii) Anything of value whatsoever.

(b) Construction.--Nothing in subsection (a) shall be construed as including within the definition of discrimination or rebates any of the following practices:

(1) In the case of an insurance policy involving life insurance or an annuity, paying bonuses to policyholders or otherwise abating their premiums in whole or in part out of surplus accumulated from nonparticipating insurance, if the bonuses or abatement of premiums are fair and equitable to policyholders and for the best interests of the company and its policyholders.

(2) In the case of a life insurance policy issued on the industrial debit plan, making allowance to policyholders who have continuously for a specified period made premium payments directly to an office of the insurer in an amount that fairly represents the saving in collection expenses.

(3) Readjusting the rate of premium for a group insurance policy based on the loss or expense under the group insurance policy, at the end of the first or any subsequent policy year of insurance under the group insurance policy, which may be made retroactive only for that policy year.

(4) Engaging in an arrangement that would not violate:

(i) 12 U.S.C. § 1972 (relating to certain tying arrangements prohibited; correspondent accounts), as interpreted by the Board of Governors of the Federal Reserve System; or

(ii) 12 U.S.C. § 1464(q) (relating to Federal savings associations).

(5) Offering or providing, by an insurer or insurance producer, by or through employees, affiliates or third-party representatives, a value-added product or service at no or reduced cost if the product or service is not specified in the insurance policy and if all of the following requirements are met:

(i) The product or service relates to the insurance coverage.

(ii) The product or service is primarily designed to satisfy one or more of the following:

(A) Provide loss mitigation or loss control.

(B) Reduce claim costs or claim settlement costs.

(C) Provide education about liability risks or risk of loss to persons or property.

(D) Monitor or assess risk, identify sources of risk or develop strategies for eliminating or reducing risk.

(E) Enhance health.

(F) Enhance financial wellness through items such as education or financial planning services.

(G) Provide post-loss services.

(H) Incentivize behavioral changes to improve the health or reduce the risk of death or disability of a customer.

(I) Assist in the administration of the employee or retiree benefit insurance coverage.

(iii) The cost to the insurer or insurance producer offering the product or service to a customer is reasonable in comparison to that customer's premiums or insurance coverage for the policy class.

(iv) If the insurer or insurance producer is providing the product or service, the insurer or insurance producer has ensured that the customer is provided with contact information to assist the customer with questions regarding the product or service.

(v) The availability of the product or service is based on documented objective criteria and offered in a manner that is not unfairly discriminatory. The insurer or insurance producer shall maintain the criteria and produce the criteria upon request by the department.

(c) Permissible activities.--An insurer or insurance producer may:

(1) Offer or give noncash gifts, items or services, including meals to or charitable donations on behalf of a customer, in connection with the marketing, sale, purchase or retention of insurance policies, in an amount not exceeding $125 on an annual, aggregate basis. The following apply:

(i) The commissioner may increase the amount by transmitting notice of the increase to the Legislative Reference Bureau for publication in the next available issue of the Pennsylvania Bulletin. The increase shall become effective upon publication of the notice in the Pennsylvania Bulletin.

(ii) The offer or gift shall be made in a manner that is not unfairly discriminatory and may not be contingent on the purchase or retention of insurance.

(2) Offer or give noncash gifts, items or services, including meals to or charitable donations on behalf of a customer, to commercial or institutional customers in connection with the marketing, sale, purchase or retention of insurance policies, if the cost is reasonable in comparison to the premium or proposed premium and the cost of the gift or service is not included in any amounts charged to another person or entity. The offer or gift shall be made in a manner that is not unfairly discriminatory and may not be contingent on the purchase or retention of insurance.

(3) As follows:

(i) Conduct a raffle or drawing to the extent permitted by State law, if:

(A) there is no financial cost for entrants to participate;

(B) the raffle or drawing does not obligate participants to purchase insurance;

(C) the prizes are not valued in excess of $125; and

(D) the raffle or drawing is open to the public.

(ii) The commissioner may increase the amount under subparagraph (i)(C) by transmitting notice of the increase to the Legislative Reference Bureau for publication in the next available issue of the Pennsylvania Bulletin. The increase shall become effective upon publication of the notice in the Pennsylvania Bulletin.

(iii) The raffle or drawing shall be offered in a manner that is not unfairly discriminatory and may not be contingent on the purchase or retention of insurance.

§ 5103. Advertisements.

An insurer or insurance producer, or a representative of an insurer or insurance producer, may not offer or provide insurance as an inducement to the purchase of another policy or otherwise use the words "free," "no cost" or words of similar import in an advertisement.

§ 5104. Pilot or testing program.

If an insurer or insurance producer does not have sufficient evidence but has a good faith belief that the product or service meets the criteria specified under section 5102(b)(5)(ii) (relating to rebates and inducements), the insurer or insurance producer may provide the product or service to consumers in a manner that is not unfairly discriminatory as part of a pilot or testing program for no more than one year. The following apply:

(1) The insurer or insurance producer shall notify the department of the pilot or testing program prior to launching the pilot or testing program.

(2) The insurer or insurance producer may proceed with the pilot or testing program unless the department objects within 21 business days of the submission of a description of the pilot or testing program to the department.

§ 5105. Penalties.

A violation of this chapter shall be deemed and defined by the commissioner to be an unfair method of competition and an unfair or deceptive act or practice in accordance with the act of July 22, 1974 (P.L.589, No.205), known as the Unfair Insurance Practices Act.

§ 5106. Regulations.

The department may promulgate regulations, as necessary, to implement, administer and enforce this chapter.

Section 2. Repeals are as follows:

(1) The General Assembly declares that the repeals under paragraph (2) are necessary to effectuate the addition of 40 Pa.C.S. Ch. 51.

(2) The following are repealed:

(i) Section 346 of the act of May 17, 1921 (P.L.682, No.284), known as The Insurance Company Law of 1921.

(ii) Sections 645-A and 646-A of the act of May 17, 1921 (P.L.789, No.285), known as The Insurance Department Act of 1921.

(iii) Section 5(b) of the act of July 22, 1974 (P.L.589, No.205), known as the Unfair Insurance Practices Act.

Section 3. This act shall take effect in 180 days.

APPROVED--The 15th day of July, A.D. 2024.

JOSH SHAPIRO