We believe that your individual lenders should obtain insurance licenses if they are soliciting or selling insurance (or doing anything beyond merely enrolling customers in insurance policies), even though they are not receiving commissions or fees for insurance sales. The Insurance Code includes an exception to its licensing requirements for employees who only enroll customers or perform administrative services, but this exception would not apply if your loan officers are soliciting insurance sales. 215 ILCS 5/500-20(b).

And because your institution is receiving commissions for insurance sales, your institution should hold a producer’s license as a business entity (formerly known as a “registered firm”). In addition, at least one individual who is an officer or director in the bank should hold a producer’s license. 215 ILCS 5/500-20(b). The Illinois Department of Insurance has released a helpful bulletin explaining the Illinois licensing requirements for banks and other institutions selling insurance, CB 2009-04, and a list of questions and answers on bank insurance sales, FAQs about Banks Selling Insurance.

The limited lines credit insurance license is a new type of license added by legislation in 2013. Below is a summary of this new type of insurance license from our 2013 Bank Counsel Conference materials:

20.        New Limited Lines Licenses for Credit Insurance Sales

Public Act 98-159, Effective August 2, 2013

Summary:  Amends Section 500-100 of the Illinois Insurance Code, 215 ILCS 5/500-100, to create a new “limited lines producer license” for persons who sell “credit life and credit accident and health insurance and other credit insurance policies approved or permitted” by the Department of Insurance. 215 ILCS 5/500-100(a)(8). 

Previously, financial institution employees selling credit insurance were required to obtain full producer licenses for each line of insurance covered by the credit insurance (i.e., life, accident and health, and property and casualty licenses).  Meanwhile, the Department of Insurance has been recognizing out-of-state limited lines licenses from nonresident credit insurance producers.

Applicants for limited lines licenses are exempt from many of the requirements for full licenses, including pre-licensing education, passing exams for each class of insurance, and continuing education requirements. Limited lines credit insurance producers need only “receive basic instruction about the credit insurance products that they will be selling” from the company underwriting the insurance.

Practice Notes: (1) If a bank employee already is selling credit insurance under a full insurance producer license, there is no need to obtain a limited lines license to continue selling the insurance.

(2)  The Illinois Department of Insurance is accepting applications for limited lines credit insurance producers through the National Insurance Producer Registry at www.nipr.com.

(3)  The legislation does not affect the exemption for credit insurance sales in the Financial Institutions Insurance Sales Law (FIISL), 215 ILCS 5/1400 et seq., but that exemption has little significance in today’s world.  The FIISL was enacted in 1997 (Public Act 90-41), prior to the Gramm-Leach-Bliley Act of 1999. The credit insurance exemption in the FIISL was intended to finesse the question of whether sales of credit insurance by financial institutions — an activity they had been engaging in for many years — was permitted without state licensing. Today, financial institutions that sell credit insurance typically have at least one employee who is licensed as an insurance producer, or they have a subsidiary or affiliate that is licensed as a “business entity,” under the Insurance Code.

(4)  Illinois was the second to last state to adopt a limited lines license for credit insurance — only New York remains without one.