Topic: Insurance Sales
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For a monthly fee, we offer an add-on checking account product that includes three types of insurance (as well as ID protection and travel perks) — cell phone protection, accidental death and dismemberment coverage, and debit card purchase protection for items that are damaged or stolen within ninety days of purchase. Our marketing materials indicate that these insurance products are not insured by the FDIC. Do these insurance products qualify as “nondeposit investment products,” and are we prohibited from marketing this add-on product at account opening?
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If the three insurance coverages your bank is offering do not incorporate an investment component, we do not believe they would be treated as nondeposit investment products, and you would be allowed to market these products at account opening — provided the required disclosures are made. The Interagency Statement on Retail Sales of Nondeposit Investment…
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We have an affiliate that will begin selling insurance products to our bank customers. We have changed our privacy notice to allow customers to opt-out of affiliate sharing. For mortgage loans, we will provide loan customers with the new privacy notice at the time of application. How soon may our insurance affiliate begin marketing to new our new mortgage loan customers? Does twenty days constitute a “reasonable opportunity” to opt out?
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In general, we recommend that your institution should wait thirty days after providing the opt-out notice before sharing information about your customers with your insurance affiliate for marketing purposes; your bank arguably could start sharing customer information after just twenty days, as discussed below, but this would be at the risk of having to prove…
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We are a state-chartered savings bank, and our Guaranteed Asset Protection (GAP) insurance company is running a promotion offering loan officers a $25 gift card for selling GAP insurance on auto loans. Is this legal? Our loan officer will not sell the GAP insurance unless it is required by our banking guidelines.
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Any bank employee who receives any incentive for referring GAP insurance customers would need to obtain an insurance producer’s license from the Illinois Department of Insurance. While the Illinois Insurance Code permits bank employees to enroll consumers in lines of insurance protecting personal property without obtaining an insurance producer’s license, they may do so only…
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Is there an Illinois law that requires or expressly permits banks to consider an individual’s status as a victim of domestic violence when selling, underwriting, renewing, or paying out claims for life or health insurance? We ask because our examiners recently pointed out that our policies do not have a reference to an FDIC rule prohibiting the consideration of domestic abuse in life and health insurance sales, unless permitted by state law.
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No. Like the FDIC rule, Illinois effectively prohibits banks from considering an individual’s status as a victim of domestic violence when selling, underwriting, renewing, or paying out claims for life or health insurance. The Illinois law expressly prohibits insurance sellers from discriminating because an individual has been the victim of domestic abuse, including refusing or…
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We are a federal savings bank. Can our tellers just pass out flyers on the insurance services we provide? Also, our teller windows are about ten feet from the insurance agency. Is that enough distance?
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Yes, your tellers may pass out flyers on your insurance services, provided they do not receive referral fees if they are not licensed as insurance producers. And yes, ten feet is likely a sufficient distance, given the size of your institution, provided that you have taken steps to avoid customer confusion about whether the insurance…
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Our federal savings bank owns an insurance agency. Can our tellers receive referral fees in return for talking to customers and passing out flyers about our insurance products? The referral fee is not dependent on whether we make a sale.
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No, the tellers cannot receive referral fees unless they hold insurance producer’s licenses. The Illinois Insurance Code (“Code”) permits bank employees to provide information about insurance products, but only if they are not paid any commission, service fee, or other valuable consideration. Otherwise, the Code prohibits the payment of referral fees or commissions for selling,…
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An insurance company wants to pay us referral fees for mentioning to loan customers after the loan has closed that the insurance company sells mortgage life insurance. Is this a prohibited kickback? Our institution does not hold an insurance producer license.
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Yes, these referral fees would be prohibited kickbacks, because your institution is not licensed as an insurance producer under Illinois law. The Illinois Insurance Code law prohibits the payment of referral fees or commissions for selling, soliciting or negotiating insurance, unless the recipient is licensed as an insurance producer. “Solicit” is defined as “attempting to…
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An insurance company wants to pay us referral fees for referring loan customers who purchase mortgage life insurance with the insurance company. Is this a prohibited kickback? Our institution does not hold an insurance producer license.
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Yes, the referral fees would be prohibited kickbacks, because your institution does not hold an insurance producer license under Illinois law. However, with proper licensing, you may be able to accept the referral fees. The Illinois Insurance Code permits financial institutions to accept referral fees from licensed insurance companies, provided that both the financial institution…