Topic: Insurance Sales
-
We gave an insurance notice to customers in the past, since we provided credit insurance through an affiliate. However, we have stopped offering insurance of any kind. Do we still have to provide the notice?
—
by
No, you should not have to provide the “credit disclosure” insurance notice if you no longer offer or sell insurance. The credit disclosure requirement applies only if you solicit, offer, or sell an insurance product or annuity in connection with an application for credit. 12 CFR 343.40(b). Because you have indicated that you no longer…
-
Do our lenders need to obtain a limited lines producer license for selling credit insurance if they solicit insurance but do not get individual commissions? What about the bank itself?
—
by
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…
-
We have lenders who do not sell credit life and disability insurance to loan customers, but they do recommend policies to customers. One of the disclosures we provide is called “Additional Insurance and Third Party Payment Addendum.” Are we required to provide this?
—
by
It appears that the “Additional Insurance and Third Party Payment Addendum” discloses to the customer that your institution is receiving commissions from the insurance company and other third parties as a result of the sale of insurance. If that is the case, then the loan officers will likely be viewed as selling the insurance, triggering…
-
We’d like to offer small cash incentives to employees for referring customers to certain types of deposit accounts and credit life insurance for automobile loans. Are there any regulations that limit the sales incentives we can give our employees?
—
by
We are not aware of any limitations on paying referral fees to employees for selling certain types of deposit accounts. While Regulation Z’s loan originator (LO) compensation rules limit referral fees that can be paid to bank employees, those rules apply only to residential loans, and we do not believe that they would apply to…
-
We have a customer who wants to establish a PFTA (premium fund trust account). The customer accepts cash premium payments. Do you have any guidance on this type of account? Can an individual broker sign up for a PFTA with other brokers under the individual broker’s SSN? Our policy is to have only one authorized signer for accounts held by individuals.
—
by
Premium fund trust accounts (PFTAs) are fiduciary accounts (similar in that respect to IOLTA accounts for lawyers). Insurance producers (also known as brokers) must place the insurance premiums they collect from clients in PFTAs (unless they send the premiums directly to the insurance broker). The Illinois Insurance Code regulations require any entity that has to…
-
We’ve been giving disclosures to loan customers about homeowners insurance. An Illinois law, 215 ILCS 5/1412, says that if we are a financial institution and offer insurance (either directly or through an affiliate), we have to give an affiliated business disclosure. We had a close relationship with an insurance company at one time, but we do not currently have any affiliate or relationships with any insurance companies. Do we need to keep giving this notice to our customers?
—
by
We do not see any reason to disclose an affiliate relationship to customers after the affiliate relationship has ended. The Illinois law you cited, 215 ILCS 5/1412, requires disclosure to customers only if your institution offers insurance directly or through an affiliate. Since your institution does not currently offer insurance directly or through an affiliate,…
-
Can we charge/rebate to customers the premiums for Lenders Single Interest insurance?
—
by
We are not aware of any restrictions on charging or rebating to customers the premiums for Lenders Single Interest (LSI) insurance (also known as Vendors Single Interest (VSI) insurance). The Illinois Collateral Protection Act does govern certain types of collateral protection insurance, but it does not apply to the following types of insurance (among other…
-
A customer asked that we set up a “premium fund trust account,” and we are not comfortable with this type of account; can you give us any guidance on what requirements this type of account might impose on the bank?
—
by
Premium fund trust accounts are fiduciary accounts (similar in that respect to lawyers’ IOLTA accounts). The Illinois Insurance Code regulations require any entity that has to be licensed under Title XXXI of the Insurance Code to hold most insurance premium payments in premium fund trust accounts. 50 Ill. Adm. Code 3113.40(c). The regulations impose several…
-
Can we charge for credit life insurance single premiums up front after July 21, 2012? When does that rule go into effect?
—
by
Section 1414 of the Dodd-Frank Act amended the Truth in Lending Act (TILA) to prohibit lenders from financing credit life insurance, with exceptions for insurance premiums “paid in full on a monthly basis” and for credit unemployment insurance (if other requirements are met). 15 USC 1639c(d). Section 1400 of Dodd-Frank states that these provisions will…
-
How long should we keep records for insurances policies?
—
by
The appropriate record retention period for an insurance policy depends on the type of policy — occurrence-based vs. claims-made, first-party vs. third-party, primary vs. secondary. It also depends on the statutes of limitations for the types of claims that the policy covers.