Act 147 of 2002, The Producer Licensing Modernization Act

Act 147 of 2002 is modeled, in part, after the NAIC's Producer Licensing Model Act that creates uniform definitions of the key terms "sell," "solicit," and "negotiate", which are the trigger points for licensure as an insurance producer.

Under Act 147 of 2002, there will not be separate "agent" and "broker" insurance licenses. Persons currently licensed as agents or brokers remain licensed as such and subject to the enforcement provisions of the new act until the expiration of existing licenses, at which time they will receive a new insurance producer license if they are current with their continuing education and have submitted the necessary application and fee. Persons possessing an insurance producer license are permitted to function in the marketplace as either a representative of the insurer (by written appointment) or as a representative of the consumer, provided they comply with the provisions of the act.

Highlights of Act 147 of 2002:

• Modernizes the licensing of insurance agents and brokers in Pennsylvania by creating one "insurance producer" license covering both functions.
• Establishes more uniform Lines of Authority based on national standards and a new authority for limited line motor vehicle rental insurance.
• Creates uniform definitions of the key terms "sell", "solicit", and "negotiate" insurance and establishes more uniform licensing exemptions with other states.
• Permits individual insurance producers to elect the state in which either their principal place of residence or principal place of business is located to be that producer's "home state"; business entities with an office in the Commonwealth must be licensed as a resident producer.
• Establishes a pre-examination education requirement of 24 credit hours, while reducing the number of continuing education credits needed in the first four years after an insurance producer becomes licensed from 48 hours to 24 credit hours per two-year cycle.
• Protects consumers by requiring new applicants to submit fingerprints to the Department and authorizing the Department to receive national criminal history records information from the Federal Bureau of Investigation.
• Removes the requirement that applications be notarized and contains an initial endorsement by an insurance company, thereby permitting applications to be submitted to the Department electronically.
• Revises outdated privacy provisions found in Act 40 of 1997.
• Establishes revenue-neutral license fees of $55 for resident insurance producers and $110 for nonresident insurance producers while eliminating "nuisance" fees for items like "Letters of Certification."
• Establishes new provisions addressing the renewal of lapsed licenses. Persons may request reinstatement of a license within one year of the date it lapsed by submitting a renewal form, the lapsed license fee (new) and proof of continuing education completion. If the Department receives the request within 60 days from the date the license lapsed, the license will be reinstated retroactively, otherwise the license will be reinstated prospectively. Persons applying more than one year after the date of lapse must reapply under the Act.
• Changes the appointment billings to insurance companies from a monthly billing cycle to an annual billing cycle. It also streamlines the appointment process allowing insurance producers to compete in the market place faster.
• Permits the sharing of commissions between insurers and licensed insurance producers, and permits the payment of referral fees to unlicensed persons provided there is no discussion of specific policy terms and conditions and that the payment of a referral fee in consumer transactions is limited to a one-time, nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a sale.
• Permits an insurance producer to charge a fee in addition to a commission in commercial transactions; however, such fees must be disclosed in writing in advance and be reasonable in relationship to the services provided. Further, insurance producers are prohibited from charging fees simply for the completion of an insurance application.

Provisions regarding privacy notices and referral fees are effective immediately; the remainder of the provisions is effective in 180 days (June 4, 2002).

This law will be effective June 4, 2003 for the new licensing process. Please review the Frequently Asked Questions and Act 147 of 2002 below and if you have a question specific to your situation that you are unclear about, please submit your inquiry to ra-in-PLMA@state.pa.us.

EFFECTIVE JUNE 4, 2003, ACT 147 OF 2002 (ACT 147) WILL AMEND THE PRIOR CONTINUING EDUCATION REQUIREMENTS FOR INSURANCE PRODUCERS. ALL INSURANCE PRODUCERS THAT WILL RENEW THEIR EXISTING LICENSE ON OR AFTER JUNE 4, 2003 WILL BE REQUIRED TO COMPLETE 24 HOURS OF CONTINUING EDUCATION. FOR ANY INSURANCE PRODUCER THAT IS IN THEIR INITIAL OR SECOND BIENNIAL LICENSE CYCLE AND WAS REQUIRED TO COMPLETE 48 HOURS, ACT 147 REDUCES THIS REQUIREMENT AS OF JUNE 4, 2003 TO A 24 HOUR REQUIREMENT PER BIENNIAL LICENSE CYCLE. ACT 147 ALSO PROVIDES FOR A MAXIMUM CARRY OVER OF 24 CE HOURS TO THE NEXT IMMEDIATE LICENSE PERIOD.