FAQ - Frequently Asked Questions

Fees

Is it permissible for a producer to charge a fee to a client when a cancellation request and refund is processed through a producer's office?

No, a cancellation fee may not be charged. Section 5/500-80e states that no service fee may be charged unless it is provided to the applicant or insured before the performance of the service or the issuance of the policy, whichever is first... In this case, since the fee is being charged after the issuance of the policy, it would be illegal. Additionally, the same statute further states (f) "There shall be no compensation or service fee assessed or received on a contract or policy by the insurance producer or business entity for processing such cancellation".

This response was given by Dale Emerson, CPCU, CIE, IL Dept of Financial & Professional Regulation, Division of Insurance in August 2005.

Adverse Action

When is a mutual required to notify an insured of an adverse action?

Our bulletin states that our interpretation of the credit scoring law is that adverse action notification applies only if the company takes an adverse action based on "credit information". So, even if a company uses an insurance score that contains credit and non-credit factors within the scoring model, it's only if the adverse action is based on the credit part of the score that the company would have to give the adverse action notification that a consumer isn't getting the best rate. I do not believe property condition enters the picture.

This response was given by Dale Emerson, CPCU, CIE, IL Dept of Financial & Professional Regulation, Division of Insurance in April 2005 in response to a question from the 2005 IAMIC Underwriting Seminar.