Senate Study Bill 3095 - Introduced SENATE FILE _____ BY (PROPOSED COMMITTEE ON COMMERCE BILL BY CHAIRPERSON McCOY) A BILL FOR An Act regulating the sale of portable electronics insurance, 1 including requiring licensure, and providing for fees and 2 penalties. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5362XC (4) 85 av/nh
S.F. _____ Section 1. NEW SECTION . 522E.1 Purpose. 1 The purpose of this chapter is to provide for the limited 2 licensing of vendors when a vendor sells an insurance product 3 or coverage in connection with and incidental to the sale or 4 lease of a portable electronic device. 5 Sec. 2. NEW SECTION . 522E.2 Definitions. 6 As used in this chapter, unless the context otherwise 7 requires: 8 1. “Commissioner” means the commissioner of insurance. 9 2. “Customer” means a person who purchases or leases 10 portable electronic devices. 11 3. “Limited licensee” means a vendor who is authorized to 12 offer or sell portable electronics insurance pursuant to this 13 chapter. 14 4. “Location” means any physical location in this state, or 15 any internet site, call center site, or similar site directed 16 to residents of this state. 17 5. “Portable electronic device” means an electronic 18 device that is personal, self-contained, easily carried by 19 an individual, battery operated, and used for communication, 20 viewing, listening, recording, gaming, computing, or global 21 positioning, including a cell or satellite phone, pager, 22 personal global positioning satellite unit, portable computer, 23 portable audio listening, video viewing, or recording device, 24 digital camera, video camcorder, portable gaming system, 25 docking station, automatic answering device, or any other 26 similar device, or an accessory or service related to the 27 use of such a device, with a value of less than one thousand 28 dollars at the time of purchase or lease. 29 6. a. “Portable electronics insurance” means insurance 30 providing coverage for the repair or replacement of a portable 31 electronic device which may include coverage against any one or 32 more of the following causes of loss: 33 (1) Property loss. 34 (2) Theft. 35 -1- LSB 5362XC (4) 85 av/nh 1/ 10
S.F. _____ (3) Inoperability due to mechanical failure. 1 (4) Malfunction. 2 (5) Damage. 3 (6) Other similar causes of loss. 4 b. “Portable electronics insurance” does not include any of 5 the following: 6 (1) A service contract or extended warranty providing 7 coverage limited to the repair, replacement, or maintenance 8 of property for the operational or structural failure of the 9 property due to a defect in materials, workmanship, accidental 10 damage from handling power surges, or normal wear and tear. 11 (2) A policy of insurance covering a seller’s or 12 manufacturer’s obligations under a warranty. 13 (3) A homeowner’s, renter’s, private passenger automobile, 14 commercial multiperil, or similar insurance policy. 15 7. “Vendor” means a person who is directly or indirectly 16 engaged in the business of selling or leasing a portable 17 electronic device. 18 8. “Vendor employee” means any employee at least eighteen 19 years of age who is employed by a vendor. 20 Sec. 3. NEW SECTION . 522E.3 Limited licenses. 21 1. Notwithstanding the provisions of chapter 522B, the 22 commissioner may issue a limited license to a vendor that 23 has complied with the requirements of this chapter and 18 24 U.S.C. §1033. The limited license shall authorize the limited 25 licensee to offer or sell portable electronics insurance 26 in connection with and incidental to the sale or lease of 27 a portable electronic device with a value of less than one 28 thousand dollars. 29 2. As a prerequisite for issuance of a limited license 30 under this section, a vendor shall file a written application 31 for a limited license, signed by an officer of the applicant, 32 with the commissioner. The application shall be in a form and 33 contain information as prescribed by the commissioner. The 34 application shall include a list of all locations where the 35 -2- LSB 5362XC (4) 85 av/nh 2/ 10
S.F. _____ vendor intends to conduct business. A list of vendor employees 1 authorized by the vendor to offer or sell portable electronics 2 insurance shall also be provided to the commissioner. If the 3 list of authorized vendor employees is amended, an updated list 4 shall be provided to the commissioner within thirty business 5 days from the date of the amendment. 6 3. If a provision of this section is violated by a 7 limited licensee, the commissioner may, after notice and a 8 hearing, revoke or suspend a limited license issued under this 9 section, or impose any other penalties, including suspension 10 of authorization to offer or sell portable electronics 11 insurance at specific vendor locations where violations of this 12 section have occurred, as the commissioner deems necessary or 13 convenient to carry out the purposes of this chapter. 14 4. A vendor licensed pursuant to this section may offer 15 or sell portable electronics insurance issued by an insurance 16 carrier authorized to do business in this state only in 17 connection with and incidental to the sale or lease of a 18 portable electronic device. A customer shall not be required 19 to purchase portable electronics insurance in order to buy or 20 lease a portable electronic device. 21 5. a. Portable electronics insurance offered or sold by 22 a limited licensee pursuant to this section, whether at the 23 vendor location or by preselection of coverage in a master, 24 corporate, group, or individual agreement, shall include 25 coverage of all of the following: 26 (1) Loss of the portable electronic device. 27 (2) Theft of the portable electronic device. 28 (3) Inoperability of the portable electronic device due to 29 mechanical failure of the device. 30 (4) Malfunction of the portable electronic device. 31 (5) Any other similar cause of loss. 32 b. Portable electronics insurance purchased in connection 33 with and incidental to the sale or lease of a portable 34 electronic device shall be considered primary coverage over 35 -3- LSB 5362XC (4) 85 av/nh 3/ 10
S.F. _____ all other collectible insurance that may apply to the portable 1 electronic device. 2 c. An insurance carrier that issues portable electronics 3 insurance in this state shall file premium and loss ratio data 4 for the preceding year with the commissioner by April 1 of each 5 year. The insurance carrier shall maintain a minimum loss 6 ratio of eighty percent. 7 6. Portable electronics insurance shall only be offered or 8 sold by a limited licensee pursuant to this section if all of 9 the following apply: 10 a. The period of the portable electronics insurance 11 agreement does not exceed twelve months, unless the customer 12 is notified prior to continuation of the policy beyond that 13 period. 14 b. At every vendor location where a portable electronics 15 insurance agreement is executed, brochures or other written 16 materials are readily available to a prospective customer that 17 include all of the following information: 18 (1) A clear and accurate summary of the material terms 19 of the portable electronics insurance coverage that is 20 being offered to the customer, including the identity of the 21 insurance carrier. 22 (2) A disclosure that the portable electronics insurance 23 coverage being offered by the vendor may provide a duplication 24 of coverage that is already provided by the customer’s 25 personal automobile insurance policy, homeowner’s insurance 26 policy, business property insurance policy, or other source of 27 coverage. 28 (3) A statement that the customer is not required to 29 purchase portable electronics insurance coverage offered 30 pursuant to this section in order to purchase or lease a 31 portable electronic device. 32 (4) A description of the process for filing a claim under 33 the portable electronics insurance in the event of a claim. 34 c. Evidence of coverage is provided in the insurance 35 -4- LSB 5362XC (4) 85 av/nh 4/ 10
S.F. _____ agreement to every customer who purchases portable electronics 1 insurance, that includes all of the following information: 2 (1) The material terms or a description of the material 3 terms of the portable electronics insurance coverage. 4 (2) A description of the process for filing a claim under 5 the portable electronics insurance. 6 (3) A description of the process for canceling the portable 7 electronics insurance coverage. 8 (4) The identity of and contact information for the 9 insurance carrier that issues the portable electronics 10 insurance coverage. 11 d. A fee, compensation, or commission is not paid to 12 a vendor employee by a vendor based solely on the sale of 13 portable electronics insurance by the vendor employee under a 14 limited license issued pursuant to this section. 15 7. A limited license issued under this section authorizes 16 a vendor employee of a limited licensee to act individually 17 on behalf, and under the supervision, of the limited licensee 18 with respect to the offer and sale of portable electronics 19 insurance, subject to the requirements of subsection 8. 20 8. In order to offer and sell portable electronics 21 insurance, a vendor employee of a limited licensee must 22 successfully complete a training program, pass an examination 23 covering the portable electronics insurance products offered 24 for sale by the limited licensee in connection with and 25 incidental to the sale or lease of a portable electronic device 26 by the limited licensee, and obtain an individual license 27 pursuant to this subsection. 28 a. The training program and examination shall be approved 29 and administered by the commissioner or by a vendor approved 30 by the commissioner pursuant to section 522E.6. The training 31 materials shall, at a minimum, contain instructions on the 32 types of portable electronics insurance offered, ethical sales 33 practices, and required disclosures to prospective customers. 34 b. A vendor employee of a limited licensee shall file an 35 -5- LSB 5362XC (4) 85 av/nh 5/ 10
S.F. _____ application with the commissioner for an individual license. 1 An application shall be deemed approved unless the commissioner 2 notifies the limited licensee of the denial or rejection of the 3 application within thirty days of receiving the application. 4 An application shall not include requirements greater in scope 5 than described in this section. 6 9. A limited licensee shall treat moneys collected from 7 customers purchasing portable electronics insurance when buying 8 or leasing a portable electronic device as moneys received in a 9 fiduciary capacity. The offer or sale of portable electronics 10 insurance not in conjunction with the purchase or lease of a 11 portable electronic device is prohibited. 12 10. A limited licensee shall not advertise, represent, or 13 otherwise hold out itself or any of its employees as licensed 14 insurers, insurance producers, or insurance brokers. 15 11. A limited licensee shall not engage in this state in any 16 of the following: 17 a. A trade practice defined in chapter 507B as, or 18 determined pursuant to section 507B.6 to be, an unfair method 19 of competition or an unfair or deceptive act or practice in the 20 business of insurance. 21 b. An illegal sales practice or unfair trade practice 22 as defined in rules adopted pursuant to chapter 17A by the 23 commissioner. 24 12. A limited licensee shall not do any of the following: 25 a. Answer technical questions about the benefits, 26 exclusions, or conditions of the portable electronics insurance 27 coverage offered. 28 b. Evaluate the adequacy of a prospective customer’s 29 existing insurance coverage. 30 13. A vendor employee’s individual license, authorization, 31 or certification to offer or sell portable electronics 32 insurance products under this chapter shall expire when the 33 vendor employee’s employment with the vendor terminates. 34 Sec. 4. NEW SECTION . 522E.4 Term of limited license. 35 -6- LSB 5362XC (4) 85 av/nh 6/ 10
S.F. _____ A limited license issued pursuant to this chapter is valid 1 for three years and may be renewed without examination if the 2 renewal application is received in a timely manner. 3 Sec. 5. NEW SECTION . 522E.5 Fees. 4 The fee for a vendor employee individual license shall 5 be fifty dollars per vendor employee. In no case shall any 6 combined fees exceed one thousand dollars in any calendar year 7 for any one vendor, limited license or licensee, or renewal 8 license. The fees collected under this section shall be 9 deposited as provided in section 505.7. 10 Sec. 6. NEW SECTION . 522E.6 Vendor qualifications. 11 The commissioner may approve a vendor that meets the 12 requirements of this section as a qualified vendor to 13 administer the requirements of section 522E.3, subsection 8. 14 A qualified vendor shall have at least two years teaching 15 experience relating to the topic of the products described 16 in this chapter. If a qualified vendor is available, the 17 commissioner shall utilize the qualified vendor closest in 18 proximity to where the vendor employee is employed to meet the 19 requirements in section 522E.3, subsection 8. 20 Sec. 7. NEW SECTION . 522E.7 Rules. 21 The commissioner shall adopt rules necessary for the 22 administration of this chapter pursuant to chapter 17A. 23 EXPLANATION 24 The inclusion of this explanation does not constitute agreement with 25 the explanation’s substance by the members of the general assembly. 26 This bill creates new Code chapter 522E for the purpose 27 of regulating the sale of portable electronics insurance, 28 including requiring licensure, and providing for fees and 29 penalties. 30 New Code chapter 522E defines “portable electronic device” 31 as an electronic device that is personal, self-contained, 32 easily carried by an individual, battery operated, and used for 33 a variety of specified purposes, and accessories or services 34 related to such a device, with a value of less than $1,000 at 35 -7- LSB 5362XC (4) 85 av/nh 7/ 10
S.F. _____ the time of purchase or lease. “Portable electronic insurance” 1 is insurance providing coverage for the repair or replacement 2 of a portable electronic device. Such insurance does not 3 include a service contract or extended warranty. 4 The bill allows the commissioner of insurance to issue a 5 limited license to a vendor of portable electronic devices that 6 authorizes the vendor to offer or sell portable electronics 7 insurance in connection with and incidental to the sale or 8 lease of a portable electronic device with a value of less than 9 $1,000. 10 A vendor must file a written application for a limited 11 license to sell such insurance that includes a list of all 12 locations where the vendor intends to conduct business and 13 a list of all vendor employees that will offer or sell the 14 insurance. Sale of portable electronics insurance is allowed 15 only in connection with and incidental to the sale or lease of 16 a portable electronic device. A customer cannot be required to 17 purchase such insurance in order to buy a portable electronic 18 device. 19 If the bill’s provisions are violated by a limited licensee, 20 the commissioner may, after notice and a hearing, revoke 21 or suspend the limited license, or impose other penalties, 22 including suspension of authorization to sell the insurance at 23 specific vendor locations where violations have occurred. 24 Portable electronics insurance sold pursuant to a limited 25 license must include specified coverage and meet specified 26 disclosure requirements. The term of the insurance cannot 27 exceed 12 months unless the customer is notified prior to 28 continuation of the policy. An insurance carrier that issues 29 portable electronics insurance in the state must file premium 30 and loss ratio data with the commissioner each year and 31 maintain a minimum loss ratio of 80 percent. A vendor cannot 32 pay a fee, compensation, or commission to a vendor employee 33 based solely on the sale of portable electronics insurance by 34 the employee. 35 -8- LSB 5362XC (4) 85 av/nh 8/ 10
S.F. _____ A limited license issued pursuant to the bill’s provisions 1 authorizes a vendor employee to act individually on behalf, 2 and under the supervision, of the limited licensee, to offer 3 and sell portable electronics insurance if the employee also 4 obtains an individual license. In order to obtain a license, a 5 vendor employee must successfully complete a training program 6 and examination. The training program and examination must be 7 approved and administered by the commissioner and must contain 8 instructions on the types of portable electronics insurance 9 offered, ethical sales practices, and required disclosures 10 to prospective customers. However, the commissioner may 11 approve a qualified vendor to perform such duties. A vendor 12 employee must file an application with the commissioner for the 13 license and the application is deemed approved if not denied or 14 rejected within 30 days of its receipt. 15 A limited licensee is required to treat moneys collected 16 from customers purchasing portable electronics insurance as 17 moneys received in a fiduciary capacity. The offer or sale 18 of portable electronics insurance not in conjunction with 19 the purchase or lease of a portable electronic device is 20 prohibited. A limited licensee is prohibited from advertising, 21 representing, or holding out itself or any of its employees as 22 licensed insurers, insurance producers, or insurance brokers. 23 A limited licensee is prohibited from engaging in a trade 24 practice that is defined in Code chapter 507B as, or determined 25 pursuant to Code section 507B.6 to be, an unfair method of 26 competition or an unfair or deceptive act or practice in the 27 business of insurance, or an illegal sales practice or unfair 28 trade practice as defined in rules adopted by the commissioner 29 pursuant to Code chapter 17A. 30 A limited licensee is prohibited from answering technical 31 questions about the portable electronics insurance offered or 32 evaluating the adequacy of a prospective customer’s existing 33 insurance coverage. 34 A limited license is valid for three years and may be renewed 35 -9- LSB 5362XC (4) 85 av/nh 9/ 10
S.F. _____ without examination if application is timely made. The fee 1 for a vendor employee individual license is $50 per vendor 2 employee but combined fees cannot exceed $1,000 in any calendar 3 year for one vendor, limited license or licensee, or renewal 4 license. The license fees collected are to be deposited in the 5 department of commerce revolving fund pursuant to Code section 6 505.7. 7 The commissioner is required to select qualified vendors 8 closest in proximity to where a vendor employee is employed to 9 meet the training and examination requirements for the employee 10 to obtain an individual license. A vendor must have at least 11 two years teaching experience relating to the topics of the 12 products described in the new Code chapter to be utilized as a 13 qualified vendor. 14 The commissioner shall adopt rules necessary for the 15 administration of the new Code chapter pursuant to Code chapter 16 17A. 17 -10- LSB 5362XC (4) 85 av/nh 10/ 10