2006 Code of Virginia § 38.2-513.1 - Insurance sales by depository institutions and other lending institutions

38.2-513.1. Insurance sales by depository institutions and other lendinginstitutions.

A. No depository institution, in the sale or solicitation of insurance, shall:

1. Reject an insurance policy required in connection with a loan or extensionof credit solely because the policy has been issued or underwritten by aperson who is not associated with such depository institution or itsaffiliate;

2. Require a debtor, insurer, agent, or surplus lines broker to pay aseparate charge in connection with the handling of insurance required inconnection with a loan or extension of credit or other banking product,unless such charge would be required when the depository institution or itsaffiliate is the licensed agent or surplus lines broker;

3. Use any advertisement that would cause a reasonable person to believemistakenly that (i) the federal government or the Commonwealth is responsiblefor the insurance sales activities of, or stands behind the credit of, thedepository institution or its affiliate; or (ii) the federal government orthe Commonwealth guarantees any returns on insurance products or is a sourceof payment on any insurance obligation of or sold by the depositoryinstitution or its affiliate;

4. Act as an agent unless licensed in accordance with the provisions ofChapter 18 ( 38.2-1800 et seq.) of this title;

5. Pay or receive commissions or other valuable consideration except inaccordance with the provisions of Chapter 18 ( 38.2-1800 et seq.) of thistitle; however, nothing herein shall prohibit the payment of compensation toa person not licensed under Chapter 18 ( 38.2-1800 et seq.) of this titlefor the referral of a customer, provided that (i) such compensation is notbased on the purchase of insurance by the customer, (ii) such compensation isa one-time, nominal fee of a fixed dollar amount for each referral, and (iii)the referral does not include a discussion of specific insurance policy termsand conditions;

6. Release insurance information of a customer to any person other than anofficer, director, employee, agent, or affiliate of the depositoryinstitution, for the purpose of soliciting or selling insurance, without theexpress written consent of the customer. This provision shall not apply to(i) the release of information as otherwise authorized by state or federallaw or (ii) the transfer of insurance information to an unaffiliated insurerin connection with transferring insurance in force on existing insureds ofthe depository institution or its affiliate, or in connection with a mergerwith or acquisition of an unaffiliated insurer. A depository institution orits affiliate shall be deemed to be in compliance with this paragraph if itcomplies with Chapter 6 ( 38.2-600 et seq.) of this title;

7. Use, disclose, or release health information obtained from the insurancerecords of a customer for any purpose other than for its activities as alicensed agent or surplus lines broker, without the express written consentof the customer. A depository institution or its affiliate shall be deemed tobe in compliance with this paragraph if it complies with Chapter 6 (38.2-600 et seq.) of this title;

8. Extend credit or provide any product or service that is equivalent to anextension of credit, lease or sell property of any kind, furnish anyservices, or fix or vary the consideration for any of the foregoing on thecondition or requirement that the customer obtain insurance from thedepository institution or its affiliate, or a particular insurer, agent, orsurplus lines broker; except that nothing shall prohibit the depositoryinstitution or its affiliate from:

a. Engaging in any activity that would not violate section 106 of the BankHolding Company Act Amendments of 1970, as interpreted by the Board ofGovernors of the Federal Reserve System, or

b. Informing a customer that (i) insurance is required in order to obtain aloan or credit approval; (ii) the loan or credit approval is contingent uponthe procurement by the customer of acceptable insurance; or (iii) insuranceis available from the depository institution or its affiliate;

9. Offer, sell, or require insurance in connection with a loan or extensionof credit, when an application for a loan or extension of credit from adepository institution is pending, unless a written disclosure is given tothe customer indicating that the customer's choice of an insurer will notaffect the credit decision or credit terms in any way; provided, however,that the depository institution may impose reasonable requirements concerningthe creditworthiness of the insurer and the scope of coverage chosen. Anydisapproval of an insurer shall be deemed unreasonable if it is not based onreasonable standards uniformly applied, relating to the extent of coveragerequired and the financial soundness and the services of an insurer. Suchstandards shall not discriminate against any particular type of insurer, norshall such standards call for disapproval of an insurance policy because thepolicy contains coverage in addition to that required by the creditor. Use ofthe ratings of a nationally recognized rating service shall not be deemedunreasonable provided such ratings are based on reasonable standardsuniformly applied. If an insurer, duly licensed in Virginia, does not possessthe required rating of a nationally recognized rating service, no person wholends money or extends credit shall refuse to accept from the insurer acertificate of 100 percent reinsurance issued by another insurer pursuant to 38.2-136, which does possess the required rating;

10. Sell an insurance policy unless:

a. A clear and conspicuous disclosure is given, in writing, wherepracticable, to the customer prior to the sale stating that such insurancepolicy (i) is not a deposit; (ii) is not insured by the Federal DepositInsurance Corporation or any other federal government agency; (iii) is notguaranteed by the depository institution or, if appropriate, its affiliate orany person soliciting or selling insurance on its premises; and (iv) whereappropriate, involves investment risk, including the potential loss ofprincipal, and

b. Written acknowledgment of the disclosure is obtained from the customer atthe time the customer receives the disclosure or at the time of the initialpurchase of the insurance policy;

11. Solicit or sell insurance, other than credit insurance or floodinsurance, unless such solicitation or sale is completed through documentsseparate from any credit transactions;

12. Include the expense of insurance premiums, other than credit insurancepremiums, title insurance premiums, or flood insurance premiums, in theprimary credit transaction without the express written consent of thecustomer; or

13. Solicit or sell insurance unless (i) its insurance sales activities are,to the extent practicable, physically segregated from areas where retaildeposits are routinely accepted; (ii) it maintains separate and distinctbooks and records relating to such insurance transactions for the threeprevious calendar years; and (iii) it makes all such books and recordsavailable to the Commission for inspection upon reasonable notice.

B. As used in this section:

"Affiliate" means any company that controls, is controlled by, or is undercommon control with another company.

"Credit insurance" means the lines of insurance defined in 38.2-103,38.2-108, 38.2-122.1, and 38.2-122.2.

"Customer" means an individual who obtains, applies for, or is solicited toobtain insurance.

"Depository institution" means any bank or savings association.

"Insurance information" means information concerning the premiums, terms,and conditions of insurance coverage, including expiration dates and rates,and insurance claims of a customer contained in the records of a depositoryinstitution or its affiliate.

C. Notwithstanding anything to the contrary, the provisions of this section,except subdivision A. 10., shall also apply to any person who lends money orextends credit and who sells or solicits any insurance as classified anddefined in Article 2 ( 38.2-101 et seq.) of Chapter 1 of this title inconnection therewith. However, this section shall not apply to premiumfinance companies licensed under Chapter 47 ( 38.2-4700 et seq.) of thistitle or agents who extend credit as authorized in 38.2-1806 to the extentthat such premium finance companies or agents are not affiliated with adepository institution.

D. If the customer agrees, the written disclosures and acknowledgementsrequired by subsection A of this section may be provided electronically. Suchdisclosures shall be provided in a format that the customer may retain andreproduce for later reference. When a purchase of insurance is made bytelephone, the disclosures and acknowledgements required by subsection A ofthis section may be given orally, provided that (i) such disclosures aremailed or provided in electronic form within three working days after thesale, solicitation, or offer of the insurance policy; (ii) documentation ismaintained showing that oral acknowledgement was given by the customer; and(iii) a reasonable effort is made to obtain written acknowledgement from thecustomer.

E. The Commission shall have the power to examine and investigate the affairsof any person to whom this section applies to determine whether that personhas violated this section. If a violation of this section is found, theperson in violation shall be subject to the same procedures and penalties asare applicable to other provisions of this chapter.

F. Except as provided for specifically in subsection A, this section shallnot prevent or restrict a depository institution or its affiliate fromengaging directly or indirectly, either by itself or in conjunction with anaffiliate, or any other person, in any activity authorized or permitted understate or federal law.

(2001, c. 371; 2002, c. 76.)