La. Admin. Code tit. 10 § III-351

Current through Register Vol. 50, No. 12, December 20, 2024
Section III-351 - Bank Insurance Activities
A. As used in this regulation:

Affiliate- a corporation which owns or controls a bank, and any other corporation which is owned or controlled by the corporation which owns or controls the bank, including but not limited to entities defined as affiliates under the provisions of 12 U.S.C.A. § 221a.(b), and 12 U.S.C.A. § 371c.(b), as those provisions from time to time may be amended or revised.

Bank- any state bank and, to the extent applicable, any national bank. When the context so requires, the term bank shall mean an ECB as defined herein.

Commissioner- the Commissioner of the Louisiana Office of Financial Institutions.

Department- the Louisiana Department of Insurance.

Eligible Community- any community the population of which, as determined by the last decennial census, does not exceed 5,000.

Eligible Community Bank(ECB)- any state bank with an office located in an eligible community. As used herein, unless the context indicates otherwise, the term shall include any bank subsidiary, affiliate, or any officer, director or employee of the bank, bank subsidiary, or affiliate.

Insurance- a contract whereby one undertakes to indemnify another or pay a specified amount upon determinable contingencies. The term shall include any kind of insurance recognized under the laws of Louisiana, but shall not include the following:

a. annuities, including but not limited to annuities governed by the provisions of §341 and 343;
b. any credit insurance which banks are authorized to sell pursuant to the provisions of the Louisiana Banking Law R.S. 6:1 et seq., the Louisiana Consumer Credit Law, R.S. 9:3510 et seq., or the Motor Vehicle Sales Finance Act, R.S. 6:951 et seq.; or
c. any insurance product sold by a bank which was engaged as a general insurance agent or broker on January 1, 1984, and continues to be so engaged, when sold by such bank.

Insurance Agent- a person appointed in writing by an insurer to submit applications for a policy of insurance or to negotiate a policy of insurance on its behalf. As used herein, the term shall also include insurance brokers, surplus lines insurance brokers, and insurance solicitors.

Insurer- any domestic, foreign, or alien insurer possessing a certificate of authority to transact any fire, life, or other insurance business in Louisiana.

Location or Located- in reference to a state bank means any place in Louisiana in which the state bank maintains an office at which money is lent, or deposits received, or checks paid.

Office of an ECB- the main office, or any branch, loan production office, or other manned physical facility of the bank or of any subsidiary or affiliate thereof.

Person- a natural or juridical person.

Subsidiary- a corporation owned or controlled by a bank, including but not limited to a service corporation governed by the provisions of LAC 10:I.501-509.

B. Authority
1. An ECB shall have and possess the rights, powers, privileges and immunities of a national bank or national bank branch domiciled in this state to engage in insurance activities.
2. An ECB may act as agent for any domestic, foreign, or alien insurer approved by the department to transact business in Louisiana.
3. An ECB may solicit and sell any insurance, may collect premiums on policies issued, and may receive such fees and commissions from the sale of such insurance as may be agreed upon between the bank and the insurer for which the bank is acting as agent.
4. An ECB may engage in the insurance activities covered by this rule directly, through its own officers, directors or employees, or through the officers, directors or employees of its subsidiary, or affiliate.
5. An ECB may also engage in the insurance activities covered by this rule indirectly by contracting with a third party, through officers, directors, or employees of a third party acting on behalf of the bank, or through persons acting as employee of both the ECB and the third party. The agreement between the bank and the third party shall be in writing and approved by the bank's board of directors.
6. The persons who act as insurance agents on behalf of the ECB shall operate from an office located within an eligible community as listed on the agents' license applications submitted to the department. The ECB's insurance agents shall have the same authority to solicit, negotiate, and sell insurance subject to the same restrictions applicable to Louisiana licensed insurance agents in general engaged in the sale of similar kinds of insurance.
C. Licensing
1. An ECB wishing to engage in insurance sales activities, or any third party wishing to engage in insurance sales activities on behalf of the ECB, shall obtain a license from the department to act as an insurance agent, insurance broker, surplus lines insurance broker or insurance solicitor.
2. The person applying on behalf of the ECB for a license as an insurance agent shall comply with the department's requirements, including continuing education requirements, applicable to insurance agents in general engaged in the sale of similar kinds of insurance.
3. Insurance agent services shall be provided only by licensed insurance agents. Unlicensed employees of the ECB or its subsidiary may provide clerical assistance in connection with the solicitation, negotiation, and sale of insurance, may collect premiums when so authorized by a licensed agent, and may refer customers to the ECB's licensed insurance agents.
4. As part of his regular examination of the ECB and of its subsidiary, the commissioner shall determine whether all persons engaged in insurance sales activities as insurance agents have been licensed by the department. If any person has failed to comply with the department's nondiscriminatory licensing requirements applicable to all insurance agents selling the same kinds of insurance, the commissioner may institute any enforcement action authorized by the Louisiana Banking Law in addition to referring the violations to the department, pursuant to the authority of R.S. 6:103 B(8)(b).
D. Disposition of Income from Sale of Insurance
1. Pursuant to the requirements of R.S. 22:1113(D), no unlicensed employee, officer, or director of an ECB may receive, directly or indirectly, commissions, brokerage, or other valuable consideration, for services as an insurance agent performed in connection with the sale of insurance authorized herein.
2. Compensation based upon commissions is a common method of selling insurance, and can increase customer awareness of the availability of insurance products offered by the ECB.
3. Compensation programs for ECB personnel engaged in insurance sales activities must be structured in such a way as to assist the customer in making informed product selections.
4. The ECB should receive compensation in recognition of the role played by its personnel, premises, and good will in connection with the ECB's insurance sales activities.
E. Consumer Protection
1. The way in which insurance products are sold within a bank can assist customers to distinguish between deposits that are insured or are obligations of the bank and uninsured products offered by the bank or a third party.
2. The commissioner shall review measures taken by an ECB with regard to the setting and circumstances of its insurance sales activities designed to minimize potential customer confusion over the nature of the product sold. Sales of insurance should take place in a location that is distinct from the teller window setting in which retail deposits are taken.
3. The ECB should give the customer the disclosures provided in Clause E.4.a.iv when it first informs the customer that required insurance is available from the ECB if:
a. insurance is required in order to obtain a loan; or
b. loan approval is contingent on the customer obtaining acceptable insurance; or
c. the customer obtained insurance required in connection with the loan from another insurance provider and the ECB is soliciting the sale of insurance to replace the customer's existing coverage.
4.
a. At the time a written application for insurance is made, the insurance agent shall obtain a separate written statement, signed by the customer, acknowledging that the customer has received and understands the following disclosures:
i. the insurance policy is not insured by the FDIC;
ii. the insurance policy is not a deposit or other obligation of, or guaranteed by, the bank;
iii. the bank does not guarantee performance by the insurer issuing the policy;
iv. the customer is not required to purchase insurance through the bank, and the customer's choice of another insurance provider will not affect the bank's credit decision or credit terms in any way.
b. These disclosures should be conspicuous and presented in a clear and concise manner.
5. All advertisements, sales literature, and other materials which relate to the marketing of insurance sold through the ECB shall clearly state that the insurance is not insured by a federal agency or guaranteed by the bank, shall indicate whether the insurance agent is employed by the bank or by a third party, and shall indicate that an insurance company, not the bank, is underwriting the insurance product.
6. Any ECB engaging in the insurance agency activities described herein shall establish an orderly process for responding to consumer complaints arising from the sales of insurance. Whether the ECB engages in insurance activities through its own employees, employees of its subsidiary, or those of a third party, the ECB shall maintain a file describing complaints lodged against the ECB, and steps taken by the ECB to resolve the complaints.
7.
a. An ECB shall not in any manner extend credit, lease or sell property of any kind, or furnish any service, or fix or vary the consideration for any of the foregoing, on the condition or requirement that the customer shall obtain insurance from the bank or its subsidiary.
b. The following activities shall not violate this anti-tying provision.
i. A bank may cross-sell or cross-market products or services. A bank cross-sells when it informs a customer that insurance is available from the bank, its subsidiary, or through a third party.
ii. A bank which requires a customer to obtain insurance coverage in connection with a loan or other extension of credit may provide the insurance if the bank discloses in writing that coverage may be obtained from a person of the customer's choice, and the transaction is not conditioned upon the customer obtaining insurance from the bank.
8. An ECB shall establish compliance programs to promote compliance with this provision.
9. Bank activities which conform to the requirements of 12 U.S.C. § 1972 (1), or 12 CFR §225 . 7, as these provisions from time to time may be amended or revised, shall be deemed to satisfy the requirements of this Subsection, and any state statutes applicable to this aspect of bank insurance sales.
F. Disclosure of Financial Records. In connection with the insurance sales activities authorized herein, an ECB may disclose a customer's records to any person as authorized in R.S. 6:333.
G. Enforcement by Commissioner
1. The commissioner is committed to ensuring that ECBs conduct their insurance sales activities in a safe and sound manner. Adequate consumer protections, qualified employees, and responsible sales practices are essential for this result.
2. The commissioner may enforce compliance with the provisions of this rule by using any regulatory, investigative, examination or enforcement authority given the Louisiana Office of Financial Institutions by the provisions of the Louisiana Banking Law, including, but not limited to, R.S. 6:121 et seq.
3. Nothing contained herein shall limit the authority or responsibility of the department to regulate insurance in conformity with all applicable laws and regulations.
H. Continuing Parity
1. The provisions of this rule are to be construed liberally in order to promote and maintain competitive equality between state and national banks, preserve the dual banking system, and serve the public interest in the business of banking.
2. In addition to the authority conferred by this rule, an ECB shall have and possess, and may exercise, such rights, powers, privileges, and immunities of a national bank or national bank branch engaged in insurance sales activities in the state pursuant to the authority of 12 U.S.C. § 92 as interpreted and applied by the Comptroller of the Currency, upon complying with the requirements of R.S. 6:242(C)(1). Upon receipt of the ECB's Notice of Intent, the commissioner shall transmit a copy thereof to the department.
I. Insurance Sales Exempted from Rule
1. The provisions of this Part shall be subject to the provisions of R.S. 6:242(A)(6) relative to banks which were engaged as general insurance agents or brokers on January 1, 1984.
2. The provisions of this Part shall not apply to any insurance sales activities in which banks were authorized to engage prior to the adoption of this rule, including, but not limited to, the sale of credit insurance and the sale of annuities.

La. Admin. Code tit. 10, § III-351

Promulgated by the Department of Economic Development, Office of Financial Institutions, LR 23:47 (January 1997).
AUTHORITY NOTE: Promulgated in accordance with R.S. 6:121 and 6:242 A(6)(a).