CHAPTER 33. MANAGING GENERAL AGENTS
IC 27-1-33
Chapter 33. Managing General Agents
IC 27-1-33-1
Actuary
Sec. 1. As used in this chapter, "actuary" means a person who isa member in good standing of the American Academy of Actuaries.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-2
Commissioner
Sec. 2. As used in this chapter, "commissioner" refers to theinsurance commissioner appointed under IC 27-1-1-2.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-3
Insurer
Sec. 3. As used in this chapter, "insurer" means any person, firm,association, or corporation duly authorized to act in Indiana as aninsurance company pursuant to IC 27-1.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-4
Managing general agent
Sec. 4. (a) As used in this chapter, "managing general agent" or"MGA" means any person, firm, association, or corporation:
(1) that manages all or part of the insurance business of aninsurer (including the management of a separate division,department, or underwriting office);
(2) that acts as an agent for the insurer, whether known as amanaging general agent, manager, or other similar term;
(3) that, with or without the authority, either separately ortogether with affiliates, produces, directly or indirectly, andunderwrites an amount of gross direct written premium at leastfive percent (5%) of the policyholder surplus as reported in thelast annual statement of the insurer in any one (1) quarter oryear; and
(4) that does at least one (1) of the following activities relatedto the business produced:
(A) Adjusts or pays claims in excess of an amountdetermined by the commissioner.
(B) Negotiates reinsurance on behalf of the insurer.
(b) Notwithstanding subsection (a), the following persons are notMGAs for the purposes of this chapter:
(1) An employee of the insurer.
(2) A United States manager of the United States branch of analien insurer.
(3) An underwriting manager that, pursuant to contract:
(A) manages all or part of the insurance operations of theinsurer; (B) is under common control with the insurer, subject toIC 27-1-23; and
(C) is not compensated based on the volume of premiumswritten.
(4) An attorney-in-fact authorized by and acting for thesubscribers of a reciprocal insurer as authorized in IC 27-6-6-1or an interinsurance exchange as authorized in IC 27-1-2-2under powers of attorney.
As added by P.L.1-1992, SEC.148. Amended by P.L.130-1994,SEC.34; P.L.116-1994, SEC.44.
IC 27-1-33-5
Underwrite
Sec. 5. As used in this chapter, "underwrite" means the authorityto accept or reject risk on behalf of the insurer.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-6
Acting in capacity of MGA with respect to risks; prohibitions;bond; errors and omissions policy
Sec. 6. (a) A person, a firm, an association, or a corporation maynot act in the capacity of an MGA with respect to risks located inIndiana for an insurer licensed in Indiana unless that person is alicensed producer in Indiana.
(b) A person, a firm, an association, or a corporation may not actin the capacity of an MGA representing an insurer domiciled inIndiana with respect to risks located outside Indiana unless thatperson is licensed as a producer in Indiana pursuant to the provisionsof this chapter. For the purposes of this subsection, a person islicensed as a producer in Indiana if that person holds a nonresidentlicense.
(c) The commissioner may require a bond in an amountdetermined by the commissioner for the protection of the insurer.
(d) The commissioner may require an MGA to maintain an errorsand omissions policy.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-7
Placement of business with an insurer; contract; contents
Sec. 7. A person, a firm, an association, or a corporation acting inthe capacity of an MGA may not place business with an insurerunless there is in force a written contract between the parties. Acontract required by this section must set forth the responsibilities ofeach party and, where both parties share responsibility for aparticular function, specify the division of those responsibilities. Thecontract must, at a minimum, contain provisions that state thefollowing:
(1) The insurer may terminate the contract for cause uponwritten notice to the MGA and may suspend the underwritingauthority of the MGA during the pendency of any dispute
regarding the cause for termination.
(2) The MGA will:
(A) render accounts to the reinsurer detailing alltransactions; and
(B) remit all funds due under the contract to the insurer onnot less than a monthly basis.
(3) All funds collected for the account of an insurer will be heldby the MGA in a fiduciary capacity in a bank that is a memberof the Federal Reserve System. This account shall be used forall payments on behalf of the insurer. The MGA may retain notmore than three (3) months estimated claims payments andallocated loss adjustment expenses.
(4) Separate records of business written by the MGA shall bemaintained. The insurer shall have access and right to copy allaccounts and records related to its business in a form usable bythe insurer, and the commissioner shall have access to all books,bank accounts, and records of the MGA in a form usable to thecommissioner.
(5) The contract may not be assigned in whole or part by theMGA.
(6) Appropriate underwriting guidelines, including thefollowing:
(A) The maximum annual premium volume.
(B) The basis of the rates to be charged.
(C) The types of risks which may be written.
(D) Maximum limits of liability.
(E) Applicable exclusions.
(F) Territorial limitations.
(G) Policy cancellation provisions.
(H) The maximum policy period.
(7) The insurer has the right to cancel or nonrenew any policyof insurance subject to the applicable laws and regulationsconcerning the cancellation and nonrenewal of insurancepolicies.
(8) If the contract permits the MGA to settle claims on behalfof the insurer, the following apply:
(A) All claims must be reported to the company in a timelymanner.
(B) A copy of the claim file will be sent to the insurer at itsrequest or as soon as it becomes known that the claim:
(i) has the potential to exceed an amount determined bythe commissioner or exceeds the limit set by the company,whichever is less;
(ii) involves a coverage dispute;
(iii) may exceed the MGA's claims settlement authority;
(iv) is open for more than six (6) months; or
(v) is closed by payment of an amount set by thecommissioner or an amount set by the company,whichever is less.
(C) All claim files will be the joint property of the insurer
and MGA. However, upon an order of liquidation of theinsurer, those files shall become the sole property of theinsurer or its estate. The MGA shall have reasonable accessto and the right to copy the files on a timely basis.
(D) Any settlement authority granted to the MGA may beterminated for cause upon the insurer's written notice to theMGA or upon the termination of the contract. The insurermay suspend the settlement authority during the pendency ofany dispute regarding the cause for termination.
(9) Where electronic claims files are in existence, the contractmust address the timely transmission of the data in those files.
(10) If the contract provides for a sharing of interim profits bythe MGA, and the MGA has the authority to determine theamount of the interim profits by establishing loss reserves orcontrolling claim payments, or in any other manner, interimprofits will not be paid to the MGA:
(A) until one (1) year after the profits are earned, forproperty insurance business, and five (5) years after theprofits are earned on casualty business; and
(B) until the profits have been verified pursuant to section 8of this chapter.
(11) An MGA may not do any of the following:
(A) Bind reinsurance or retrocessions on behalf of theinsurer, except that the MGA may bind facultativereinsurance contracts pursuant to obligatory facultativeagreements if the contract with the insurer containsreinsurance underwriting guidelines, including, for bothreinsurance assumed and ceded, a list of reinsurers withwhich the automatic agreements are in effect, the coveragesand amounts or percentages that may be reinsured, andcommission schedules.
(B) Commit the insurer to participate in insurance orreinsurance syndicates.
(C) Appoint any producer without assuring that the produceris lawfully licensed to transact the type of insurance forwhich the producer is appointed.
(D) Without prior approval of the insurer, pay or commit theinsurer to pay a claim over a specified amount, net ofreinsurance, which may not exceed one percent (1%) of theinsurer's policyholder's surplus as of December 31 of the lastcompleted calendar year before the payment or commitment.
(E) Collect any payment from a reinsurer or commit theinsurer to any claim settlement with a reinsurer without priorapproval of the insurer. If prior approval is given, a reportmust be promptly forwarded to the insurer.
(F) Permit its subproducer to serve on the insurer's board ofdirectors.
(G) Jointly employ an individual who is employed with theinsurer, unless the MGA and the insurer are affiliated in aninsurance holding company system. (H) Appoint a sub-MGA.
As added by P.L.1-1992, SEC.148. Amended by P.L.186-1997,SEC.9.
IC 27-1-33-8
Independent financial examination; loss reserves; on-site review ofunderwriting and claims; reinsurance; termination of contracts;review of books and records; board of directors
Sec. 8. (a) An insurer shall have on file an independent financialexamination, in a form acceptable to the commissioner, of eachMGA with which it has done business.
(b) If an MGA establishes loss reserves, the insurer shall annuallyobtain the opinion of an actuary attesting to the adequacy of lossreserves established for losses incurred and outstanding on businessproduced by the MGA. This requirement is in addition to any otherrequired loss reserve certification.
(c) The insurer shall periodically (at least semiannually) conductan on-site review of the underwriting and claims processingoperations of the MGA.
(d) Binding authority for all reinsurance contracts or participationin insurance or reinsurance syndicates shall rest with an officer of theinsurer, who may not be affiliated with the MGA.
(e) Within thirty (30) days after entering into or terminating acontract with an MGA, the insurer shall provide written notificationof the appointment or termination to the commissioner. Notices ofappointment of an MGA must include a statement of duties that theapplicant is expected to perform on behalf of the insurer, the lines ofinsurance for which the applicant is to be authorized to act, and anyother information the commissioner may request.
(f) An insurer shall review its books and records each quarter todetermine if any producer (as defined by section 4 of this chapter)has become, by operation of section 4 of this chapter, an MGA. If theinsurer determines that a producer has become an MGA pursuant tosection 4 of this chapter, the insurer shall promptly notify theproducer and the commissioner of that determination, and the insurerand producer shall fully comply with the provisions of this chapterwithin thirty (30) days.
(g) An insurer shall not appoint to its board of directors an officer,a director, an employee, a subproducer, or a controlling shareholderof its MGAs. This subsection does not apply to relationshipsgoverned by IC 27-1-23.
(h) An insurance holding company system regulated underIC 27-1-23 may perform the obligations imposed by this section forinsurers affiliated in the system by submitting, in a form acceptableto the commissioner, consolidated information concerning the MGAswith whom the insurers have done business.
As added by P.L.1-1992, SEC.148. Amended by P.L.116-1994,SEC.45.
IC 27-1-33-9 Actions of MGA; examinations
Sec. 9. The acts of the MGA are considered to be the acts of theinsurer on whose behalf the MGA is acting. An MGA may beexamined as if it were the insurer.
As added by P.L.1-1992, SEC.148.
IC 27-1-33-10
Violations; penalties; civil actions
Sec. 10. (a) If the commissioner determines that the MGA or anyother person has not materially complied with this chapter or any ruleor order adopted under this chapter, after notice and opportunity tobe heard:
(1) the commissioner may order:
(A) for each separate violation, a civil penalty in an amountnot exceeding five thousand dollars ($5,000); and
(B) the revocation or suspension of the producer's license;and
(2) if it is found that because of such material noncompliancethe insurer has suffered any loss or damage, the commissionermay maintain a civil action brought by or on behalf of theinsurer and its policyholders and creditors for recovery ofcompensatory damages for the benefit of the insurer and itspolicyholders and creditors or other appropriate relief.
(b) If an order of rehabilitation or liquidation of the insurer hasbeen entered under IC 27-9 and the receiver appointed under thatorder determines that the MGA or any other person has notmaterially complied with this chapter or any rule or order adoptedunder this chapter and the insurer suffered any loss or damagetherefrom, the receiver may maintain a civil action for recovery ofdamages or other appropriate sanctions for the benefit of the insurer.
(c) Nothing contained in this section affects the right of thecommissioner to impose any other penalties provided for by law.
(d) Nothing contained in this chapter is intended to or shall in anymanner limit or restrict the rights of policyholders, claimants, andauditors.
As added by P.L.1-1992, SEC.148. Amended by P.L.130-1994,SEC.35; P.L.116-1994, SEC.46.
IC 27-1-33-11
Rules for implementation and administration of chapter
Sec. 11. The commissioner may adopt reasonable rules underIC 4-22-2 for the implementation and administration of this chapter.
As added by P.L.1-1992, SEC.148.