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 is
a 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 the
insurance 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 an
insurance 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 an
insurer (including the management of a separate division,
department, or underwriting office);
(2) that acts as an agent for the insurer, whether known as a
managing general agent, manager, or other similar term;
(3) that, with or without the authority, either separately or
together with affiliates, produces, directly or indirectly, and
underwrites an amount of gross direct written premium at least
five percent (5%) of the policyholder surplus as reported in the
last annual statement of the insurer in any one (1) quarter or
year; and
(4) that does at least one (1) of the following activities related
to the business produced:
(A) Adjusts or pays claims in excess of an amount
determined by the commissioner.
(B) Negotiates reinsurance on behalf of the insurer.
(b) Notwithstanding subsection (a), the following persons are not
MGAs for the purposes of this chapter:
(1) An employee of the insurer.
(2) A United States manager of the United States branch of an
alien insurer.
(3) An underwriting manager that, pursuant to contract:
(A) manages all or part of the insurance operations of the
insurer;
(B) is under common control with the insurer, subject to
IC 27-1-23; and
(C) is not compensated based on the volume of premiums
written.
(4) An attorney-in-fact authorized by and acting for the
subscribers of a reciprocal insurer as authorized in IC 27-6-6-1
or an interinsurance exchange as authorized in IC 27-1-2-2
under 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 authority
to 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 may
not act in the capacity of an MGA with respect to risks located in
Indiana for an insurer licensed in Indiana unless that person is a
licensed producer in Indiana.
(b) A person, a firm, an association, or a corporation may not act
in the capacity of an MGA representing an insurer domiciled in
Indiana with respect to risks located outside Indiana unless that
person is licensed as a producer in Indiana pursuant to the provisions
of this chapter. For the purposes of this subsection, a person is
licensed as a producer in Indiana if that person holds a nonresident
license.
(c) The commissioner may require a bond in an amount
determined by the commissioner for the protection of the insurer.
(d) The commissioner may require an MGA to maintain an errors
and 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 in
the capacity of an MGA may not place business with an insurer
unless there is in force a written contract between the parties. A
contract required by this section must set forth the responsibilities of
each party and, where both parties share responsibility for a
particular function, specify the division of those responsibilities. The
contract must, at a minimum, contain provisions that state the
following:
(1) The insurer may terminate the contract for cause upon
written notice to the MGA and may suspend the underwriting
authority 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 all
transactions; and
(B) remit all funds due under the contract to the insurer on
not less than a monthly basis.
(3) All funds collected for the account of an insurer will be held
by the MGA in a fiduciary capacity in a bank that is a member
of the Federal Reserve System. This account shall be used for
all payments on behalf of the insurer. The MGA may retain not
more than three (3) months estimated claims payments and
allocated loss adjustment expenses.
(4) Separate records of business written by the MGA shall be
maintained. The insurer shall have access and right to copy all
accounts and records related to its business in a form usable by
the insurer, and the commissioner shall have access to all books,
bank accounts, and records of the MGA in a form usable to the
commissioner.
(5) The contract may not be assigned in whole or part by the
MGA.
(6) Appropriate underwriting guidelines, including the
following:
(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 policy
of insurance subject to the applicable laws and regulations
concerning the cancellation and nonrenewal of insurance
policies.
(8) If the contract permits the MGA to settle claims on behalf
of the insurer, the following apply:
(A) All claims must be reported to the company in a timely
manner.
(B) A copy of the claim file will be sent to the insurer at its
request or as soon as it becomes known that the claim:
(i) has the potential to exceed an amount determined by
the 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 the
commissioner 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 the
insurer, those files shall become the sole property of the
insurer or its estate. The MGA shall have reasonable access
to and the right to copy the files on a timely basis.
(D) Any settlement authority granted to the MGA may be
terminated for cause upon the insurer's written notice to the
MGA or upon the termination of the contract. The insurer
may suspend the settlement authority during the pendency of
any dispute regarding the cause for termination.
(9) Where electronic claims files are in existence, the contract
must address the timely transmission of the data in those files.
(10) If the contract provides for a sharing of interim profits by
the MGA, and the MGA has the authority to determine the
amount of the interim profits by establishing loss reserves or
controlling claim payments, or in any other manner, interim
profits will not be paid to the MGA:
(A) until one (1) year after the profits are earned, for
property insurance business, and five (5) years after the
profits are earned on casualty business; and
(B) until the profits have been verified pursuant to section 8
of this chapter.
(11) An MGA may not do any of the following:
(A) Bind reinsurance or retrocessions on behalf of the
insurer, except that the MGA may bind facultative
reinsurance contracts pursuant to obligatory facultative
agreements if the contract with the insurer contains
reinsurance underwriting guidelines, including, for both
reinsurance assumed and ceded, a list of reinsurers with
which the automatic agreements are in effect, the coverages
and amounts or percentages that may be reinsured, and
commission schedules.
(B) Commit the insurer to participate in insurance or
reinsurance syndicates.
(C) Appoint any producer without assuring that the producer
is lawfully licensed to transact the type of insurance for
which the producer is appointed.
(D) Without prior approval of the insurer, pay or commit the
insurer to pay a claim over a specified amount, net of
reinsurance, which may not exceed one percent (1%) of the
insurer's policyholder's surplus as of December 31 of the last
completed calendar year before the payment or commitment.
(E) Collect any payment from a reinsurer or commit the
insurer to any claim settlement with a reinsurer without prior
approval of the insurer. If prior approval is given, a report
must be promptly forwarded to the insurer.
(F) Permit its subproducer to serve on the insurer's board of
directors.
(G) Jointly employ an individual who is employed with the
insurer, unless the MGA and the insurer are affiliated in an
insurance 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 of
underwriting 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 financial
examination, in a form acceptable to the commissioner, of each
MGA with which it has done business.
(b) If an MGA establishes loss reserves, the insurer shall annually
obtain the opinion of an actuary attesting to the adequacy of loss
reserves established for losses incurred and outstanding on business
produced by the MGA. This requirement is in addition to any other
required loss reserve certification.
(c) The insurer shall periodically (at least semiannually) conduct
an on-site review of the underwriting and claims processing
operations of the MGA.
(d) Binding authority for all reinsurance contracts or participation
in insurance or reinsurance syndicates shall rest with an officer of the
insurer, who may not be affiliated with the MGA.
(e) Within thirty (30) days after entering into or terminating a
contract with an MGA, the insurer shall provide written notification
of the appointment or termination to the commissioner. Notices of
appointment of an MGA must include a statement of duties that the
applicant is expected to perform on behalf of the insurer, the lines of
insurance for which the applicant is to be authorized to act, and any
other information the commissioner may request.
(f) An insurer shall review its books and records each quarter to
determine if any producer (as defined by section 4 of this chapter)
has become, by operation of section 4 of this chapter, an MGA. If the
insurer determines that a producer has become an MGA pursuant to
section 4 of this chapter, the insurer shall promptly notify the
producer and the commissioner of that determination, and the insurer
and producer shall fully comply with the provisions of this chapter
within 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 shareholder
of its MGAs. This subsection does not apply to relationships
governed by IC 27-1-23.
(h) An insurance holding company system regulated under
IC 27-1-23 may perform the obligations imposed by this section for
insurers affiliated in the system by submitting, in a form acceptable
to the commissioner, consolidated information concerning the MGAs
with 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 the
insurer on whose behalf the MGA is acting. An MGA may be
examined 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 any
other person has not materially complied with this chapter or any rule
or order adopted under this chapter, after notice and opportunity to
be heard:
(1) the commissioner may order:
(A) for each separate violation, a civil penalty in an amount
not 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 noncompliance
the insurer has suffered any loss or damage, the commissioner
may maintain a civil action brought by or on behalf of the
insurer and its policyholders and creditors for recovery of
compensatory damages for the benefit of the insurer and its
policyholders and creditors or other appropriate relief.
(b) If an order of rehabilitation or liquidation of the insurer has
been entered under IC 27-9 and the receiver appointed under that
order determines that the MGA or any other person has not
materially complied with this chapter or any rule or order adopted
under this chapter and the insurer suffered any loss or damage
therefrom, the receiver may maintain a civil action for recovery of
damages or other appropriate sanctions for the benefit of the insurer.
(c) Nothing contained in this section affects the right of the
commissioner to impose any other penalties provided for by law.
(d) Nothing contained in this chapter is intended to or shall in any
manner limit or restrict the rights of policyholders, claimants, and
auditors.
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 under
IC 4-22-2 for the implementation and administration of this chapter.
As added by P.L.1-1992, SEC.148.