COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.: 0775-04
Bill No.: Perfected SS for SB 193
Subject: Insurance - General; Insurance Department; Licenses - Professional
Type: Original
Date: April 3, 2001
FISCAL SUMMARY
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Insurance Dedicated | $0 | ($40,750) | $58,500 |
| Total Estimated
Net Effect on All State Funds |
$0 | ($40,750) | $58,500 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| None | |||
| Total Estimated
Net Effect on All Federal Funds |
$0 | $0 | $0 |
| FUND AFFECTED | FY 2002 | FY 2003 | FY 2004 |
| Local Government | $0 | $0 | $0 |
Numbers within parentheses: ( ) indicate costs or losses.
This fiscal note contains 4 pages.
ASSUMPTION
Officials from the Department of Insurance (INS) state there would be a revenue loss due to single producer licenses: There are currently 4,200 dual agent/broker licensees who pay $125 biennially for an agent and a broker license ($25 agent and $100 broker). These individuals would now have a single license at a cost of $100 biennially. Lost revenue is estimated at $52,500 (4200 x 25 divided by 2) annually. There are approximately 3,000 brokers with no change. License fee revenue remains the same for 9,900 agencies. Due to full reciprocity, certification and clearance fees from non-resident producers would result in a loss of $425,000 annually. Late fees would be capped at $25 per month for 12 months. Currently they are calculated at $25 per month with no cap. Estimated loss of revenue is 1/3 of average annual late fees collected or $56,000 annually. Continuing education filing fee has been eliminated at a loss in revenue of $363,000 annually. Appointment and termination fees have been eliminated at a loss of revenue of $1,820,000 annually. Total annual loss of revenue is estimated at $2,716,500 from Insurance Dedicated Fund. INS estimates a revenue gain due to single producer licenses: There are currently 86,000 licensed producers (4,200 have dual agent/broker licenses, 3,000 have broker licenses, 9,900 have agency licenses and 69,000 have agent licenses. With adding new agents each year, department estimates revenue gain would be $75 per license on 37,000 agents per year or $2,775,000. The department would require contract programming cost of $70,000 to modify the licensing system to go from multiple licenses to a single producer license.
INS states that in 1997 examination fees exceeding tax liability was $2,014,964 and was $1,843,054 for 1998. Using this information, INS estimates that $1,929,009 in examination fees would be carried forward each year split between General Revenue Fund and County Foreign Insurance Fund beginning with taxes filed 3/2004. Carry forward would impact revenues in 2005. The department would need to re-write the premium tax credit sub-system using a relational database to allow for accounting of the tax credits and carryover from year to year. This would require approximately 760 hours of contract computer programming at $125 per hour to implement. This would be a one-time cost of $95,000 to the Insurance Dedicated fund during FY2005.
| FISCAL IMPACT - State Government | FY 2002
(6 Mo.) |
FY 2003 | FY 2004 |
| INSURANCE DEDICATED FUND | |||
| Income - Department of Insurance | |||
| Licensing fees | $0 | $29,250 | $58,500 |
| Cost - Department of Insurance | |||
| Programming costs | ($) | ($70,000) | $0 |
| ESTIMATED NET EFFECT ON INSURANCE DEDICATED FUND |
$ |
($40,750) |
$58,500 |
| FISCAL IMPACT - Local Government | FY 2002
(6 Mo.) |
FY 2003 | FY 2004 |
| $0 | $0 | $0 |
FISCAL IMPACT - Small Business
Small businesses would expect to be fiscally impacted to the extent they may incur additional licensing fees and administrative costs as a result of the requirements of this proposal.
DESCRIPTION
This proposal would revise the law governing the licensing of insurance agents and brokers. The proposal would remove distinctions between agents and brokers in terms of licensing, referring to each as "insurance producers". The proposal would revise most of the provisions pertaining to licensure including: the courses of study initially required for licensure, continuing education, temporary licensure, the termination and renewal of agency contracts, examination requirements, broker compensation restrictions, suspension and revocation of licenses, penalties for violations, closed and confidential records, and fees for licensure. This proposal is modeled after the Producer Licensing Model Act promulgated by the National Association of Insurance Companies.
This proposal, for all tax years beginning on or after January 1, 2003, would prohibit refunding any amount deducted for examination fees which exceeds an insurance company's or association's premium tax liability. The proposal would allow such amounts to be carried forward until the deduction is claimed in full.
This legislation is not federally mandated, would not duplicate any other program and would not require additional capital improvements or rental space.
SOURCES OF INFORMATION
Department of Insurance
Jeanne Jarrett, CPA
Director
April 3, 2001