SESSION OF 2020
SUPPLEMENTAL NOTE ON SENATE SUBSTITUTE FOR
HOUSE BILL NO. 2480
As Recommended by Senate Committee on
Financial Institutions and Insurance

Brief*
Senate Sub. for HB 2480 would make several
amendments to and enact new law supplemental to the
Insurance Code and would amend law governing the
appointment of the Securities Commissioner by the
Commissioner of Insurance (Commissioner). Among these
changes, the bill would:
● Create law and amend law to allow a reciprocal to
convert to a Kansas mutual insurance company in
accordance with terms of a conversion plan filed
with and approved by the Commissioner (New
Section 1; Sections 4-5);
● Amend provisions governing excess lines coverage
and taxation to change a requirement that the
Commissioner collect double the amount of tax as
a penalty from any licensee or individual who fails,
refuses, or neglects to transmit the required
affidavit or statement for surplus line insurance or
fails to pay the imposed tax for surplus line
insurance (Section 2);
● Amend the effective date specified for the risk-
based capital (RBC) instructions promulgated by
the National Association of Insurance
Commissioners (NAIC) for property and casualty
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org
 companies and for life insurance companies
(Section 3);
● Amend provisions of the Long-term Care (LTC)
Insurance Act to modify a definition to allow
regulation of LCT policies providing coverage for
less than 12 months (Section 6);
● Amend provisions governing agent licensing and
renewal licensure requirements in the Uniform
Agents Licensing Act and in the Public Adjusters
Licensing Act (Sections 7-14); and
● Amend law governing the Office of the Securities
Commissioner and the appointment and removal
authority assigned to the Commissioner of
Insurance (Section 15).
The bill also would make technical changes.
Reciprocals and Conversion to Mutual Insurance
Companies (New Section 1; Sections 4-5)
The bill would create law and amend law in the
Insurance Code to allow a reciprocal to convert to a Kansas
mutual insurance company in accordance with terms of a
conversion plan filed with and approved by the
Commissioner. A reciprocal, as defined in KSA 40-1623, is an
aggregation of subscribers under a common name.
The bill would permit the Commissioner to establish
reasonable requirements and procedures for the submission
and approval of a conversion plan. The bill would outline
those items that must be included in the conversion plan:
● A provision for converting the existing subscriber
interests in the reciprocal into policyholder interests
in the resulting mutual insurance company, so that
each policyholder’s interest in the mutual insurance
company is fairly proportionate to such subscriber’s
interest in the reciprocal;
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 ● A provision amending the existing subscriber’s
agreement to articles of incorporation that comply
with provisions in the Insurance Code governing
the authority for formation, votes of members, and
charter filing requirements for mutual insurance
companies;
● A proposed copy of the articles of incorporation;
● Proof of the approval or adoption of the conversion
plan by not less than two-thirds of the subscriber
interests entitled to vote;
● A transition plan for the change of governance of
the reciprocal from an attorney-in-fact to a board of
directors and officers that is governed by Kansas
law applicable to mutual insurance companies; and
● Any other information required by the
Commissioner.
The bill would provide the Commissioner shall approve
the conversion plan if the Commissioner finds that the
proposed conversion will not:
● Be detrimental to the interests of the reciprocal’s
subscribers;
● Be detrimental to the interests of the state of
Kansas; and
● Render the insurer incapable of fulfilling its
contractual obligations.
Upon the approval of a conversion plan, the
Commissioner would be required to issue a new or amended
certificate of authority, which would be deemed the final act of
conversion; at such time, the reciprocal concurrently would
become a mutual insurance company.

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 Mutual insurance companies created under the
provisions of this bill would be required to comply with all
statutes in the Insurance Code, including Articles 12 and 40,
that are applicable to mutual insurance companies.
The bill would amend law, which currently allows a
mutual insurance company opting to convert to a reciprocal to
request a hearing, within 15 days of the Commissioner’s
approval or denial of the conversion plan, under the Kansas
Administrative Procedure Act. The bill would grant this same
ability to a reciprocal seeking to convert to a mutual insurance
company.
Finally, the law created in the bill would be made
supplemental to Article 16 in Chapter 40 (Insurance Code),
which governs reciprocals or interinsurance contracts.

Excess Lines Coverage (Section 2)
The bill would amend provisions in the Insurance Code
governing excess lines coverage and taxation to change a
requirement that the Commissioner collect double the amount
of tax as a penalty from any licensee or individual who fails,
refuses, or neglects to transmit the required affidavit or
statement for surplus line insurance or fails to pay the
imposed tax for surplus line insurance. The bill would assign
the Commissioner permissive authority to collect the penalty
up to double the amount of the tax.

Risk-based Capital (RBC) Instructions (Section 3)
The bill would amend the effective date specified in the
Insurance Code for the RBC instructions promulgated by the
NAIC for property and casualty companies and for life
insurance companies. The instructions currently specified
became effective December 31, 2018. The bill would update
the effective date on the RBC instructions to December 31,
2019.

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Long-term Care Insurance Act—Duration of Polices
(Section 6)
The bill would amend provisions of the LTC Insurance
Act to modify the definition of “long-term care insurance” and
to allow the Kansas Insurance Department (Department) to
regulate LTC policies that provide coverage for less than 12
months. Current law requires LTC policies to have a duration
of at least 12 consecutive months.

Agent and Public Adjuster Licensure; Appointment of
Agents (Sections 7-14)
The bill would amend provisions governing agent
licensing and renewal licensure requirements in the Uniform
Insurance Agents Licensing Act and in the Public Adjusters
Licensing Act.

Uniform Insurance Agents Licensing Act (Sections 7-12)
Definitions (Section 7)
The bill would modify the definition of “biennial due date”
as the term applies to both agents (the last day of the agent’s
birth month) and to registered businesses (the last day of the
month of the business’ initial licensure).
Biennial Renewal Fee and Continuing Education
Requirements for Licensure (Section 8)
In addition to the current criteria specified for residential
agents to meet educational requirements in the biennial
license period, the bill would require agents to submit an
application for renewal on a form prescribed by the
Commissioner and, on and after January 1, 2022, to pay a
$4.00 biennial renewal application fee.

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 Under current law, licensed agents holding only a
property and casualty (P&C) or life, accident, and health
(L&H) qualification are required to obtain biennially a
minimum of 12 continuing education credits (CECs), including
at least 1 hour in insurance ethics and no more than 3 CECs
in insurance agency management. If an agent holds both the
P&C and L&H certifications, the agent is required to obtain a
minimum of 24 CECs biennially.
On and after January 1, 2022, the bill would increase the
minimum CEC requirement for agents holding only 1
certification from 12 to 24 CECs biennially, permit at least 3
hours of instruction in ethics, and remove the required
insurance agency management hours. [Note: Agents holding
both P&C and L&H certifications would continue to be
required to obtain 24 CECs biennially.]
The bill would update the CEC requirements for
specified lines of insurance to add exemptions for insurance
agents licensed to hold only a qualification in either self-
service storage unit or travel insurance. [Note: Agents
licensed and holding only 1 or more of these qualifications
are exempted from the requirement for a minimum of 12 or 24
CECs under continuing law.]


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Appointment of Agents; Notification (Section 9, Section 11)
Appointment of agents. The bill would remove
affiliation requirements for business entities (insurance
companies). Under current law, each officer, director, partner,
and employee of the business entity who acts as an
insurance agent must be licensed as an insurance agent. The
business entity is required to disclose to the Department all of
its officers, directors, partners, and employees, regardless of
whether such persons are licensed as insurance agents. The
current notification requirement and licensure of the business
entity’s representatives includes an associated time frame for
notification to the Department and penalties for failure to
notify. The bill would remove the notification time frames and
penalties.
The bill would, on and after January 1, 2021, also
remove a required annual certification and related certification
fee for a licensed insurance agent who is an officer, director,
partner, or employee of, or is otherwise legally associated
with, a corporation, association, partnership, or other legal
entity appointed by an insurance company. Under current law,
an annual certification fee must be paid for each licensed
agent certified by the company at the time the company files
its premium tax returns.
Notification. The bill would create reporting
requirements on each person or entity licensed in the state as
an insurance agent. The bill would require the following
information to be reported to the Commissioner within 30
days of an occurrence:
● Each disciplinary action on the agent’s license or
licenses by the regulatory agency of another state
or territory of the United States;
● Each disciplinary action on an occupational license
held by the licensee, other than an insurance
agent’s license;

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 ● Each judgment or injunction entered against the
licensee on the basis of conduct involving fraud,
deceit or misrepresentation, or a violation of any
insurance law;
● All details of any conviction of a misdemeanor or
felony (The types of details are specified in the bill;
minor traffic violations could be omitted.);
● Each change in name (if the change is effected by
court order, the bill would require a copy of such
order to be provided to the Commissioner);
● Each change in residence or mailing address,
email address, or telephone number;
● Each change in the name or address of the agency
with which the agent is associated; and
● Each termination of a business relationship with an
insurer if the termination is for cause, including the
reason for the termination.
In addition, each person or entity licensed in Kansas as
an insurance agent would be required to provide to the
Commissioner, upon request, a current listing of company
affiliations and affiliated insurance agents. Business entities
licensed in Kansas as insurance agents would be required to
report each change in legal or mailing address, email
address, and telephone number to the Commissioner within
30 days of occurrence. These entities would also be required
to report each change in the name and address of the
licensed agent who is responsible for the business entity’s
compliance with the insurance laws of Kansas to the
Commissioner within 30 days of occurrence.


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Commissioner—Licenses and Renewals; Permissible
Considerations (Section 10)
Under continuing law, the Commissioner is permitted to
deny, suspend, revoke, or refuse renewal of licenses if the
Commissioner finds violation of several listed actions of the
applicant or license holder (e.g., providing incorrect,
misleading, incomplete, or untrue information; violations of
insurance law; been convicted of a misdemeanor or felony).
The bill would add “failed to respond to an inquiry from the
Commissioner within 15 business days” to this list of actions.
In addition, the bill would require the Commissioner to
consider the following criteria when determining whether to
grant or renew a license:
● Applicant’s age at the time of the conduct;
● Recency of the conduct;
● Reliability of the information concerning the
conduct;
● Seriousness of the conduct;
● Factors underlying the conduct;
● Cumulative effect of the conduct or information;
● Evidence of rehabilitation;
● Applicant’s social contributions since the conduct;
● Applicant’s candor in the application process; and
● Materiality of any omissions or misrepresentations.
Separately, the Commissioner would be required to
consider the following factors when determining whether to
reinstate or grant to an applicant a license that has been
revoked:
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 ● Present moral fitness of the applicant;
● Demonstrated consciousness by the applicant of
the wrongful conduct and disrepute that the
conduct has brought to the insurance profession;
● Extent of the applicant’s rehabilitation;
● Seriousness of the original conduct;
● Applicant’s conduct subsequent to discipline;
● Amount of time that has elapsed since the original
discipline;
● Applicant’s character, maturity, and experience at
the time of the revocation; and
● Applicant’s present competence and skills in the
insurance industry.
The bill would provide that an applicant to whom a
license has been denied after a hearing could not apply for a
license again until after the expiration of a period of one year
from the date of the Commissioner’s order or such other time
as prescribed in the order. A licensee whose license was
revoked could not reapply until after five years from the date
of the order or such period of time as prescribed in the order
or revocation.
Renewal Application—Penalties (Section 12)
The bill would amend provisions applying to the renewal
of licensure for an insurance agent to create corresponding
penalty provisions when the required renewal application is
not received by the Commissioner by the agent’s biennial due
date. The bill would provide, if the required renewal
application is late:


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 ● Such individual insurance agent’s qualification and
each corresponding license shall be suspended
automatically for a period of 90 calendar days or
until such time as the agent satisfactorily submits a
completed application, whichever occurs first; and
● The Commissioner shall assess a penalty of $100
for each licensed suspended:
○ If such agent fails to provide the required
renewal application and the monetary penalty
within 90 calendar days of the biennial due
date, the agent’s qualification and each
corresponding license would expire on such
agent’s biennial due date;
○ If, after more than 3 but less than 12 months
from the date the license expired, the agent
desires to reinstate his or her license, the
agent must provide the required renewal
application and pay a reinstatement fee in the
amount of $100 for each license suspended;
and
○ If, after more than 12 months have passed
since license expiration, the agent desires to
reinstate the license, this agent would be
required to apply for an insurance agent’s
license, provide the required proof of CEC
completion, and pay a reinstatement fee in
the amount of $100 for each license
suspended.
The bill would permit, upon receipt of a written
application from an agent claiming extreme hardship, the
Commissioner to waive any penalty associated with renewal
of an agent’s license.


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Public Adjusters Licensing Act (Sections 13-14)
The bill would amend