SESSION OF 2021
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2136
As Amended by Senate Committee on Financial
Institutions and Insurance

Brief*
HB 2136, as amended, would amend several provisions
in the Insurance Code pertaining to service contracts, surplus
lines insurance, the Standard Nonforfeiture Law for Individual
Deferred Annuities (Standard Nonforfeiture Law), the
Utilization Review Organization Act and oversight of utilization
review organizations, and risk retention groups. The bill would
also amend a requirement in the Professional Employer
Organization (PEO) Registration Act pertaining to registration
of PEOs.
The bill also would repeal the Automobile Club Services
Act and a statute relating to the power of the Commissioner
of Insurance (Commissioner) to examine and investigate into
the affairs of persons engaged in the business of insurance to
determine whether any unfair method of competition or unfair
or deceptive act or practice has occurred (KSA 40-2405).
The bill would be in effect upon publication in the
Kansas Register.

Service Contracts; Repeal of the Automobile Club
Services Act (Sections 1, 9)
The bill would amend the definition of “service contract”
within the general provisions of the Insurance Code to specify
the term would not include an automobile club service
____________________
*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
contract. The bill would define the term “automobile club
service contract,” which would mean:
● A contract that provides, in consideration of dues,
assessments, or periodic payments of money,
promises to assist in matters relating to travel and
the operation, use, and maintenance of an
automobile in the supply of features or services or
reimbursement thereof, which may include:
○ Such services as community traffic safety
services, travel and touring service, theft or
reward service, map service, towing service,
emergency road service, bail bond service,
and legal fee reimbursement service in the
defense of traffic offenses, none of which
enumerated features or services, if provided
by the promisor itself, shall be subject to the
insurance laws of this state;
○ The purchase of accidental injury and death
benefits insurance coverage issued, as
provided by applicable statutes, by an
insurance company authorized to do business
in Kansas; or
○ Such other features or services not deemed
by the Commissioner to constitute the
business of insurance.
Under current law, the exclusion applies to automobile
club service contracts as defined in the Automobile Club
Services Act. The bill would repeal the Automobile Club
Services Act, which requires persons providing automobile
club services to register with the Commissioner and pay an
annual licensing fee.

Definitions, Surplus Lines Insurance (Section 2)
The bill would also amend definitions associated with
surplus lines insurance to update provisions within the

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definition of “exempt commercial purchaser.” Under current
law, the minimum requirements for net worth, annual
revenue, and annual budgeted expenditures on exempt
commercial purchasers must be adjusted and published by
the Commissioner through rules and regulations. The bill
would instead require these adjusted amounts to be
published in the Kansas Register.

Standard Nonforfeiture Law for Individual Deferred
Annuities (Section 3)
The bill would amend the nonforfeiture rate used to
calculate the minimum values of a paid-up annuity, cash
surrender, or death benefit available under an annuity
contract. The interest rate used in determining the minimum
nonforfeiture rate amount would be specified as an annual
rate determined as the lesser of three percent per annum and
the interest rate calculated as shown below
● The five-year constant maturity rate reported by the
Federal Reserve as of a date, or average over a
period, rounded to the nearest 1/20th of 1 percent,
as specified in the contract no longer than 15
months prior to the annuity contract’s issue date or
redetermination date (no change from current law);
● Reduced by 125 basis points (no change from
current law);
● Where the resulting interest rate is not less than 15
basis points or 0.15 percent (1 percent in current
law); and
● The interest rate shall apply for an initial period and
may be redetermined for additional periods. The
redetermination date, basis, and period, if any,
must be stated in the annuity contract (no change
from current law).

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Utilization Review Organization Act (Sections 4-6)
The bill would make changes to the Utilization Review
Organization Act as follows.
Certification and Conduct (Section 4)
Under current law, the Commissioner is required to
adopt rules and regulations, with the advice of a utilization
review advisory committee, which establish standards for the
conduct of utilization review activities performed in Kansas or
affecting residents in this state by utilization review
organizations. The bill would remove the requirement for the
advice of the advisory committee and add health care
providers to those affected by utilization review activities
subject to the required rules and regulations establishing the
standards for conduct.
Advisory Committee (Section 5)
The bill would remove requirements establishing the
utilization review advisory committee. The bill would maintain
the listed exceptions to the Utilization Review Organization
Act (e.g., utilization review of health care services, reviews
conduct by insurance companies and plans, and certain
medical programs).
Certification (Section 6)
The bill would amend requirements in this act pertaining
to certification of utilization review activities. The bill would
specify provisions of the Utilization Review Organization Act
would not apply to utilization review organizations accredited
by and adhering to national utilization review standards
approved by URAC, an independent, nonprofit accreditation
entity, or other such utilization review organizations the
Commissioner approves. Under current law, these provisions
would not apply to the American Accreditation Health Care

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Commission (replaced by URAC in the bill); the utilization
review organizations are subject to the recommendations of
the advisory committee (the bill removes this committee from
utilization review law, Section 5).

Risk Retention Groups (Section 7)
The bill would amend a requirement placed on risk
retention groups chartered in states other than Kansas that
are seeking to do business in Kansas. Under current law, a
risk retention group seeking to do business in this state is
required to submit, among other things, a copy of the group’s
financial statement submitted to its state of domicile that is
certified by an independent public accountant and contains a
statement of opinion on loss and loss adjustment expense
reserves. The bill would remove the requirement that such
statement must be certified by an independent public
accountant.

Professional Employer Organization Registration Act
(Section 8)
The bill would amend certain requirements placed on a
registrant’s application by:
● Extending, from 60 to 120 days, the time frame
specified for the registrant’s renewal and
notification of the Commissioner of any changes in
the information provided in the registrant’s most
recent registration or renewal; and
● Extending, from 60 to 120 days, the permissible
time frame for the annual filing of the most recent
audit by a PEO group.
Technical Amendments
The bill would also make technical amendments.
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Background
The bill was introduced by the House Committee on
Insurance and Pensions at the request of the Kansas
Insurance Department (Department).
[Note: A companion bill, SB 78, has been introduced in
the Senate.]

House Committee on Insurance and Pensions
In the House Committee hearing, a representative of the
Department provided proponent testimony, stating the bill
seeks to improve efficiencies at the Department, eliminate
unnecessary government regulation, and address statutory
inconsistencies. Commenting on certain provisions of the bill,
the representative indicated the bill would not expand
substantive regulatory authority, but instead provide for a
process improvement (section 1 of the bill as introduced,
supervision and subpoena powers). Addressing the repeal of
the Automobile Club Services Act, the representative
indicated the registration requirement may have been
valuable at some time, but in the Department’s view, there is
no reasonable justification to continue this practice.
No other testimony was provided.
The House Committee amended the bill to:
● Remove language pertaining to the powers and
authority of the Commissioner (section 1) and
update the bill title accordingly; and
● Include automobile service club contracts in the
exclusions from the definition of “service contract”
within the general provisions of the Insurance

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 Code. A definition for the term “automobile club
service contract” is created by the amendment.
Senate Committee on Financial Institutions and
Insurance
In the Senate Committee hearing, a representative of
the Department provided proponent testimony. No other
testimony was provided.
The Senate Committee amended the bill to insert “club”
where omitted in the term “automobile club service contract”
and to change the effective date to upon publication in the
Kansas Register.

Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department states
because the bill would repeal the Automobile Club Services
Act, automobile clubs would no longer be required to register
with the Department and as a result, the bill, if enacted, would
reduce revenues to the Insurance Department Service
Regulation Fund by $33,670 annually beginning in FY 2022.
The fiscal note indicates the bill could increase the
number of cases filed in district courts because it allows the
Commissioner to apply to the courts to enforce compliance
with subpoenas. This would in turn increase the time spent by
the district court judicial and nonjudicial personnel in
processing, researching, and hearing cases. The bill could
also result in the collection of additional docket fees and civil
penalties. However, the additional expenditures and revenues
cannot be estimated at this time.
The Kansas Association of Counties (Association) states
there could be some costs associated with the servicing of
subpoenas and other court activities. The bill could also affect
counties if there are costs associated with cooperating in
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investigations with the Department. The Association states
court costs and fees could be recovered to assist with the
additional costs. However, a precise fiscal effect cannot be
estimated. The League of Kansas Municipalities states the bill
would not have a fiscal effect on cities.
[Note: The bill, as amended by the House Committee
and the Senate Committee, does not contain provisions
relating to investigatory powers of the Commissioner.]
Any fiscal effect associated with the bill is not reflected
in The FY 2022 Governor’s Budget Report.
Automobile Club Services Act; surplus lines; Standard Nonforfeiture Law; Utilization
Review Organization Act; risk retention groups; Professional Employer Registration
Organization Act


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Statutes affected:
As introduced: 40-103, 40-201a, 40-246i, 40-4, 40-22a04, 40-22a05, 40-22a06, 40-4103, 44-1704
As Amended by House Committee: 40-103, 40-201a, 40-246i, 40-4, 40-22a04, 40-22a05, 40-22a06, 40-4103, 44-1704
As Amended by Senate Committee: 40-103, 40-201a, 40-246i, 40-4, 40-22a04, 40-22a05, 40-22a06, 40-4103, 44-1704
Enrolled: 12-187, 12-189, 12-192, 74-8927, 79-3602, 79-3607