R590. Insurance, Administration.
(Effective 3-7-00)
R590-170. Fiduciary and Trust Account Obligations.
R590-170-1. Authority.
This rule is promulgated by the insurance commissioner pursuant to the
authority granted under Subsection 31A-2-201(3) to adopt rules for the
implementation of the Utah Insurance Code under Sections 31A-23a-406,
31A-23a-409, 31A-23a-412 and 31A-25-305 authorizing the commissioner
to establish by rule, records to be kept by licensees.
R590-170-2.
Purpose and Scope.
(1) The purpose of this rule is to set minimum standards that shall be
followed for fiduciary and trust account obligations pursuant to Sections
31A-23a-406, 31A-23a-409 and 31A-25-305.
(2) This rule applies to all Chapter 31A-23a and Chapter 31A-25
licensees holding funds in a fiduciary capacity.
R590-170-3.
Definitions.
For the purposes of this rule the commissioner adopts the definitions
as set forth in Section 31A-l-301 and the following:
(1) "Trust Account" means a checking or savings account where funds
are held in a fiduciary capacity.
(2) "Accounts Receivable" means premiums, fees, or taxes invoiced by a
licensee.
(3) "Accounts Payable" means premiums or fees due insurers that a
licensee is responsible for invoicing and collecting from insureds on behalf
of insurers and licensees and premium taxes due taxing entities.
(4) "Licensee" means a licensee under Chapters 31A-23a and 31A-25.
R590-170-4.
Establishing the Trust Account.
(1) All records relating to a trust account shall be identified with
the wording "Trust Account" or words of similar import. These records
include checks, bank statements, general ledgers and records retained by the
bank pertaining to the trust account.
(2) All trust accounts shall be established with a Federal Employer
Identification Number rather than a Social Security Number.
(3) A trust account shall be separate and distinct from operating and
personal accounts, i.e., a separate account number, a separate account
register, and different checks, deposit and withdrawal slips.
(4) A non-licensee may not be a signator on a licensee's trust
account, unless the non-licensee signatory is an employee of the licensee
and has specific responsibility for the licensee's trust account.
R590-170-5.
Maintaining the Trust Account.
(1) Funds deposited into a trust account shall be limited to:
premiums which may include commissions; return premiums; fees or taxes paid
with premiums; financed premiums; funds held pursuant to a third party
administrator contract; funds deposited with a title insurance agent in
connection with any escrow settlement or closing, amounts necessary to cover
bank charges on the trust account; and interest on the trust account, except
as provided under Subsection 31A-23a-406(2)(b).
(2) Disbursements from a trust account shall be limited to: premiums
paid to insurers; return premiums to policyholders; transfer of commissions
and fees; fees or taxes collected with premiums paid to insurers or taxing
authority; funds paid pursuant to a third party administrator contract;
funds disbursed by a title insurance agent in connection with any escrow
settlement or closing; and the transfer of accrued interest.
(3) Personal or business expenses may not be paid from a trust
account, even if sufficient commissions exist in the account to cover these
expenses.
(4) Commissions may not be disbursed from a trust account prior to the
beginning of the policy period for which the premium has been collected.
(5) Commissions attributed to premiums and fees collected must be
disbursed from a trust account on a date not later than the first business
day of the calendar quarter after the end of the policy period for which the
funds were collected.
(6) Premiums due insurers may not be paid from a trust account unless
the premiums directly relating to the amount due have been deposited into,
and are being held in, the trust account, or unless funds have been retained
in the trust account consistent with Subsection 5 above, or placed by a
licensee into the trust account to finance premiums on behalf of insureds.
(7) Premiums financed by a licensee must be accounted for as a loan
with interest charged at no less than the statutory rate for any loan
exceeding 90 days, pursuant to Section 31A-23a-404.
R590-170-6.
Insurers' Access to Trust Accounts.
(1) Insurer access to licensee trust funds is not prohibited by the
trust relationship; however, licensees must take reasonable steps to assure
trust funds are protected from misappropriation by limiting access to those
trust funds.
(2) An insurer desiring to access funds in a licensee's trust account
may do so if:
(a) the contract between the insurer and the licensee allows
electronic funds transfers into or out of the licensee's trust account:
(i) expressly permits the insurer to withdraw only the amount
authorized by the licensee for each transaction; and
(ii) specific authorization from the licensee of the amount to be
withdrawn from the licensee's trust account must be received by the insurer
prior to the withdrawal; or
(b) the licensee provides the insurer electronic funds transfer into
or out of a separate trust account set up solely for trust funds deposited
for that insurer.
(3) By implementing electronic fund transfers from a licensee's trust
account, the insurer accepts the commissioner's right to oversight of all
electronic funds transfers between the insurer and licensee.
(4) Insurers utilizing electronic funds transfer contracts will
annually report to the commissioner the name of each licensee with whom they
have such contracts.
(a) The report is due January 15 of each year.
(b) The report will include the name and address of each licensee and
the line of business involved, i.e. personal lines, commercial lines,
health, life, etc.
R590-170-7.
Accounting Records to be Maintained.
(1) Bank statements for trust accounts shall be reconciled monthly.
(2) An accounts receivable report showing credits and debits shall be
maintained and reconciled monthly. This report must list, at a minimum, the
account name and the amount and date due for each receivable. The sum of all
receivables shall be shown on the report. Receivables and their sums that
are over 90 days old shall be shown separately on the report.
(3) An accounts payable report showing the status of each account
shall be maintained and reconciled monthly.
(4) Adequate records shall be maintained to establish ownership of all
funds in the trust account: from whom they were received; and
for whom they are held.
(5) Trust account registers shall maintain a running balance.
(6) All accounting records relating to the business of insurance shall
be maintained in a manner that facilitates an audit.
R590-170-8.
Insurer Responsibility.
Insurers and their managing general agents shall provide a written
report to the insurance commissioner within 15 days:
(1) if a licensee fails to pay an account payable within 30 days of
the due date. This does not apply where a legitimate dispute exists
regarding the account payable if the licensee has properly notified the
insurer of any disputed items and has provided documentation supporting that
position; or
(2) if a licensee issues a check that when presented at the bank is
not honored or is returned because of insufficient funds.
R590-170-9.
Severability.
If any provision or clause of this rule or its application to any
person or situation is held invalid such invalidity will not affect any
other provision or application of this rule which can be given effect
without the invalid provision or application, and to this end the provisions
of this rule are declared to be severable.
KEY: insurance
Nonsubstantive Change 11-25-03
March 7, 2000
31A-2-201
31A-23a-406
31A-23a-409
31A-23a-412
31A-25-305
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