Premium Payments Deposited to Bank in Your State

Nine States Require You to Use a Bank in Their State

When an insurance agent accepts a premium payment from a customer it always creates a fiduciary responsibility for the insurance agent.

Most states have laws outlining many specifics of how these premium payments must be handled.

These states all require that the premium payments be deposited in a bank or other depository institution with a physical presence in the agent's state or at a minimum regulated by the agent's state's banking regulators.

States Requiring Bank Account in Agency’s State

1. California – see note
2. Hawaii
3. Illinois
4. Maryland
5. Nevada
6. New York
7. Utah
8. Washington
9. Wyoming

NOTE: California requirement is limited to cash payments received at agency. Checks and card payments can be out of state.

Insurance Premium Collection in Pennsylvania

Insurance Premium Collection Certificate

Like many states, Pennsylvania has addressed collecting insurance premiums very specifically. Take a quick look at my two previous posts to see some of the details.

If you use a third party to accept ACH, Credit Cards, Debits Cards or e-checks, this specific section of the law needs to be considered.

https://www.pacode.com/secure/data/031/chapter37/s37.17.html

§ 37.17. Collection of premiums requires certificate or license.

 A person who is responsible for the collection and forwarding of premiums for insurance policies shall be deemed to be performing as an agent and shall be required to obtain a certificate and appointment from the insurance entity on whose behalf collection is being performed, or hold a license as a broker. This section does not apply to employes of agents or agencies who exclusively provide clerical support as described in the definition of agent in §  37.1 (relating to definitions). 

Money in Transit or Money at Rest

Is the third party you are using holding the funds at anytime?

If they are this is called "money at rest".

It is our opinion that once a third party holds your funds at rest they fall under this requirement in Pennsylvania to have a certificate or license.

How Do You Know

If you have your own Merchant Account with a bank or other third party for processing electronic payments, then it is our opinion the money processed is in transit, not at rest.

If you have an agreement with an payment aggregator or payment facilitator, then that third party is the actual party collecting and holding the premiums before funding your bank account. In this case it is our opinion that third party needs to be certified or license under this Pennsylvania Law.

You will have an agreement with an aggregator or payment facilitator, but that will not be a true Merchant Agreement. You need to be sure in writing.

Compliance

At Simply Easier Payments we take compliance with all State insurance laws and regulations very seriously. We spend time each year updating our understanding of these issues to be certain we never put our users at risk.


Let me now you thoughts and questions.