Chapter 363 Oregon Laws 2003

AN ACT

SB 235

Relating to insurance activities; creating new provisions; amending ORS 708A.005, 708A.120, 708A.145, 715.075, 716.594, 716.610, 746.195, 746.201, 750.055 and 750.333; and repealing ORS 708A.200, 746.180, 746.182, 746.185, 746.191, 746.205 and 746.211.

Be It Enacted by the People of the State of Oregon:

SECTION 1. Sections 2 to 5 of this 2003 Act are added to and made a part of the Insurance Code.

SECTION 2. As used in sections 2 to 5 of this 2003 Act:

(1) “Affiliate” means any company that controls, is controlled by or is under common control with another company.

(2) “Customer” means an individual who purchases, applies to purchase or is solicited to purchase insurance products primarily for personal, family or household purposes.

(3) “Depository institution” means a financial institution as that term is defined in ORS 706.008.

SECTION 3. (1) A depository institution or an affiliate of a depository institution that lends money or extends credit may not:

(a) As a condition precedent to the lending of money or extension of credit, or any renewal thereof, require that the person to whom the money or credit is extended, or whose obligation a creditor is to acquire or finance, negotiate any policy or renewal thereof through a particular insurer or group of insurers or agent or group of agents.

(b) Reject an insurance policy solely because the policy has been issued or underwritten by a person who is not associated with the depository institution or affiliate when insurance is required in connection with a loan or the extension of credit.

(c) As a condition for extending credit or offering any product or service that is equivalent to an extension of credit, require that a customer obtain insurance from a depository institution or an affiliate of a depository institution, or from a particular insurer or agent. This paragraph does not prohibit a depository institution or an affiliate of a depository institution from informing a customer or prospective customer that insurance is required in order to obtain a loan or credit, that loan or credit approval is contingent upon the procurement by the customer of acceptable insurance or that insurance is available from the depository institution or an affiliate of the depository institution.

(d) Unreasonably reject an insurance policy furnished by the customer or borrower for the protection of the property securing the credit or loan. A rejection is not considered unreasonable if it is based on reasonable standards that are uniformly applied and that relate to the extent of coverage required and to the financial soundness and the services of an insurer. The standards may not discriminate against any particular type of insurer or call for rejection of an insurance policy because the policy contains coverage in addition to that required in the credit transaction.

(e) Require that any customer, borrower, mortgagor, purchaser, insurer or agent pay a separate charge in connection with the handling of any insurance policy required as security for a loan on real estate, or pay a separate charge to substitute the insurance policy of one insurer for that of another. A charge prohibited in this paragraph does not include the interest that may be charged on premium loans or premium advancements in accordance with the terms of the loan or credit document. This paragraph does not apply to charges that would be required when the depository institution or an affiliate of a depository institution is the licensed agent providing the insurance.

(f) Require any procedures or conditions of an insurer or agent not customarily required of insurers or agents affiliated or in any way connected with the depository institution.

(g) Use an advertisement or other insurance promotional material that would cause a reasonable person to mistakenly believe that the federal government or the state is responsible for the insurance sales activity of, or stands behind the credit of, the depository institution or its affiliate.

(h) Use an advertisement or other insurance promotional material that would cause a reasonable person to mistakenly believe that the federal government or the state guarantees any returns on insurance products or is a source of payment on any insurance obligation of or sold by the depository institution or its affiliate.

(i) Act as an agent unless properly licensed in accordance with ORS 744.062, 744.063 or 744.064.

(j) Pay or receive any commission, brokerage fee or other compensation as an agent, unless the depository institution or affiliate holds a valid agent license for the applicable class of insurance. However, an unlicensed depository institution or affiliate may make a referral to a licensed agent if the depository institution or affiliate does not negotiate, sell or solicit insurance. In the case of a referral of a customer, however, the unlicensed depository institution or affiliate may be compensated for the referral only if the compensation is a fixed dollar amount for each referral that does not depend on whether the customer purchases the insurance product from the licensed agent. Any depository institution or affiliate that accepts deposits from the public in an area in which such transactions are routinely conducted in the depository institution may receive for each customer referral no more than a one-time, nominal fee of a fixed dollar amount for each referral that does not depend on whether the referral results in a transaction.

(k) Solicit or sell insurance, other than credit insurance or flood insurance, unless the solicitation or sale is completed through documents separate from any credit transactions.

(L) Except as provided in ORS 746.201, include the expense of insurance premiums, other than credit insurance premiums or flood insurance premiums, in the primary credit transaction without the express written consent of the customer.

(m) Solicit or sell insurance unless the insurance sales activities of the depository institution or affiliate are, to the extent practicable, physically separated from areas where retail deposits are routinely accepted by depository institutions.

(n) Solicit or sell insurance unless the depository institution or affiliate maintains separate and distinct books and records relating to the insurance transactions, including all files relating to and reflecting consumer complaints.

(2) A depository institution or an affiliate of a depository institution that lends money or extends credit and that solicits insurance primarily for personal, family or household purposes shall disclose to the customer in writing that the insurance related to the credit extension may be purchased from an insurer or agent of the customer’s choice, subject only to the depository institution’s right to reject a given insurer or agent as provided in subsection (1)(d) of this section. The disclosure shall inform the customer that the customer’s choice of insurer or agent will not affect the credit decision or credit terms in any way, except that the depository institution may impose reasonable requirements concerning the creditworthiness of the insurer and the extent of coverage chosen as provided in subsection (1)(d) of this section.

SECTION 4. (1) A depository institution that sells insurance, and any person that sells insurance on behalf of a depository institution, or on the premises of a depository institution where the depository institution is engaged in the business of taking deposits or making loans, shall disclose to the customer in writing, when practicable and in a clear and conspicuous manner, prior to a sale, that the insurance:

(a) Is not a deposit;

(b) Is not insured by the Federal Deposit Insurance Corporation or any other federal government agency;

(c) Is not guaranteed by the depository institution or an affiliate of the depository institution if applicable, or any person that is selling insurance if applicable; and

(d) When appropriate, involves investment risk, including the possible loss of value.

(2) The requirements of subsection (1) of this section apply:

(a) To an affiliate of a depository institution only to the extent that it sells insurance on the premises of a depository institution where the depository institution is engaged in the business of taking deposits or making loans or on behalf of a depository institution.

(b) When an individual purchases insurance primarily for personal, family or household purposes and only to the extent that the disclosure would be accurate.

(3) For the purpose of subsection (1) of this section, a person is selling insurance on behalf of a depository institution, whether on the premises of the depository institution or at another location, if either one of the following applies:

(a) The person represents to the customer that the sale of the insurance is by or on behalf of the depository institution; or

(b) The depository institution refers a customer to the person that sells insurance and the depository institution has a contractual arrangement to receive commissions or fees derived from the sale of insurance resulting from the referral.

SECTION 5. (1) The Director of the Department of Consumer and Business Services may examine and investigate the insurance activities of any person that the director believes may be in violation of section 2, 3 or 4 of this 2003 Act. Upon request and reasonable notice, a person shall make its insurance books and records available to the director and the director’s staff for inspection. An affected person may submit to the director a complaint or material pertinent to the enforcement of sections 2, 3 and 4 of this 2003 Act.

(2) Nothing in section 2, 3 or 4 of this 2003 Act prevents a depository institution or an affiliate of a depository institution that lends money or extends credit or other lender or seller from placing insurance on real or personal property in the event the customer, borrower, mortgagor or purchaser fails to provide insurance required under the terms of the loan or credit document.

(3) Sections 2, 3 and 4 of this 2003 Act do not apply to credit-related insurance.

SECTION 6. ORS 708A.005 is amended to read:

708A.005. (1) Except as otherwise limited in the Bank Act or the articles of incorporation of an institution, an institution shall have:

(a) Perpetual duration and succession in its corporate name, unless a limited period of duration is stated in its articles of incorporation;

(b) The power to do all things necessary or convenient to carry out its business and affairs including, without limitation, the power to:

(A) Sue and be sued and complain and defend in its corporate name;

(B) Have a corporate seal, which may be altered at will, and use it or a facsimile thereof by impressing, affixing or reproducing it in any other manner;

(C) Make contracts, incur liabilities, borrow money, issue its notes, bonds and other obligations that may be convertible into other securities of the institution or include the option to purchase other securities of the institution;

(D) Conduct its business, locate offices and exercise the powers granted by the Bank Act within or without this state;

(E) Elect or appoint directors, officers, employees and agents of the institution;

(F) Make and amend bylaws not inconsistent with its articles of incorporation or with the laws of this state for managing the business and regulating the affairs of the institution;

(G) Make donations for the public welfare or for charitable, scientific or educational purposes;

(H) Transact any business permitted by the Bank Act; and

(I) Pay pensions and establish pension plans, and share option plans and benefit or incentive plans for any or all of its current or former directors, officers, employees and agents;

(d) The power to be licensed as an agent as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062 except for title insurance; and

(e) All powers necessary or convenient to effect any or all of the purposes for which the institution is organized or to perform any or all of the acts expressly or impliedly authorized or required under the Bank Act.

(2) With respect to any exercise of the power granted under subsection (1)(d) of this section, other than the licensing of the institution to transact types of limited class insurance, as that term is defined in ORS 744.052, designated by the Director of the Department of Consumer and Business Services:

(a) The conduct by the institution of insurance agency activities shall be subject to the approval of the director. The director shall base consideration for approval on the condition of the institution, the adequacy of a formal business plan for the insurance activities and the existence of satisfactory management for the insurance activity.

(b) The director may revoke or restrict the ongoing authority of the institution to engage in the insurance agency activity if the condition of the institution substantially deteriorates or if the insurance activities are adversely affecting the institution.

[(c) If the insurance agency activity is conducted in a branch or office in which the institution carries on its banking business, the insurance agency activity shall be physically separated from those parts of the premises in which the institution carries on the banking business.]

[(d) No person who acts on behalf of the institution as an agent, as that term is defined in ORS 731.062, other than to transact such types of limited class insurance, shall in any manner engage on behalf of the institution in any activities relating to the making of loans or to the granting of other credits to the customers of the institution, including but not limited to serving as a loan officer or as a member of a loan committee or other group charged with approval of loans and other credits.]

[(e) Prior to selling any policy of insurance, the institution shall give substantially the following notice in writing to the purchaser in at least 10-point boldfaced type:]

[____________________________________________________________________________]

NOTICE

___________ (Name of institution) is a licensed insurance agent under Oregon law. You are not required to purchase any insurance from it as a condition of obtaining any service from or engaging in any other transaction with it. Before committing to purchase any policy of insurance, you should shop for the coverage by carefully comparing information obtained from two or more agents on prices, benefits, services, terms of renewal and other policy features. You hereby acknowledge receipt of a copy of this notice.

_________________ __________

Customer’s signature Date

[____________________________________________________________________________]

[(f)] (c) The institution shall file a written report with the director no later than March 31 of each year disclosing the insurance activities of the institution. The required contents of the report shall be established by the director by rule. Reports filed with the director under this paragraph shall be available for public inspection in the office of the director.

(3) An institution licensed as an agent, as that term is defined in ORS 731.062, shall not in any manner use customer information obtained from another insurance agent to promote, develop or solicit insurance business for the institution unless the other insurance agent consents to such use of the customer information.

SECTION 7. ORS 708A.120 is amended to read:

708A.120. (1) An institution shall not invest any of its assets in the capital stock of any other corporation, except:

(a) In the capital stock of the Federal Reserve Bank.

(b) In stock acquired or purchased to save a loss on a preexisting debt. The stock shall be sold within two years of the date acquired or purchased. The Director of the Department of Consumer and Business Services may extend the time if the director finds that an extension will not be detrimental to the public interest and will not contravene any other law.

(c) In the capital stock of any safe deposit company doing an exclusive safe deposit business on premises owned or leased by the institution upon 30 days’ advance notice to the director subject to the same limitations applicable to a national bank.

(d) In the capital stock of agricultural and livestock finance companies, subject to the same limitations applicable to national banks and to the approval of the director.

(e) In the capital stock, eligible for purchase by national banks, of small business investment companies, but the aggregate investment in the stock shall not exceed two percent of the capital of the institution.

(f) In the common stock of any federally chartered corporation that is chartered for the purpose of providing secondary markets for the sale of mortgages by institutions.

(g) In the stock of the Federal Home Loan Bank.

(h) In the capital stock of a corporation exclusively engaged in a trust business or a banker’s bank, subject to the same limitations applicable to national banks.

(i) In the capital stock of bank service corporations as provided in ORS 708A.130 to 708A.145.

(j) In the capital stock of a community development corporation as provided in ORS 708A.150.

(k) If a trust company is not engaged in a banking business and if the investment is first approved by the director, the trust company may invest an amount not to exceed 20 percent of the capital of the trust company:

(A) In the capital stock of a subsidiary investment company defined in the Investment Company Act of 1940, as amended; or

(B) In a company one of the purposes of which is to act as a federal covered investment adviser or a state investment adviser, as defined in ORS 59.015, with all the powers customarily exercised by a federal covered investment adviser or a state investment adviser.

(L) In adjustable rate preferred stock of the Student Loan Marketing Association established in 20 U.S.C. 1087-2, but the aggregate investment in the stock shall not exceed 15 percent of the capital of the institution.

(m) In the capital stock of a company acquired for the purpose of strengthening the institution’s capital structure or the elimination of undesirable assets as provided in ORS 708A.125.

(n) In the capital stock of banks and corporations engaged in international or foreign banking or foreign banking in a dependency or insular possession of the United States, as provided in ORS 708A.155.

(o) In the capital stock of a corporation created to establish ATMs as provided in ORS 708A.160.

(2) An institution may invest its assets in shares of any mutual fund, the assets of which are invested solely in obligations of the type described in and limited under ORS 708A.115.

(3) An institution may, subject to the approval of the director, acquire or continue to hold the fully paid stock of a corporation, one of the purposes of which is to assist the institution in handling real estate, claims, judgments or other assets or in holding title to the assets.

(4) An institution may acquire or continue to hold the fully paid stock of a corporation the purpose of which is to permit the institution to engage in any business in which a financial holding company, a bank holding company or a nonbank subsidiary of a financial holding company or a bank holding company is authorized to engage. This subsection does not apply unless the institution is the owner of at least 80 percent of the common stock of the subsidiary corporation, except qualifying shares of directors.

(5) An institution may, subject to the approval of the director and to rules promulgated by the director, acquire and continue to hold at least 80 percent of the fully paid stock of a corporation engaged in any business in which an institution is authorized to engage. Except as otherwise permitted by statute or rule, the investment limitations applicable to the institution apply to the subsidiary.

(6) An institution may, subject to the approval of the director and under rules promulgated by the director, acquire and continue to hold all the fully paid stock of a subsidiary corporation engaged in the business of purchasing the stock of the institution for purposes of holding that stock and making a market for that stock, if not more than 20 percent of the net profit of the banking institution is disbursed to the subsidiary in any one fiscal year. Except as otherwise permitted by statute or rule, the investment limitations applicable to the institution apply to the subsidiary. Acquisitions under this subsection shall not exceed 15 percent of the capital of the institution.

(7) An institution may acquire and hold all or part of the stock of a corporation that is or may thereafter be licensed as an agent as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062, except for title insurance, subject to the following requirements:

(a) The acquisition and holding of such stock shall be subject to the approval of the director. The director shall base consideration for approval on the condition of the institution, the adequacy of a formal business plan for the insurance activities, and the existence of satisfactory management for the corporation.

(b) The director may revoke or restrict the ongoing authority of the institution to hold stock in the corporation if the condition of the institution substantially deteriorates or if the insurance activities are adversely affecting the institution.

[(c) If the corporation conducts the insurance agency activity in a branch or office in which the institution carries on its banking business, the insurance agency activity shall be physically separated from those parts of the premises in which the institution carries on the banking business.]

[(d) No person who acts on behalf of the corporation as an agent, as that term is defined in ORS 731.062, shall while employed by the corporation engage on behalf of the corporation in any activities relating to the making of loans or to the granting of other credits to the customers of the corporation, including but not limited to serving as a loan officer or as a member of a loan committee or other group charged with approval of loans and other credits.]

[(e) The name of the corporation and any assumed business name used by it shall not be identical to that of the institution.]

[(f) Prior to selling any policy of insurance, the corporation shall give substantially the following notice in writing to the purchaser in at least 10-point boldfaced type:]

[____________________________________________________________________________]

NOTICE

________________ (Name of corporation licensed as an agent) is owned by

_______________ (Name of institution). You are not required to purchase any insurance from it as a condition of obtaining any service from or engaging in any transaction with the institution. Before committing to purchase any policy of insurance, you should shop for the coverage by carefully comparing information obtained from two or more agents on prices, benefits, services, terms of renewal and other policy features. You hereby acknowledge receipt of a copy of this notice.

__________________ _________

Customer’s signature Date

[____________________________________________________________________________]

[(g)] (c) For each calendar year during which an institution owns all or part of any corporation licensed as an agent as required by ORS 744.053, the institution shall file a written report with the director. The report shall be filed no later than March 31 of the following year and shall disclose the insurance activities of the corporation. The required contents of the report shall be established by the director by rule. The reports filed with the director under this paragraph shall be available for public inspection in the office of the director.

[(h)] (d) The corporation shall not in any manner use customer information obtained by the institution from another insurance agent to promote, develop or solicit insurance business for the corporation unless the other insurance agent consents to such use of the customer information.

[(i)] (e) The corporation shall be subject to the limitations applicable to [lending] depository institutions under [ORS 746.180 and 746.185 to 746.211] sections 2 to 5 of this 2003 Act. For the purpose of this paragraph, [the term “lending] “depository institution” has the meaning [set forth in ORS 746.185] given that term in section 2 of this 2003 Act.

(8) An institution may invest up to 15 percent of its capital in the stock of the Oregon Capital Corporation authorized to be created under ORS 284.750 to 284.795, 315.504, 317.084, 317.267 and 318.031.

SECTION 8. ORS 708A.145 is amended to read:

708A.145. (1) A bank service corporation may perform any of the following services for financial institutions:

(a) Check and deposit sorting and posting;

(b) Computation and posting of interest and other credits and charges;

(d) Any other clerical, bookkeeping, accounting, statistical or similar functions performed for a financial institution.

(2) In addition to the services that may be performed by a bank service corporation for financial institutions under subsection (1) of this section, a bank service corporation:

(a) May perform for any person any service that may lawfully be performed by all shareholders of the bank service corporation, or by any holding company or subsidiary of any such shareholder, except that a bank service corporation shall not take deposits.

(b) With respect to the sale of insurance, shall be subject to the limitations applicable to [lending] depository institutions under [ORS 746.180 and 746.185 to 746.211] sections 2 to 5 of this 2003 Act. For the purpose of this paragraph, [the term “lending]”depository institution” has the meaning [set forth in ORS 746.185] given that term in section 2 of this 2003 Act.

(3) A banking institution may not cause to be performed, by contract or otherwise, any of the services described in subsection (1) of this section for itself, whether on or off its premises, unless assurances satisfactory to the Director of the Department of Consumer and Business Services are furnished to the director by both the banking institution and the person performing the services that the performance of the services will be subject to regulation and examination by the director to the same extent as if the services were performed by the banking institution itself on its own premises.

(4) The director may regulate and examine the performance of the services described in subsection (1) of this section for financial institutions, and may regulate and examine the performance by bank service corporations of the services described in subsection (2) of this section.

SECTION 9. ORS 715.075 is amended to read:

715.075. A financial holding company or a bank holding company may acquire and hold all or part of the stock of a corporation that is or may thereafter be licensed as an agent as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062 except for title insurance, subject to the following requirements:

(1) The acquisition and holding of such stock shall be subject to the approval of the Director of the Department of Consumer and Business Services. The director shall base consideration for approval on the condition of the financial holding company or the bank holding company, the adequacy of a formal business plan for the insurance activities and the existence of satisfactory management for the corporation.

(2) The director may revoke or restrict the ongoing authority of the financial holding company or the bank holding company to hold stock in the corporation if the condition of the financial holding company or the bank holding company or of any bank owned by it substantially deteriorates or if the insurance activities are adversely affecting the financial holding company or the bank holding company or any bank owned by it.

[(3) If the corporation conducts the insurance agency activity in any branch or office in which any bank owned by the financial holding company or the bank holding company carries on its banking business, the insurance agency activity shall be physically separated from those parts of the premises in which the bank carries on the banking business.]

[(4) No person who acts on behalf of the corporation as an agent, as that term is defined in ORS 731.062, shall while employed by the corporation engage on behalf of the financial holding company or the bank holding company or any bank owned by it in any activities relating to the making of loans or the granting of other credits to the customers of any bank owned by the financial holding company or the bank holding company, including but not limited to serving as a loan officer or as a member of a loan committee or any other group charged with approval of loans and other credits.]

[(5) The name of the corporation and any assumed business name used by it shall not be identical to that of any bank owned by the financial holding company or the bank holding company.]

[(6) Prior to selling any policy of insurance, the corporation shall give substantially the following notice in writing to the purchaser in at least 10-point boldfaced type:]

[____________________________________________________________________________]

NOTICE

_______________ (Name of corporation licensed as an agent) is owned by

________________ (Name of financial holding company or bank holding company) which also owns _____________ (Name of institution or savings bank). You are not required to purchase any insurance from it as a condition of obtaining any service from or engaging in any transaction with the institution, savings bank, financial holding company or bank holding company. Before committing to purchase any policy of insurance, you should shop for the coverage by carefully comparing information obtained from two or more agents on prices, benefits, services, terms of renewal and other policy features. You hereby acknowledge receipt of a copy of this notice.

__________________ __________

Customer’s signature Date

[____________________________________________________________________________]

[(7)] (3) For each calendar year during which a financial holding company or a bank holding company owns all or part of any corporation licensed as an agent as required by ORS 744.053, the financial holding company or the bank holding company shall file a written report with the director. The report shall be filed no later than March 31 of the following year and shall disclose the insurance activities of the corporation. The required contents of the report shall be established by the director by rule. The reports filed with the director under this [paragraph] subsection shall be available for public inspection in the office of the director.

[(8)] (4) The corporation shall not in any manner use customer information obtained by the institution from another insurance agent to promote, develop or solicit insurance business for the corporation unless the other insurance agent consents to such use of the customer information.

[(9)] (5) The corporation shall be subject to the limitations applicable to [lending] depository institutions under [ORS 746.180 and 746.185 to 746.211] sections 2 to 5 of this 2003 Act. For the purpose of this subsection, [the term “lending] “depository institution” has the meaning [set forth in ORS 746.185] given that term in section 2 of this 2003 Act.

SECTION 10. ORS 716.594 is amended to read:

716.594. An Oregon savings bank may acquire and hold all or part of the stock of a corporation that is or may thereafter be licensed as an agent as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062 except for title insurance, subject to the following requirements:

(1) The acquisition and holding of such stock shall be subject to the approval of the Director of the Department of Consumer and Business Services. The director shall base consideration for approval on the condition of the Oregon savings bank, the adequacy of a formal business plan for the insurance activities and the existence of satisfactory management for the corporation.

(2) The director may revoke or restrict the ongoing authority of the Oregon savings bank to hold stock in the corporation if the condition of the Oregon savings bank substantially deteriorates or if the insurance activities are adversely affecting the Oregon savings bank.

[(3) If the corporation conducts the insurance agency activity in a branch or office in which the Oregon savings bank carries on its banking business, the insurance agency activity shall be physically separated from those parts of the premises in which the Oregon savings bank carries on the banking business.]

[(4) No person who acts on behalf of the corporation as an agent, as that term is defined in ORS 731.062, shall while employed by the corporation engage on behalf of the corporation in any activities relating to the making of loans or to the granting of other credits to the customers of the corporation, including but not limited to serving as a loan officer or as a member of a loan committee or other group charged with approval of loans and other credits.]

[(5) The name of the corporation and any assumed business name used by it shall not be identical to that of the Oregon savings bank.]

[(6) Prior to selling any policy of insurance, the corporation shall give substantially the following notice in writing to the purchaser in at least 10-point boldfaced type:]

[____________________________________________________________________________]

NOTICE

________________ (Name of corporation licensed as an agent) is owned by ________________ (Name of Oregon savings bank). You are not required to purchase any insurance from it as a condition of obtaining any service from or engaging in any transaction with the Oregon savings bank. Before committing to purchase any policy of insurance, you should shop for the coverage by carefully comparing information obtained from two or more agents on prices, benefits, services, terms of renewal and other policy features. You hereby acknowledge receipt of a copy of this notice.

__________________ _________

Customer’s signature Date

[____________________________________________________________________________]

[(7)] (3) For each calendar year during which an Oregon savings bank owns all or part of any corporation licensed as an agent as required by ORS 744.053, the Oregon savings bank shall file a written report with the director. The report shall be filed no later than March 31 of the following year and shall disclose the insurance activities of the corporation. The required contents of the report shall be established by the director by rule. The reports filed with the director under this subsection shall be available for public inspection in the office of the director.

[(8)] (4) The corporation shall not in any manner use customer information obtained by the Oregon savings bank from another insurance agent to promote, develop or solicit insurance business for the corporation unless the other insurance agent consents to such use of the customer information.

SECTION 11. ORS 716.610 is amended to read:

716.610. A savings bank, subject to the restrictions and limitations contained in this chapter, may:

(1) Receive time deposits and demand deposits of money without restriction.

(2) Offer time and savings accounts and other kinds of deposit accounts, including but not limited to automatic savings to checking transfer accounts and negotiable order of withdrawal accounts, to individuals and nonprofit corporations.

(3) Exercise by its board of directors or authorized officers or agents, subject to law, all powers necessary to carry on the business of savings banks.

(4) Pay depositors when requested by them, by drafts upon deposits to the credit of the savings bank in any city in the United States, and charge current rates of exchange for the drafts.

(5) Borrow money, and pledge securities to secure the money borrowed, but any amount borrowed in excess of 20 percent of deposits shall first be approved in writing by the Director of the Department of Consumer and Business Services. The failure to obtain the approval of the director shall not make an excess loan invalid as to the lender.

(6) Collect or protest promissory notes or bills of exchange owned by the savings bank or held by it as collateral, and charge the usual fees for the collection or protest.

(7) Sell gold or silver received in payment of interest or principal of obligations owned by the savings bank, or from depositors in the ordinary course of business.

(8) Become a member of the Federal Reserve Bank or the Federal Home Loan Bank of the district in which the savings bank is located.

(9) Conduct a trust business and exercise all the powers of a trust company as defined by ORS 709.150 upon compliance with the laws of this state relating to the regulations of a trust business.

(10) Be licensed as an agent as required by ORS 744.053 to transact one or more of the classes of insurance described in ORS 744.062 except for title insurance. With respect to the exercise of the power granted under this subsection, other than the maintenance of any insurance license granted to a savings bank prior to September 27, 1987, or the licensing of the savings bank to transact types of limited class insurance, as that term is defined in ORS 744.052, designated by the Director of the Department of Consumer and Business Services:

(a) The conduct by the savings bank of insurance agency activities shall be subject to the approval of the director. The director shall base consideration for approval on the condition of the savings bank, the adequacy of a formal business plan for the insurance activities and the existence of satisfactory management for the insurance activity.

(b) The director may revoke or restrict the ongoing authority of the savings bank to engage in the insurance agency activity if the condition of the savings bank substantially deteriorates or if the insurance activities are adversely affecting the savings bank.

[(c) If the insurance agency activity is conducted in a branch or office in which the savings bank carries on its banking business, the insurance agency activity shall be physically separated from those parts of the premises in which the savings bank carries on the banking business.]

[(d) No person who acts on behalf of the savings bank as an agent, as that term is defined in ORS 731.062, other than to transact such types of limited class insurance, or under a license granted to the savings bank prior to September 27, 1987, shall in any manner engage on behalf of the savings bank in any activities relating to the making of loans or to the granting of other credits to the customers of the savings bank, including but not limited to serving as a loan officer or as a member of a loan committee or other group charged with approval of loans and other credits.]

[(e) Prior to selling any policy of insurance, the savings bank shall give substantially the following notice in writing to the purchaser in at least 10-point boldfaced type:]

[____________________________________________________________________________]

NOTICE

________________ (Name of savings bank) is a licensed insurance agent under Oregon law. You are not required to purchase any insurance from it as a condition of obtaining any service from or engaging in any other transaction with it. Before committing to purchase any policy of insurance, you should shop for the coverage by carefully comparing information obtained from two or more agents on prices, benefits, services, terms of renewal and other policy features. You hereby acknowledge receipt of a copy of this notice.

__________________ _________

Customer’s signature Date

[____________________________________________________________________________]

[(f)] (c) The savings bank shall file a written report with the director no later than March 31 each year disclosing the insurance activities of the savings bank. The required contents of the report shall be established by the director by rule. The reports filed with the director under this paragraph shall be available for public inspection in the office of the director.

[(g)] (d) The savings bank shall not in any manner use customer information obtained from another insurance agent to promote, develop or solicit insurance business for the savings bank unless the other insurance agent consents to such use of the customer information.

SECTION 12. ORS 746.195 is amended to read:

746.195. (1) A [lending] depository institution [shall] may not:

[(1)] (a) Solicit the sale of insurance for the protection of real or personal property after a person indicates interest in securing a loan or credit extension, until the [lending] depository institution has agreed to make the loan or credit extension;

[(2) Unreasonably reject an insurance policy furnished by the borrower for the protection of the property securing the loan or credit. A rejection shall not be considered unreasonable when it is based on reasonable standards, uniformly applied, relating to the extent of coverage required and the financial soundness and the services of an insurer. The standards shall not discriminate against any particular type of insurer, nor shall the standards call for rejection of an insurance policy because the policy contains coverage in addition to that required in the credit transaction;]

[(3) Require that any borrower, mortgagor, purchaser, insurer or agent pay a separate charge in connection with the handling of any insurance policy required as security for a loan or credit extension, or pay a separate charge to substitute the insurance policy of one insurer for that of another. This subsection does not apply to the interest that may be charged on premium loans or premium advancements under the terms of the loan or credit document;]

[(4) Require any procedures or conditions of an insurer or agent not customarily required of insurers or agents that are affiliated or in any other way connected with the lending institution;]

[(5)] (b) Refuse to accept a written binder issued by an agent as proof that temporary insurance exists covering the real or personal property that is the subject matter of, or security for, a loan or extension of credit, and that a policy of insurance will be issued covering that property. A written binder issued by an agent or insurer covering real or personal property that is the subject matter of, or security for, a loan or extension of credit shall be effective until a policy of insurance is issued in lieu thereof, including within its terms the identical insurance bound under the binder and the premium therefor, or until notice of the cancellation of the binder is received by the borrower and the [lending] depository institution extending credit or offering the loan. When a [lending] depository institution closes on a binder under ORS 742.043, the agent or insurer issuing the binder shall be bound to provide a policy of insurance, equivalent in coverage to the coverage set forth in the binder, within 60 days from the date of the binder. The provisions of this [subsection] paragraph do not apply when prohibited by federal or state statute or regulations; or

[(6)] (c) Use or disclose to any other insurance agent, other than the original agent, the information relating to a policy of insurance furnished by a borrower unless the original agent fails to deliver a policy of insurance within 60 days prior to expiration to the [lending] depository institution without first procuring the written consent of the borrower.

(2) As used in this section, “depository institution” means a financial institution as that term is defined in ORS 706.008.

SECTION 13. ORS 746.201 is amended to read:

746.201. [(1) Nothing contained in ORS 746.185 to 746.205 shall prevent a lending institution or other lender or seller from placing insurance on real or personal property in which the financial institution or other lender or seller has a security interest when the mortgagor, borrower or purchaser fails to provide required insurance under the terms of the loan or credit document.]

[(2)] (1) In a contract or loan agreement, or in a separate document accompanying the contract or loan agreement and signed by the mortgagor, borrower or purchaser, that provides for a loan or other financing secured by the mortgagor’s, borrower’s or purchaser’s real or personal property and that authorizes the secured party to place insurance on the property when the mortgagor, borrower or purchaser fails to maintain the insurance as required by the contract or loan agreement or the separate document, a warning in substantially the following form shall be set forth in 10-point type:

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WARNING

Unless you provide us with evidence of the insurance coverage as required by our contract or loan agreement, we may purchase insurance at your expense to protect our interest. This insurance may, but need not, also protect your interest. If the collateral becomes damaged, the coverage we purchase may not pay any claim you make or any claim made against you. You may later cancel this coverage by providing evidence that you have obtained property coverage elsewhere.

You are responsible for the cost of any insurance purchased by us. The cost of this insurance may be added to your contract or loan balance. If the cost is added to your contract or loan balance, the interest rate on the underlying contract or loan will apply to this added amount. The effective date of coverage may be the date your prior coverage lapsed or the date you failed to provide proof of coverage.

The coverage we purchase may be considerably more expensive than insurance you can obtain on your own and may not satisfy any need for property damage coverage or any mandatory liability insurance requirements imposed by applicable law.

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[(3)] (2) Substantial compliance by a secured party with subsection [(2)] (1) of this section constitutes a complete defense to any claim arising under the laws of this state challenging the secured party’s placement of insurance on the real or personal property in which the secured party has a security interest, for the protection of the secured party’s interest in the property.

[(4)] (3) Nothing contained in this section shall be construed to require any secured party to place or maintain insurance on real or personal property in which the secured party has a security interest, and the secured party shall not be liable to the mortgagor, borrower or purchaser or to any other party as a result of the failure of the secured party to place or maintain such insurance.

[(5)] (4) The failure of a secured party prior to January 1, 1996, to include in a contract or loan agreement, or in a separate document accompanying the contract or loan agreement, the notice set forth in subsection [(2)] (1) of this section shall not be admissible in any court or arbitration proceeding or otherwise used to prove that a secured party’s actions with respect to the placement or maintenance of insurance on real or personal property in which the secured party has a security interest are or were unlawful or otherwise improper. A secured party shall not be liable to the mortgagor, borrower or purchaser or to any other party for placing such insurance in accordance with the terms of an otherwise legal contract or loan agreement with the mortgagor, borrower or purchaser entered into prior to January 1, 1996.

SECTION 14. ORS 750.055 is amended to read:

750.055. (1) The following provisions of the Insurance Code shall apply to health care service contractors to the extent so applicable and not inconsistent with the express provisions of ORS 750.005 to 750.095:

(a) ORS 705.137, 705.139, 731.004 to 731.150, 731.162, 731.216 to 731.362, 731.382, 731.385, 731.386, 731.390, 731.398 to 731.430, 731.428, 731.450, 731.454, 731.488, 731.504, 731.508, 731.509, 731.510, 731.511, 731.512, 731.574 to 731.620, 731.592, 731.594, 731.640 to 731.652, 731.730, 731.731, 731.735, 731.737, 731.750, 731.752, 731.804 and 731.844 to 731.992.

(b) ORS 732.215, 732.220, 732.230, 732.245, 732.250, 732.320, 732.325 and 732.517 to 732.592, not including ORS 732.549 and 732.574 to 732.592.

(c)(A) ORS 733.010 to 733.050, 733.080, 733.140 to 733.170, 733.210, 733.510 to 733.620, 733.635 to 733.680 and 733.695 to 733.780 apply to not-for-profit health care service contractors.

(B) ORS chapter 733, not including ORS 733.630, applies to for-profit health care service contractors.

(d) ORS chapter 734.

(e) ORS 742.001 to 742.009, 742.013, 742.061, 742.065, 742.150 to 742.162, 742.400, 742.520 to 742.540, 743.010, 743.013, 743.018 to 743.030, 743.050, 743.100 to 743.109, 743.402, 743.412, 743.472, 743.492, 743.495, 743.498, 743.522, 743.523, 743.524, 743.526, 743.527, 743.528, 743.529, 743.549 to 743.555, 743.556, 743.560, 743.600 to 743.610, 743.650 to 743.656, 743.693, 743.694, 743.697, 743.699, 743.701, 743.706 to 743.712, 743.721, 743.722, 743.726, 743.727, 743.728, 743.729, 743.804, 743.807, 743.808, 743.809, 743.814 to 743.839, 743.842, 743.845, 743.847, 743.854, 743.856, 743.857, 743.858, 743.859, 743.861, 743.862, 743.863, 743.864, 743.866 and 743.868.

(f) The provisions of ORS chapter 744 relating to the regulation of agents.

(g) ORS 746.005 to 746.140, 746.160, [746.180,] 746.220 to 746.370 and 746.600 to 746.690.

(h) ORS 743.714, except in the case of group practice health maintenance organizations that are federally qualified pursuant to Title XIII of the Public Health Service Act unless the patient is referred by a physician associated with a group practice health maintenance organization.

(i) ORS 735.600 to 735.650.

(j) ORS 743.680 to 743.689.

(k) ORS 744.700 to 744.740.

(L) ORS 743.730 to 743.773.

(m) ORS 731.485, except in the case of a group practice health maintenance organization that is federally qualified pursuant to Title XIII of the Public Health Service Act and that wholly owns and operates an in-house drug outlet.

(2) For the purposes of this section only, health care service contractors shall be deemed insurers.

(3) Any for-profit health care service contractor organized under the laws of any other state which is not governed by the insurance laws of such state, will be subject to all requirements of ORS chapter 732.

(4) The Director of the Department of Consumer and Business Services may, after notice and hearing, adopt reasonable rules not inconsistent with this section and ORS 750.003, 750.005, 750.025 and 750.045 that are deemed necessary for the proper administration of these provisions.

SECTION 15. ORS 750.333 is amended to read:

750.333. (1) The following provisions of the Insurance Code apply to trusts carrying out a multiple employer welfare arrangement:

(a) ORS 731.004 to 731.150, 731.162, 731.216 to 731.268, 731.296 to 731.316, 731.324, 731.328, 731.378, 731.386, 731.390, 731.398, 731.406, 731.410, 731.414, 731.418 to 731.434, 731.454, 731.484, 731.486, 731.488, 731.512, 731.574 to 731.620, 731.640 to 731.652, 731.804 to 731.992.

(b) ORS 733.010 to 733.050, 733.140 to 733.170, 733.210, 733.510 to 733.680 and 733.695 to 733.780.

(d) ORS 742.001 to 742.009, 742.013, 742.061 and 742.400.

(e) ORS 743.028, 743.053, 743.524, 743.526, 743.527, 743.528, 743.529, 743.530, 743.560, 743.562, 743.600, 743.601, 743.602, 743.610, 743.693, 743.694, 743.699, 743.727, 743.728, 743.730 to 743.773 (except 743.760 to 743.773), 743.801, 743.804, 743.807, 743.808, 743.809, 743.814 to 743.839, 743.842, 743.845, 743.847, 743.854, 743.856, 743.857, 743.858, 743.859, 743.861, 743.862, 743.863 and 743.864.

(f) ORS 743.556, 743.701, 743.703, 743.706, 743.707, 743.709, 743.710, 743.712, 743.713, 743.714, 743.717, 743.718, 743.719, 743.721, 743.722, 743.725 and 743.726. Multiple employer welfare arrangements to which ORS 743.730 to 743.773 apply are subject to the sections referred to in this paragraph only as provided in ORS 743.730 to 743.773.

(g) Provisions of ORS chapter 744 relating to the regulation of agents and insurance consultants, and ORS 744.700 to 744.740.

(h) ORS 746.005 to 746.140, 746.160[, 746.180] and 746.220 to 746.370.

(i) ORS 731.592 and 731.594.

(2) For the purposes of this section:

(a) A trust carrying out a multiple employer welfare arrangement shall be considered an insurer.

(b) References to certificates of authority shall be considered references to certificates of multiple employer welfare arrangement.

(3) The provision of health benefits under ORS 750.301 to 750.341 shall be considered to be the transaction of health insurance.

SECTION 16. ORS 708A.200, 746.180, 746.182, 746.185, 746.191, 746.205 and 746.211 are repealed.

Approved by the Governor June 13, 2003

Filed in the office of Secretary of State June 13, 2003

Effective date January 1, 2004

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