Committee considers bill updating insurance unfair-trade rules, banks seek clarifying amendments

Representative Steve Fitzpatrick, R-House District 24, opened a hearing on House Bill 114, a measure requested by the State Auditor's Office that updates Montana law on unfair insurance trade practices and incorporates elements of a National Association of Insurance Commissioners model.

"What this is is this is an update to some of the unfair trade practices acts," Fitzpatrick said. He told the committee HB 114 includes a new section on unfair financial planning practices and additions to misrepresentation and advertising provisions.

Frank Cote, representing the State Auditor's Office and the commissioner of insurance and securities, said the bill is based on an NAIC model and that the office had circulated the proposal to affected industry parties. "We base this bill off the NAIC, National Association of Insurance Commissioners model act," Cote said. He told the committee the auditor's office had heard concerns from banking interests and planned amendments to address perception issues without weakening consumer protections.

Sam Sill, with the Montana Bankers Association, said several banks in the state operate affiliated insurance agencies and that bankers had only recently seen the draft. "I think we're headed in a positive direction along those lines. We'll be back with amendments," Sill said, expressing a desire to resolve drafting issues.

Key provisions described in the hearing include: - A prohibition on an insurance producer holding themselves out as a financial advisor unless they have "appropriate training." - A requirement that an insurance producer engaged in financial planning have written agreements and make specified disclosures. - Definitions for a "health insurance lead generator" and expanded misrepresentation and advertising prohibitions that explicitly include electronic mail and internet postings. - Restrictions on banks and financial institutions that would bar steering customers to affiliated insurance products and require certain disclosures; the text also includes a complaint-handling process for marketing by health-insurance lead generators.

Committee members asked for clarifications. Representative Marshall asked whether the State Auditor's Office would need additional staff to enforce the law; Cote said the fiscal note indicates no additional full-time equivalents would be required. Representative Nickel asked whether the misrepresentation provision would cover an insurer that later adjusted a quoted premium after receiving additional information; Cote replied the provision targets intentional misrepresentation "if you go out there and ... you tell that consumer it's $50 a month ... and you find out it's a hundred and $50 a month ... They intentionally misrepresented that premium so that you would drop your other coverage and purchase it from them." Representative Sechinger asked whether the advertising language would ban banks from using trademarked imagery; Cote said the provision was aimed at preventing marketing that would make a reasonable person think the government (for example, Medicare) sells a product, and would not prohibit typical commercial imagery.

Next steps and context: Cote promised amendments to clarify drafting points raised by the bankers; the sponsor said he would request those amendments be drafted and provided to the committee in time for executive action. The committee closed the hearing on HB 114 with no vote taken at this meeting.

Why it matters: If enacted, HB 114 would change consumer protections for insurance and financial-planning interactions in Montana, affect banks that sell or refer customers to insurance products, and update statutory language for deceptive advertising and misrepresentation in modern platforms such as email and internet postings.

What the hearing did not resolve: The committee record shows banks and the auditor's office intend to negotiate clarifying amendments; no final text, votes or fiscal impacts beyond the stated FTE conclusion were recorded at the hearing.