Opinion  Summary of Selected Opinion 98-226

Date:	04/01/1999
Organization:	Division of Banks
Docket Number:	98-226

This opinion was issued in the second quarter of 1999.

Licensing requirements for insurance brokers and agents participating in a "point spread program"

SECTION 1 of Chapter 174 of the Acts of 1997 exempts the financing of commercial insurance policies from the maximum interest rate established by the Insurance Premium Financing Board pursuant to Mass. Gen. Laws chapter 175, section 162B. In the event a "point spread program", as described below, is only offered to insurance brokers and agents in order to finance the insurance premiums exclusively on commercial policies and only for entities which such broker/agent insures, there would be no prohibition on such broker/agent participating in the program without being licensed. The exemption to licensing under Mass. Gen. Laws chapter 255C was set out in SECTIONS 2 and 3 of said Chapter 174. The amendments contained in said Chapter 174 are not triggered by whether the assignment is with or without recourse. Following is an example of how a "point spread program" would operate: a licensed insurance premium finance agency ("Agency") would quote an interest rate to a broker/agent, and the broker/agent would offer to finance the premium for its own insured at a rate 1% to 2% above the rate quoted to the broker/agent by the Agency. The insured would sign a premium finance agreement offered by the broker/agent which included a $16 administrative fee and this agreement would be immediately assigned to the Agency. The broker/agent would be entitled to retain the difference, or "point spread", above the Agency's quoted rate. The "point spread program" will only apply to the financing of premiums for commercial insurance policies for entities which such broker/agent insures, and not for consumer insurance policies.