LANSING, Mich., May 11, 2023 — House Bill 4376 passed the House of Representatives today. This bill would prohibit an agent from using client funds for purposes other than for the transaction of insurance. It requires insurance agents to hold consumer funds solely to pay insurance premiums and other expenses related to an insurance policy. This would ensure that consumer funds are not used by agents for general business or any purpose that is not related to the needs of the consumer. It codifies what is considered a best practice within the industry. Current Michigan law does not prohibit insurance producers from borrowing funds from clients. This omission could create opportunities for agents to mishandle client funds. This bill simply closes that gap. State Rep. Brenda Carter (D-Pontiac) issued the following statement after the passage of this bill:
“This legislation is a commonsense consumer protection policy, and its impact will be felt by nearly every Michigander. Consumers’ money should be safeguarded. Additionally, more than half of audits conducted by the Department of Insurance and Financial Services result in a referral to enforcement for premium compliance violations. The requirement for a trust account is driven by the need to establish a control to safeguard consumer premiums. Prohibiting the blend between client or insurer funds with the monies of agents is already strongly discouraged and an insurance industry best practice. This bill just puts it on the books.”
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