Insurance companies that do business in Indiana may be concerned that they are now required to register as a telephone solicitor with the Indiana Attorney General’s Office as a result of legislation that went into effect in that state on July 1st. Shortly before this legislation became effective, the Data Privacy and Identity Theft Unit of the Consumer Protection Division of the Office of Attorney General Curtis Hill sent a general communication to all purchasers of the Indiana Do Not Call list, including licensed insurance companies, informing recipients of the amendment and urging recipients to consult with private counsel with regard to the “application of the law to your situation.”
This alert discusses the amendments to the Indiana Telephone Solicitations law that became effective July 1, requiring prior registration by sellers making solicitations over the telephone in Indiana, and whether that requirement should apply to insurers.
Indiana Telephone Solicitations Law
Indiana amended the Telephone Solicitations law, Ind. Code § 24-5-12-0.1 et seq., effective July 1, 2019, to require that any “seller” making a “solicitation” in Indiana must first register with the Attorney General’s Office and pay the applicable registration fee. The Indiana Telephone Solicitations law broadly defines a “seller” as “a person who, personally, through salespersons, or through the use of an automated dialing and answering device, makes a solicitation.” Ind. Code § 24-5-12-8. A “solicitation” is defined as “a telephone conversation or attempted telephone conversation in which the seller offers, or attempts to offer, an item to another person in exchange for money or other consideration.” See Ind. Code § 24-5-12-9. There are no express exemptions to the registration requirement in the Indiana Telephone Solicitations law.
Indiana Telephone Solicitation of Consumers Law
Although the Telephone Solicitations Law does not allow for any exemptions in its application, this statute has a companion statute within the same title (Title 24 Trade Regulation), the Indiana Telephone Solicitation of Consumers law, Ind. Code § 24-4.7-1-1 et seq. Section 1(5) of the Indiana Telephone Solicitation of Consumers law provides that the statute does not apply to a “telephone call made by an individual licensed under Ind. Code § 27-1-15.6 [Insurance Producers] or Ind. Code § 27-1-15.8 [Surplus Lines Producers] when the individual is soliciting an application for insurance or negotiating a policy of insurance on behalf of an insurer (as defined in Ind. Code § 27-1-2-3),”1 thereby expressly exempting insurers from the application of the Indiana Telephone Solicitation of Consumers law. See Ind. Code § 24-4.7-1-1(5).
The Telephone Solicitations Law and the Telephone Solicitation of Consumers Law: How they Work Together
The Telephone Solicitations law and the Telephone Solicitation of Consumers law are intended to complement each other and work together to effectuate the intent of the Indiana legislature to protect the citizens of the state and should be interpreted accordingly. For example, Section 23(a) of the Telephone Solicitations law provides that a seller who fails to comply with any provision of Chapter 12 (Telephone Solicitations) or Article 4.7 (Telephone Solicitations of Consumers) commits a deceptive act under the Telephone Solicitations law that is subject to penalties. In instances, such as here, where an insurance company is expressly exempt from complying with the provisions of the Telephone Solicitation of Consumers law, in order for the legislature’s intent in exempting insurers to be effective, the same definitions and exemptions must apply to both the Telephone Solicitations and the Telephone Solicitation of Consumers laws.
Furthermore, Indiana Regulation 11 Ind. Admin. Code § 1-1-1, which applies to the Telephone Solicitations law, provides that “The definitions set forth at IC 24-4.7-2, as supplemented in this rule, apply throughout this article and 11 IAC 2.” Accordingly, the definitions of Art. 4.7 (the Telephone Solicitation of Consumers law) are to be used in the Telephone Solicitations law as well as the Telephone Solicitation of Consumers law. Therefore, since insurance companies are exempt from the definitions included in the Indiana Telephone Solicitation of Consumers law, insurance companies should also be exempt from the definitions provided in the Telephone Solicitation law, including the definition of “seller” and “solicitation,” and thus exempt from the registration and fee requirements of the Telephone Solicitations law.
Why Insurance Companies Should Be Exempt
Exemption of insurance companies from both the Telephone Solicitations law and the Telephone Solicitation of Consumers law, as well as express exemption from other statutes such as the Deceptive Consumer Sales statute (see Ind. Code § 24-5-0.5-3), is appropriate because such companies are highly regulated by the State of Indiana, and are already subject to intense supervision by the Indiana Department of Insurance and the provisions of the Indiana Insurance Code, Ind. Code § 27-1-1-1 et seq.2 The Indiana Insurance Code contains many provisions intended to protect consumers and gives the Indiana Department of Insurance the authority to oversee the consumer contacts of insurers authorized to conduct the business of insurance in Indiana, such as the Unfair Competition and Unfair or Deceptive Acts and Practices Act, Ind. Code § 27-4-1-1 et seq. Furthermore, insurance contracts such as policies of life insurance are not contracts that can be entered into during the course of a telephone conversation; insurers must underwrite and price each policy based on the individual’s age, gender, health history and other factors, which is a detailed and sometimes lengthy process. Insurers who engage in customer outreach by telephone are not, and could not, seek to bind consumers to contracts over the telephone; rather, they are generally hoping to develop interest in the company’s products and encourage consumers to meet with an agent to obtain more detailed information or submit an application.
Conclusion
We believe that the registration requirement imposed by the Telephone Solicitations law was not intended to reach insurance companies authorized to conduct the business of insurance in Indiana, as such companies are expressly exempt from the application of the companion law, the Telephone Solicitation of Consumers law, and because such companies are already subject to extensive regulation by the State of Indiana. We understand that certain industry groups have engaged in extensive conversations with the Attorney General’s Office regarding the application of this requirement to insurance companies, and that official legal guidance from that office is forthcoming, as well as a further amendment to the Telephone Solicitations law that would clarify the intended scope of the change that went into effect on July 1st.
A Note about Broker-Dealers and Investment Advisers
We note that unlike producers soliciting on behalf of insurance companies, broker-dealers and investment advisers who make telephone solicitations are not expressly exempt from the Telephone Solicitation of Consumers law. However, we believe that requiring broker-dealers and investment advisers to register separately with the Attorney General’s Office and to file materials used for solicitation is unnecessarily duplicative, and likely beyond the intent of the amendments to the statute for many of the same reasons discussed above. Broker-dealers and investment advisers are already required to be registered with and are subject to regulation by the Indiana Securities Division under the provisions of the Indiana Uniform Securities Act (see Ind. Code § 23-19-4-1 (broker-dealers) and Ind. Code § 23-19-4-3 (investment advisers)). Among other requirements, as part of the registration process with the Securities Division, broker-dealers and investment advisers must provide extensive background information and pay a fee (see Ind. Code § 23-19-4-6). Arguably, requiring broker-dealers and investment advisers to register separately with the Consumer Protection Division of the Indiana Attorney General’s Office under the Telephone Solicitations law in addition to the Securities Division of the Secretary of State’s Office does not serve the purpose of the Indiana legislatures in enacting the amendments to the Telephone Solicitations law, as broker-dealers and investment advisers, like insurers, are already well-regulated in Indiana.
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1 Ind. Code § 27-1-2-3 defines "insurer" as “a company, firm, partnership, association, order, society or system making any kind or kinds of insurance and shall include associations operating as Lloyds, reciprocal or inter-insurers, or individual underwriters.” Ind. Code § 27-1-2-3(x).
2 For example, insurance companies are already required to provide many of the protections included in the Telephone Solicitations law to their existing and potential customers. Similar to the protection in the Telephone Solicitations law that gives a purchaser the right to void a sale within 90 days of the date of the contract if a seller fails to deliver an item ordered within four weeks (see Ind. Code § 24-5-12-19), the Insurance Code provides that life insurers must give customers a “free look” period during which a customer can void the policy and receive a full refund of all money paid by the policyholder (see Ind. Code § 27-1-12-43). In addition, similar to the provision in the Telephone Solicitations law requiring sellers to submit an unexecuted copy of all contracts that may be offered in the transaction being solicited (see Ind. Code § 24-5-12-12(9)), the Insurance Code requires that all “contracts” (policy forms) offered by insurers must be filed in advance of sale with the Indiana Department of Insurance.
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