House File 986 - Introduced HOUSE FILE 986 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HF 911) (SUCCESSOR TO HSB 256) A BILL FOR An Act relating to matters under the purview of the department 1 of insurance and financial services, and the utilities 2 commission, including financial literacy and exploitation, 3 tax confidentiality, health insurance rates, health savings 4 accounts, insurer withdrawals, property insurance, service 5 contracts, and cross-subsidization of public utilities, and 6 including penalties. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 1437HZ (2) 91 nls/ko
H.F. 986 DIVISION I 1 FINANCIAL LITERACY AND FINANCIAL EXPLOITATION 2 Section 1. Section 502.410, subsection 2, Code 2025, is 3 amended to read as follows: 4 2. Agents. The fee for an individual is forty dollars 5 when filing an application for registration as an agent, a fee 6 of forty dollars when filing a renewal of registration as an 7 agent, and a fee of forty dollars when filing for a change of 8 registration as an agent. Of each forty-dollar fee collected, 9 ten dollars is appropriated to the securities investor 10 education and financial literacy training fund established 11 under financial literacy and investor education fund created 12 in section 502.601, subsection 5 546.14, and ten dollars is 13 appropriated to the financial exploitation prevention fund 14 created in section 546.15 . If the filing results in a denial 15 or withdrawal, the administrator shall retain the fee. 16 Sec. 2. Section 502.601, subsection 4, Code 2025, is amended 17 by striking the subsection and inserting in lieu thereof the 18 following: 19 4. Financial literacy and investor education. Initiatives 20 involving financial literacy and investor education shall 21 comply with the initiatives in section 546.14, subsection 1, 22 and section 546.15, subsection 1. 23 Sec. 3. Section 502.601, subsection 5, Code 2025, is amended 24 by striking the subsection. 25 Sec. 4. Section 505.7, subsection 3, Code 2025, is amended 26 to read as follows: 27 3. Forty percent of the nonexamination Nonexamination 28 revenues payable to the division of insurance or the department 29 of revenue in connection with the regulation of insurance 30 companies or other entities subject to the regulatory 31 jurisdiction of the division shall be deposited in the commerce 32 revolving fund created in section 546.12 and shall be subject 33 to annual appropriation to the division for its operations 34 and is also subject to expenditure under subsection 6 . The 35 -1- LSB 1437HZ (2) 91 nls/ko 1/ 41
H.F. 986 remaining nonexamination revenues payable to the division of 1 insurance or the department of revenue shall be deposited in 2 the general fund of the state. 3 Sec. 5. Section 546.2, subsection 4, Code 2025, is amended 4 by adding the following new paragraph: 5 NEW PARAGRAPH . g. To identify and coordinate appropriate 6 opportunities for collaboration under sections 546.14 and 7 546.15 with the chief administrative officers of each division 8 and each chief administrative officers respective regulated 9 entities. 10 Sec. 6. NEW SECTION . 546.14 Financial literacy and investor 11 education fund. 12 1. The director shall develop and implement financial 13 literacy and investor education initiatives for the public by 14 providing education on financial topics, including but not 15 limited to the topics required to be offered and taught for 16 grades nine through twelve under section 256.11, subsection 5, 17 paragraph k , subparagraph (1). 18 2. A financial literacy and investor education fund is 19 created in the state treasury under the control of the director 20 for the purposes specified in subsection 1. The fund shall 21 consist of any moneys appropriated to the fund by the general 22 assembly and any other moneys available and obtained or 23 accepted by the department for placement in the fund including 24 all of the following: 25 a. Moneys appropriated to the fund pursuant to section 26 502.410, subsection 2. 27 b. Notwithstanding any provision of law to the contrary, 28 the director may, at the directors discretion, transfer up to 29 two hundred fifty thousand dollars from the commerce revolving 30 fund created in section 546.12 to complete the objectives under 31 subsection 1. 32 c. Notwithstanding any provision of law to the contrary, 33 any moneys received by the department by reason of civil 34 penalties assessed pursuant to chapter 502 may be deposited 35 -2- LSB 1437HZ (2) 91 nls/ko 2/ 41
H.F. 986 in the financial literacy and investor education fund at the 1 discretion of the director. 2 d. The director may collaborate with organizations with an 3 interest in financial literacy and investor education. The 4 director may accept a grant or donation to be placed in the 5 financial literacy and investor education fund. 6 3. Notwithstanding any provision of law to the contrary, 7 moneys in the financial literacy and investor education fund 8 may be transferred to the financial exploitation prevention 9 fund in section 546.15 at the discretion of the director. 10 4. Notwithstanding section 12C.7, subsection 2, interest or 11 earnings on moneys in the fund shall be credited to the fund. 12 Notwithstanding section 8.33, moneys appropriated in this 13 section that remain unencumbered or unobligated at the close of 14 a fiscal year shall not revert but shall remain available for 15 expenditure for the purposes designated. 16 Sec. 7. NEW SECTION . 546.15 Financial exploitation 17 prevention fund. 18 1. The director shall develop and implement initiatives to 19 accomplish all of the following: 20 a. Educate the public on financial exploitation. 21 b. Assist individuals who are known, suspected, or potential 22 victims of financial exploitation. 23 c. Conduct investigations, refer investigations to other law 24 enforcement, and assist in the prosecution of persons involved 25 in financial exploitation. 26 2. A financial exploitation prevention fund is created 27 in the state treasury under the control of the director and 28 consists of any moneys appropriated to the fund by the general 29 assembly for the purposes of subsection 1, and any other moneys 30 available and obtained or accepted by the department for 31 placement in the fund including all of the following: 32 a. Moneys appropriated to the fund pursuant to section 33 502.410, subsection 2. 34 b. Notwithstanding any provision of law to the contrary, the 35 -3- LSB 1437HZ (2) 91 nls/ko 3/ 41
H.F. 986 director may, at the directors discretion, transfer up to two 1 hundred fifty thousand dollars from the commerce revolving fund 2 to complete the objectives of this section. 3 c. Notwithstanding any provision of law to the contrary, 4 any moneys received by the department as a result of civil 5 penalties assessed pursuant to chapter 502 may be placed into 6 the financial exploitation prevention fund at the discretion of 7 the director. 8 d. The director may collaborate with organizations with an 9 interest in financial exploitation prevention and education. 10 e. The director may accept a grant or donation to be placed 11 in the financial exploitation prevention fund. 12 3. Notwithstanding section 12C.7, subsection 2, interest or 13 earnings on moneys in the fund shall be credited to the fund. 14 Notwithstanding section 8.33, moneys appropriated in this 15 section that remain unencumbered or unobligated at the close of 16 a fiscal year shall not revert but shall remain available for 17 expenditure for the purposes designated. 18 4. a. All investigation files, investigation reports, 19 and all other investigative information in the possession of 20 the department pursuant to this section shall be confidential 21 records under chapter 22, except as specifically provided in 22 this section, and shall not be subject to release by discovery, 23 subpoena, or other means of legal compulsion until opened for 24 public inspection by the department, or upon the consent of 25 the department, or until a court of competent jurisdiction 26 determines, after notice to the department and hearing, 27 that the department will not be unnecessarily hindered in 28 accomplishing the purposes of this section if opened for public 29 inspection. Investigative information in the possession of 30 the department may be disclosed, in the directors discretion, 31 to appropriate regulatory or law enforcement agencies within 32 the state, another state, the District of Columbia, or another 33 territory or country. 34 b. The director may share documents, materials, or other 35 -4- LSB 1437HZ (2) 91 nls/ko 4/ 41
H.F. 986 information, including confidential and privileged documents, 1 materials, or other information, with any person provided 2 that the recipient agrees to maintain the confidential 3 and privileged status of the document, material, or other 4 information pursuant to Iowa law. 5 c. The director may receive documents, materials, or other 6 information, including confidential and privileged documents, 7 materials, or other information from any person and shall 8 maintain as confidential and privileged any document, material, 9 or other information received with notice or the understanding 10 that it is confidential or privileged under the laws of the 11 jurisdiction that is the source of the document, material, or 12 other information. 13 d. The director may enter into an agreement governing the 14 sharing and use of documents, materials, or other information 15 consistent with this section. 16 e. An investigator or other staff member of the department 17 shall not be subject to subpoena in a civil action concerning 18 any matter of which the department investigator or other staff 19 member has knowledge pursuant to a pending or continuing 20 investigation conducted by the department pursuant to this 21 chapter. 22 Sec. 8. TRANSFER OF MONEYS. On the effective date of this 23 division of this Act, any unencumbered and unobligated moneys 24 remaining in the securities investor education and financial 25 literacy training fund created in section 502.601 shall be 26 transferred to the financial literacy and investor education 27 fund created in section 546.14, as enacted in this division of 28 this Act. 29 DIVISION II 30 TAX ON GROSS PREMIUMS CONFIDENTIALITY 31 Sec. 9. Section 432.1, Code 2025, is amended by adding the 32 following new subsection: 33 NEW SUBSECTION . 7. a. A tax return filed under this 34 section shall not be subject to inspection under chapter 22. 35 -5- LSB 1437HZ (2) 91 nls/ko 5/ 41
H.F. 986 It shall be unlawful for any present or former officer or 1 employee of the state to willfully or recklessly publish any 2 tax return filed under this section. A person who violates 3 this paragraph shall be guilty of a serious misdemeanor and, in 4 addition to any other penalty, shall be dismissed from state 5 office or discharged from state employment. 6 b. This section shall not be construed to prohibit the 7 department of revenue from turning over information and tax 8 returns in the department of revenues possession pursuant 9 to this subsection to duly authorized officers of the United 10 States, or tax officials of other states, pursuant to an 11 agreement between the commissioner of insurance and any of the 12 following: 13 (1) The secretary of the treasury of the United States, or 14 the secretarys delegate. 15 (2) The commissioner of insurance of another state. 16 Sec. 10. Section 432.1A, Code 2025, is amended by adding the 17 following new subsection: 18 NEW SUBSECTION . 8. a. A tax return filed under this 19 section shall not be subject to inspection under chapter 22. 20 It shall be unlawful for any present or former officer or 21 employee of the state to willfully or recklessly publish any 22 tax return filed under this section. A person who violates 23 this paragraph shall be guilty of a serious misdemeanor and, in 24 addition to any other penalty, shall be dismissed from state 25 office or discharged from state employment. 26 b. This section shall not be construed to prohibit the 27 department of revenue from turning over information and 28 tax returns in the departments possession pursuant to this 29 subsection to duly authorized officers of the United States, or 30 tax officials of other states, pursuant to an agreement between 31 the commissioner of insurance and any of the following: 32 (1) The secretary of the treasury of the United States, or 33 the secretarys delegate. 34 (2) The commissioner of insurance of another state. 35 -6- LSB 1437HZ (2) 91 nls/ko 6/ 41
H.F. 986 DIVISION III 1 HEALTH INSURANCE RATE INCREASES PUBLIC HEARINGS 2 Sec. 11. Section 505.19, subsection 2, Code 2025, is amended 3 to read as follows: 4 2. The commissioner shall may hold a public hearing 5 at the time a carrier files for proposed health insurance 6 rate increases exceeding the average annual health spending 7 growth rate as provided in subsection 1 , prior to approval or 8 disapproval of the proposed rate increases for that carrier by 9 the commissioner. 10 DIVISION IV 11 HEALTH SAVINGS ACCOUNTS AND QUALIFIED HIGH-DEDUCTIBLE HEALTH 12 PLANS COST-SHARING 13 Sec. 12. NEW SECTION . 509.3B Health savings accounts and 14 qualified high-deductible health plans cost-sharing. 15 If a copayment, coinsurance, or deductible paid as 16 cost-sharing by an enrollee under this chapter may result in 17 the enrollee becoming ineligible for a health savings account 18 associated with the enrollees qualified high-deductible 19 health plan under section 223 of the Internal Revenue Code, 20 the cost-sharing shall apply only to the enrollees qualified 21 high-deductible health plan after the enrollee satisfies the 22 enrollees minimum deductible, except for items or services 23 determined to be preventive care under section 223(c)(2)(C) of 24 the Internal Revenue Code. 25 Sec. 13. NEW SECTION . 514A.3C Health savings accounts and 26 qualified high-deductible health plans cost-sharing. 27 If a copayment, coinsurance, or deductible paid as 28 cost-sharing by an enrollee under this chapter may result in 29 the enrollee becoming ineligible for a health savings account 30 associated with the enrollees qualified high-deductible 31 health plan under section 223 of the Internal Revenue Code, 32 the cost-sharing shall apply only to the enrollees qualified 33 high-deductible health plan after the enrollee satisfies the 34 enrollees minimum deductible, except for items or services 35 -7- LSB 1437HZ (2) 91 nls/ko 7/ 41
H.F. 986 determined to be preventive care under section 223(c)(2)(C) of 1 the Internal Revenue Code. 2 DIVISION V 3 INSURANCE COMPANY WITHDRAWAL REQUIREMENTS 4 Sec. 14. NEW SECTION . 505.36 Insurer withdrawal 5 requirements. 6 1. Definitions. As used in this section, unless the context 7 otherwise requires: 8 a. Commissioner means the commissioner of insurance. 9 b. Insurer means an insurance company, an affiliate of 10 an insurance company, or other legal entity authorized to 11 engage in the business of insurance in this state, including 12 a reciprocal exchange, an interinsurance exchange, and a 13 lloyds plan. Insurer does not include an eligible surplus 14 lines insurer under chapter 515I, a county mutual insurance 15 association under chapter 518, a state mutual insurance 16 association under chapter 518A, an entity offering health 17 coverage, or an entity offering accident and sickness coverage. 18 2. Exemption. This section shall not apply to a transfer of 19 business from one insurer to another insurer if the insurer to 20 whom the business is being transferred is all of the following: 21 a. Within the same insurance holding company system as the 22 insurer from whom business is being transferred. 23 b. Authorized to engage in the business of insurance in this 24 state. 25 c. Not a reciprocal or interinsurance exchange, a lloyds 26 plan, a state mutual insurance association, or a county mutual 27 insurance association. 28 3. Withdrawal plan required. 29 a. An insurer shall file a withdrawal plan with the 30 commissioner in any of the following circumstances: 31 (1) The insurer intends to reduce the insurers total annual 32 premium volume in the state by fifty percent or more. 33 (2) The insurer intends to reduce the insurers total annual 34 premium in the state in a line of insurance by seventy-five 35 -8- LSB 1437HZ (2) 91 nls/ko 8/ 41
H.F. 986 percent or more. 1 (3) The insurer intends to reduce the insurers total annual 2 premium volume in the state in a line of private passenger 3 automobile insurance, homeowners insurance, or dwelling 4 property insurance by fifty percent or more. 5 b. If an insurer intends to restrict writing new business 6 in the state, but not to an extent that requires the insurer 7 to file a plan for orderly withdrawal under paragraph a , the 8 insurer shall provide prior written notice to the commissioner 9 of the insurers intent to restrict writing new business in the 10 state. 11 4. Withdrawal plan. 12 a. A withdrawal plan filed under this section shall provide 13 for all of the following: 14 (1) The insurer fulfilling all contractual obligations. 15 (2) The insurer providing service to all policyholders and 16 claimants. 17 (3) The insurer meeting all statutory obligations, 18 including but not limited to payment of assessments to the 19 guaranty fund and participation in an assigned risk plan. 20 b. A withdrawal plan filed pursuant to this section shall, 21 at a minimum, include all of the following: 22 (1) The date on which the insurer proposes to commence 23 execution of the withdrawal plan, and the date on which 24 execution of the withdrawal plan will be completed. 25 (2) The reason for withdrawal for each line of insurance. 26 (3) Each policy form by number, and all of the following 27 information: 28 (a) The total number of policyholders. 29 (b) The total amount of premiums impacted for each line of 30 insurance. 31 (4) The total number of insurance producers impacted for 32 each line of insurance. 33 (5) A copy of the notification the insurer will provide to 34 each impacted insurance producer. 35 -9- LSB 1437HZ (2) 91 nls/ko 9/ 41
H.F. 986 (6) A copy of the notification or nonrenewal the insurer 1 will provide to each impacted policyholder. 2 (7) Details regarding the insurers fulfillment of 3 contractual obligations to the insurers policyholders during 4 the withdrawal. 5 (8) Whether replacement coverage will be provided to a 6 policyholder and, if so, the insurer shall provide all of the 7 following: 8 (a) The insurers relationship with the replacing insurer. 9 (b) The underwriting requirements and rates that will be 10 used to underwrite the policyholder. 11 (9) An estimate of the percentage of the Iowa market 12 affected by withdrawal. 13 (10) Any third-party contracts that provide for continuity 14 of coverage for policyholders. 15 (11) A list of the lines of insurance that the insurer will 16 continue to offer in the state. 17 5. Commissioner approval. 18 a. Except as provided in paragraph b , the commissioner 19 shall approve a withdrawal plan that has been determined to 20 meet all of the following requirements: 21 (1) The withdrawal plan provides a minimum of one hundred 22 eighty calendar days notice to the commissioner. 23 (2) The withdrawal plan includes notice to policyholders as 24 required by chapter 515. 25 (3) The withdrawal plan complies with subsection 4. 26 b. If the commissioner finds that a withdrawal plan does 27 not comply with paragraph a , the commissioner may modify, 28 restrict, limit, or deny the withdrawal plan. 29 c. An insurer may request a hearing within thirty calendar 30 days of the commissioners decision to modify, restrict, limit, 31 or deny the insurers withdrawal plan. A hearing under this 32 paragraph shall be held within sixty calendar days of the 33 insurers request unless a later date is agreed to by the 34 insurer and the commissioner, or permitted by the commissioner 35 -10- LSB 1437HZ (2) 91 nls/ko 10/ 41
H.F. 986 for good cause. 1 6. Resumption of writing insurance after withdrawal. An 2 insurer that withdraws from writing all lines of insurance 3 in the state shall not, without prior approval of the 4 commissioner, resume writing insurance in the state for a 5 minimum of five years from the date of completion of the 6 insurers withdrawal. 7 7. Remedies. A violation of this section shall constitute 8 an unfair method of competition and unfair or deceptive act or 9 practice under section 507B.4. 10 8. Rules. The commissioner may adopt rules pursuant 11 to chapter 17A as necessary to administer and enforce this 12 section. 13 Sec. 15. Section 507B.4, subsection 3, Code 2025, is amended 14 by adding the following new paragraph: 15 NEW PARAGRAPH . v. Improper withdrawal of an 16 insurer. Failure of an insurer to comply with section 17 505.36. As used in this paragraph, insurer means the same as 18 defined in section 505.36, subsection 1. 19 DIVISION VI 20 REPLACEMENT COST, ACTUAL CASH VALUE, AND LINE OF SIGHT 21 Sec. 16. NEW SECTION . 515.116 Line of sight. 22 1. Definitions. As used in this section, unless the context 23 otherwise requires: 24 a. Actual cash value means the replacement cost of 25 property at the time of loss, less depreciation, if any. 26 b. Line of sight means any location a reasonable person 27 would stand, on the ground or any floor of an insureds damaged 28 structure, to view, without obstruction or the use of aerial 29 tools or technology, the damaged area of the interior or 30 exterior of the damaged structure from a reasonable distance. 31 Line of sight is not limited to a view of the insureds 32 damaged structure from the location at which the damage 33 occurred. 34 c. Reasonable distance means, for exterior repair or 35 -11- LSB 1437HZ (2) 91 nls/ko 11/ 41
H.F. 986 replacement, a vantage point approximately thirty feet from 1 where the repair or replacement is to occur. A reasonable 2 distance for interior repair or replacement means a vantage 3 point approximately five feet from where the repair or 4 replacement is to occur. Based on a particular property, 5 reasonable distance may be determined to be greater than or 6 less than thirty feet for exterior repair, or greater than or 7 less than five feet for interior repair. 8 d. Reasonably similar appearance means if, within a line 9 of sight, a person viewing the repaired or replaced property 10 would find the property to resemble the propertys preloss 11 condition. Whether a replacement results in a reasonably 12 similar appearance is a fact-specific determination made 13 on a case-by-case basis considering the totality of the 14 circumstances. 15 e. Reasonably similar product means a product of like 16 kind, quality, color, and size. Reasonably similar product 17 does not mean an exact match. 18 2. Replacement cost. For an insurance policy providing 19 for the adjustment and settlement of first-party losses based 20 on replacement cost, unless the insurance policy, a rider, or 21 an endorsement specifically provides otherwise, all of the 22 following shall apply: 23 a. When a loss requires repair or replacement of a product 24 or part, consequential physical damage incurred during the 25 repair or replacement of the product or part, not otherwise 26 excluded by the policy, shall be included in the calculation of 27 loss. The insured shall not be required to pay for betterment 28 or other costs, except for any applicable deductible. 29 b. When a loss requires replacement of a product and the 30 product to be replaced remains available for purchase, the 31 identical product shall be used to repair or replace the 32 damaged product, even if the undamaged existing product shows 33 discoloration due to age or normal wear and tear. If the 34 identical product is not available for purchase, the insurer 35 -12- LSB 1437HZ (2) 91 nls/ko 12/ 41
H.F. 986 shall use a reasonably similar product to achieve a reasonably 1 similar appearance. 2 3. Actual cash value. For an insurance policy providing 3 for adjustment and settlement of first-party losses based on 4 actual cash value, unless the insurance policy, a rider, or 5 an endorsement specifically provides otherwise, all of the 6 following shall apply: 7 a. For residential fire and extended coverage, the insurer 8 shall determine the actual cash value. The insurer shall 9 provide a copy of the claim file worksheet detailing all 10 deductions for depreciation. Upon request by the insured, the 11 insurer shall provide a detailed written explanation of the 12 manner in which depreciation was calculated. 13 b. Where the insureds interest is limited because 14 damaged property has nominal or no economic value, or a value 15 disproportionate to replacement cost less depreciation, a 16 determination of actual cash value shall not be required. At 17 the request of the insured, the insurer shall provide a written 18 explanation of the basis for limiting the amount of recovery, 19 the amount payable under the policy, and the manner in which 20 actual cash value was determined. 21 DIVISION VII 22 SERVICE COMPANIES, SERVICE CONTRACTS, AND LICENSES 23 Sec. 17. Section 507B.4, subsection 3, Code 2025, is amended 24 by adding the following new paragraph: 25 NEW PARAGRAPH . v. Service contracts. Failure of a person 26 in the business of service contracts to comply with chapter 27 523C. 28 Sec. 18. Section 523C.1, Code 2025, is amended by adding the 29 following new subsections: 30 NEW SUBSECTION . 1A. Communicating in a verifiable manner 31 means communication by in-person delivery, email, or, if there 32 is an auditable record of the communication, by telephone. 33 NEW SUBSECTION . 6A. Person means an individual or a 34 business entity. 35 -13- LSB 1437HZ (2) 91 nls/ko 13/ 41
H.F. 986 NEW SUBSECTION . 12A. Service contract holder means the 1 original purchaser of a service contract or the successor in 2 interest or transferee entitled to services under the service 3 contract. 4 NEW SUBSECTION . 12B. Substitute part means a part that is 5 not issued by the original part manufacturer, including but not 6 limited to a remanufactured part, an aftermarket part, and a 7 part obtained from a salvage yard. 8 NEW SUBSECTION . 12C. Support services means a person that 9 provides services that support, or a person that works under 10 the direction of, a licensed service company in connection with 11 the issuance, offer for sale, sale, or administration of a 12 service contract in this state, including but not limited to a 13 person that provides marketing, administrative, or technical 14 support to a service company. 15 Sec. 19. Section 523C.1, subsection 4, Code 2025, is amended 16 to read as follows: 17 4. Motor vehicle means any vehicle that is self-propelled 18 vehicle and subject to registration under chapter 321 or 19 chapter 321I . 20 Sec. 20. Section 523C.2, Code 2025, is amended by striking 21 the section and inserting in lieu thereof the following: 22 523C.2 License required. 23 1. A person that shall be contractually obligated to the 24 service contract holder under the terms of the service contract 25 shall not directly or indirectly issue, offer for sale, or 26 sell a motor vehicle service contract or residential service 27 contract in this state unless the person is a licensed service 28 company. 29 2. This chapter shall not apply to any person that provides 30 support services. A service company that utilizes support 31 services shall ensure the support services compliance with the 32 issuance, offer for sale, or sale of a service contract under 33 this chapter. 34 3. A service company shall maintain a license for the 35 -14- LSB 1437HZ (2) 91 nls/ko 14/ 41
H.F. 986 duration of time that the service company is contractually 1 obligated to a service contract holder under the terms of a 2 service contract. 3 4. A service company shall report to the commissioner 4 within thirty calendar days any material change to the 5 information submitted by the service company in the service 6 companys initial license application, or license renewal 7 application, including a change in the service companys 8 contact information, ownership, officers or directors directly 9 responsible for the providers service contract business, 10 or any other change that substantially affects the service 11 companys operations in the state. 12 5. A service company shall report to the commissioner any 13 administrative action taken against the service company in 14 another jurisdiction within thirty calendar days of the final 15 disposition. The report shall include a copy of the order, 16 consent to the order, and other relevant legal documents. 17 6. Within thirty calendar days of the initial pretrial 18 hearing date, a service company shall report to the 19 commissioner a criminal prosecution in any jurisdiction of an 20 owner with more than a ten percent ownership stake, an officer, 21 or a director directly responsible for the service contract 22 business of the service company, for an offense involving 23 dishonesty or a false statement including but not limited 24 to fraud, theft, misappropriation of funds, falsification 25 of documents, deceptive acts or practices, or other related 26 offenses. The report shall include a copy of the initial 27 complaint filed, the order resulting from the hearing, and any 28 other relevant legal documents. 29 Sec. 21. Section 523C.3, Code 2025, is amended by striking 30 the section and inserting in lieu thereof the following: 31 523C.3 Application for license. 32 1. Application for a license as a service company 33 shall be filed with the commissioner on a form approved 34 by the commissioner and shall include all of the following 35 -15- LSB 1437HZ (2) 91 nls/ko 15/ 41
H.F. 986 information: 1 a. The name and principal address of the applicant. 2 b. The state of incorporation of the applicant. 3 c. The name and address of the applicants registered agent 4 for service of process in Iowa. 5 d. The legal name of all of the following: 6 (1) Each owner of the service company that has a greater 7 than ten percent ownership stake in the service company. 8 (2) Each officer of the service company. 9 (3) Each director directly responsible for the business of 10 the service company. 11 e. A certificate of good standing for the applicant issued 12 by the secretary of state and dated not more than thirty 13 calendar days from the date of the application. 14 f. Evidence of compliance with section 523C.5. 15 g. A copy of each motor vehicle service contract form to be 16 used, issued, or offered for sale in this state by the service 17 company. 18 h. A copy of each residential service contract form to be 19 used, issued, or offered for sale in this state by the service 20 company. 21 i. A national association of insurance commissioners 22 biographical affidavit and the verification of the biographical 23 affidavit for the chief executive officer and chief financial 24 officer of the service company, or for the individuals in 25 the equivalent positions. The service company shall use a 26 third-party vendor from a list of vendors approved by the 27 commissioner to verify the biographical affidavits. The 28 service company shall pay all costs associated with the 29 required verifications. 30 j. A list of any disciplinary actions taken against the 31 service company, or any of the service companys owners, 32 officers, or directors directly responsible for the providers 33 service contract business, in the immediately preceding ten 34 years by a regulatory agency or state attorney general in any 35 -16- LSB 1437HZ (2) 91 nls/ko 16/ 41
H.F. 986 jurisdiction. 1 2. The application shall be accompanied by all of the 2 following: 3 a. A license fee in the amount of five hundred dollars. 4 b. A fee in the amount of thirty-five dollars for each motor 5 vehicle service contract form provided pursuant to subsection 6 1, paragraph g . 7 3. If the application for a service company license contains 8 the information under subsection 1, is accompanied by the fees 9 under subsection 2, and the commissioner has not denied the 10 application pursuant to section 523C.9, the commissioner shall 11 issue the license to the applicant. 12 4. Fees collected under this section shall be deposited 13 into the service company oversight fund as provided in section 14 523C.24. 15 Sec. 22. Section 523C.4, Code 2025, is amended by striking 16 the section and inserting in lieu thereof the following: 17 523C.4 License expiration and renewal. 18 1. A license issued under this chapter shall be valid for a 19 period of one year. A license that is not renewed prior to the 20 expiration date shall be deemed expired. Prior to a license 21 expiration date, and if a renewal application was submitted at 22 least fourteen calendar days prior to the license expiration 23 date, the commissioner may extend the renewal period for an 24 additional thirty calendar days. 25 2. An application for license renewal shall include the 26 information required for an initial license as described in 27 section 523C.3, subsection 1, paragraphs a through f , 28 and a list of each service contract form the service company 29 continues to use, offer for sale, or issue in the state, 30 including the service contract form name, number, and the date 31 the form was last revised. 32 3. The license renewal application shall be accompanied by 33 all of the following: 34 a. A license renewal fee in the amount of two hundred 35 -17- LSB 1437HZ (2) 91 nls/ko 17/ 41
H.F. 986 dollars. 1 b. A fee in the amount of three percent of the aggregate 2 amount of payments the service company received for the sale 3 or issuance of residential service contracts in this state 4 during the period beginning on the date the service companys 5 license was issued until the date of the service companys 6 renewal filing, provided that such fee shall be no less than 7 one hundred dollars and no greater than fifty thousand dollars. 8 c. A fee in the amount of thirty-five dollars for each motor 9 vehicle service contract form filed with the commissioner that 10 the service company continues to use, offer for sale, or issue 11 in the state. 12 d. The number of motor vehicle service contracts and the 13 number of residential service contracts issued during the 14 immediately preceding calendar year by the service company in 15 this state. 16 e. The number of motor vehicle service contracts and the 17 number of residential service contracts canceled during the 18 immediately preceding calendar year by the service company in 19 this state. 20 f. The total dollar amount of refunds issued to service 21 contract holders by the service company during the immediately 22 preceding calendar year for canceled motor vehicle service 23 contracts in this state, and the total dollar amount of refunds 24 issued to service contract holders by the service company 25 during the immediately preceding calendar year for canceled 26 residential service contracts in this state. 27 g. The total dollar amount of motor vehicle service contract 28 fees, and the total dollar amount of residential service 29 contract fees, collected during the immediately preceding 30 calendar year by the service company for contracts sold in this 31 state. 32 h. The number of claims filed with the service company 33 for motor vehicle service contracts in this state during 34 the immediately preceding calendar year, and the number of 35 -18- LSB 1437HZ (2) 91 nls/ko 18/ 41
H.F. 986 claims filed with the service company for residential service 1 contracts in this state during the immediately preceding 2 calendar year. 3 i. The total dollar amount of claims paid by the service 4 company for motor vehicle service contracts sold by the service 5 company in this state during the immediately preceding calendar 6 year, and the total dollar amount of claims paid by the service 7 company for residential service contracts sold by the service 8 company in this state during the immediately preceding calendar 9 year. 10 j. The total number of claims during the immediately 11 preceding calendar year for motor vehicle service contracts 12 in this state that did not result in repair, replacement, 13 payment, or other thing of value to the service contract 14 holder by the service company, and the total number of claims 15 during the immediately preceding calendar year for residential 16 service contracts in this state that did not result in repair, 17 replacement, payment, or other thing of value to the service 18 contract holder by the service company. 19 k. The total number of written complaints regarding motor 20 vehicle service contracts received by the service company 21 during the immediately preceding calendar year, and the 22 total number of written complaints regarding residential 23 service contracts received by the service company during the 24 immediately preceding calendar year, including complaints 25 received directly from a consumer, indirectly on behalf of a 26 consumer from a third party other than a regulatory agency, and 27 from a regulatory agency. 28 l. The number of lawsuits filed by a third party or a 29 regulatory agency, against the service company during the 30 immediately preceding calendar year regarding service contracts 31 issued, offered for sale, or sold by the service company. 32 4. If the license renewal application complies with this 33 section, and the commissioner has not refused to renew the 34 license pursuant to section 523C.9, the commissioner shall 35 -19- LSB 1437HZ (2) 91 nls/ko 19/ 41
H.F. 986 renew the license. If the commissioner refuses renewal of a 1 license pursuant to section 523C.9, the refusal shall be in 2 writing setting forth the grounds for the refusal. 3 5. If a service company submits a license renewal 4 application after the license has expired, the service company 5 shall pay a reinstatement fee of eight hundred dollars, and 6 applicable fees pursuant to subsection 3. 7 6. a. A service company whose license has expired, and is 8 not within an additional thirty-day extension period granted 9 by the commissioner pursuant to section 523C.4, subsection 1, 10 shall not offer, extend, or renew a service contract until the 11 service companys license has been renewed, or the service 12 company has been issued a new license. 13 b. If, at the time a service contract is issued or sold in 14 this state, the service company has an expired license that is 15 not within an additional thirty-day extension period granted 16 by the commissioner pursuant to section 523C.4, subsection 1, 17 the service contract may be canceled at the discretion of the 18 service contract holder. If a service contract holder chooses 19 to cancel a service contract, the full purchase price of the 20 service contract, less any claims paid, shall be refunded to 21 the service contract holder within thirty calendar days. A ten 22 percent penalty shall be added each month to the refund if the 23 refund is not paid to the service contract holder within the 24 thirty calendar days. 25 Sec. 23. Section 523C.7, Code 2025, is amended by striking 26 the section and inserting in lieu thereof the following: 27 523C.7 Disclosure to service contract holders contract 28 form required provisions. 29 1. A service contract shall not be issued, sold, or offered 30 for sale in this state unless the service company does all of 31 the following: 32 a. Provides a receipt for the purchase of the service 33 contract to the service contract holder. 34 b. Provides a complete sample copy of the service contract 35 -20- LSB 1437HZ (2) 91 nls/ko 20/ 41
H.F. 986 to the consumer prior to purchase. A service company may 1 comply with this paragraph by providing the consumer with a 2 complete electronic sample copy of the service contract, or 3 directing the consumer to a complete sample copy of the service 4 contract at an internet site. A paper copy of the sample 5 service contract shall be provided upon the request of the 6 consumer at the expense of the service company. 7 c. Provides a fully executed paper or electronic copy of 8 the service contract to the service contract holder within ten 9 calendar days of the date the service contract holder purchased 10 the service contract. A paper copy of the executed service 11 contract shall be provided to the service contract holder upon 12 request of the service contract holder at the expense of the 13 service company. 14 2. A service contract issued, sold, or offered for sale 15 in the state shall comply with all of the following, as 16 applicable: 17 a. A service contract shall be written in clear, 18 understandable language in at least ten point type. 19 b. (1) A service contract insured by a reimbursement 20 insurance policy as provided in section 523C.5, subsection 1, 21 shall include a statement in substantially the following form: 22 Obligations of the service company under this service contract 23 are guaranteed under a reimbursement insurance policy. If the 24 service company fails to pay or provide service on a claim 25 within sixty days after proof of loss has been filed with 26 the service company, the service contract holder is entitled 27 to make a claim directly against the reimbursement insurance 28 policy. 29 (2) A service contract insured by a reimbursement insurance 30 policy shall conspicuously state the name and address of the 31 issuer of the reimbursement insurance policy for that service 32 contract. A claim against a reimbursement insurance policy 33 shall also include a claim for return of any refund due in 34 accordance with paragraphs m and n . 35 -21- LSB 1437HZ (2) 91 nls/ko 21/ 41
H.F. 986 c. A service contract not insured under a reimbursement 1 insurance policy shall contain a statement in substantially the 2 following form: 3 Obligations of the service company under this service contract 4 are backed by the full faith and credit of the service company 5 and are not guaranteed under a reimbursement insurance policy. 6 d. A service contract shall state the name and address of 7 the service company obligated to perform services under the 8 contract, and shall conspicuously identify the service company, 9 any third-party administrator, and the service contract holder 10 to the extent that the name and address of the service contract 11 holder has been furnished. The identities of such parties 12 shall not be required to be printed on the contract in advance 13 and may be added to the contract at the time of sale. 14 e. A service contract shall clearly state the total purchase 15 price of the service contract and the terms under which the 16 service contract is sold. The total purchase price shall not 17 be required to be printed on the contract in advance and may be 18 added to the contract at the time of sale. 19 f. If prior approval of repair work is required, a service 20 contract shall conspicuously describe the procedure for 21 obtaining prior approval and for making a claim, including a 22 toll-free telephone number for claim service, and the procedure 23 for obtaining emergency repairs performed outside of normal 24 business hours. 25 g. A service contract shall clearly state any waiting period 26 applicable to coverage under the service contract, and the date 27 on which coverage begins. 28 h. A service contract shall clearly state the existence of 29 any deductible amount. 30 i. A service contract shall specify the merchandise 31 or services, or both, to be provided and any limitations, 32 exceptions, or exclusions. 33 j. A service contract shall clearly state the conditions on 34 which the use of substitute parts or services will be allowed. 35 -22- LSB 1437HZ (2) 91 nls/ko 22/ 41
H.F. 986 Such conditions shall comply with applicable state and federal 1 laws. 2 k. A service contract shall clearly state any terms, 3 restrictions, or conditions governing the transferability of 4 the service contract. 5 l. A service contract shall clearly state the instructions 6 for cancellation of the service contract by the service 7 contract holder. Cancellation instructions shall include all 8 necessary information for a service contract holder to complete 9 a cancellation. Cancellation instructions shall include the 10 phone number, email address, or mailing address necessary for 11 the cancellation of the service contract, as well as any other 12 information that the service contract holder must use to cancel 13 the contract. A service company shall accept cancellation of a 14 service contract from a service contract holder by telephone, 15 email, or mail, or any other cost-effective and accessible 16 method of communication. The method of cancellation utilized 17 by a service company for the cancellation of a service contract 18 shall be as accessible as the method utilized by the service 19 company for the service contract holder to enter into the 20 service contract. 21 m. A service contract shall clearly state the terms and 22 conditions governing the cancellation of the contract prior 23 to the termination or expiration date of the contract by the 24 service company or the service contract holder. If the service 25 company cancels the contract, the service company shall mail a 26 written notice of termination to the service contract holder at 27 least fifteen calendar days before the date of the termination. 28 Prior notice of cancellation by the service company shall not 29 be required if the reason for cancellation is nonpayment of the 30 purchase price, a material misrepresentation by the service 31 contract holder to the service company or the support services 32 for the service company, or a substantial breach of duty by the 33 service contract holder relating to the covered product or use 34 of the covered product. The notice of cancellation shall state 35 -23- LSB 1437HZ (2) 91 nls/ko 23/ 41
H.F. 986 the effective date of the cancellation and the reason for the 1 cancellation. If a service contract is canceled by the service 2 company for any reason other than nonpayment of the purchase 3 price, the service company shall refund the service contract 4 holder in an amount equal to one hundred percent of the 5 unearned purchase price paid, calculated on a pro rata basis 6 based upon elapsed time or mileage, less any claims paid. The 7 service company may also charge a reasonable administrative fee 8 in an amount no greater than ten percent of the total purchase 9 price. A ten percent penalty shall be added each month to the 10 refund if the refund is not paid to the service contract holder 11 within thirty calendar days. 12 n. (1) A service contract shall permit the original 13 service contract holder who purchased the contract to cancel 14 the service contract within at least thirty calendar days of 15 the effective date of the service contract, provided no claims 16 have been paid under the service contract, or within a longer 17 period of time as permitted under the service contract. If 18 a claim has not been paid under the service contract prior 19 to cancellation by the service contract holder, the service 20 contract is void and the full purchase price of the service 21 contract shall be refunded to the service contract holder. A 22 ten percent penalty shall be added each month to a refund if 23 the refund is not paid to the service contract holder within 24 thirty calendar days, unless the service contract holder fails 25 to provide the information required by the service contract to 26 complete the cancellation. 27 (2) If the service contract holder cancels the service 28 contract in violation of subparagraph (1), the service company 29 shall refund the service contract holder an amount equal to one 30 hundred percent of the unearned purchase price paid, calculated 31 on a pro rata basis based upon elapsed time or mileage, 32 less any claims paid. The service company may also charge a 33 reasonable administrative fee in an amount no greater than ten 34 percent of the total purchase price. A ten percent penalty 35 -24- LSB 1437HZ (2) 91 nls/ko 24/ 41
H.F. 986 shall be added each month to a refund if the refund is not paid 1 to the service contract holder within thirty calendar days of 2 the service contract cancellation request, unless the service 3 contract holder fails to provide the information required in 4 the service contract to complete the cancellation. 5 o. A service contract shall set forth all obligations 6 and duties of the service contract holder, including but not 7 limited to the duty to protect against any further damage, and 8 the obligation to follow an owners manual and to perform, or 9 have performed, all required service or maintenance. 10 p. A service contract shall clearly state if the contract 11 covers or excludes consequential damages and preexisting 12 conditions, if applicable. A service contract may, but is not 13 required to, cover damage resulting from rust, corrosion, or 14 damage caused by a part or system not covered under the service 15 contract. 16 q. A service contract shall clearly state the service call 17 fee, if any, charged to the service contract holder. 18 r. A service contract shall state the name and address of 19 the commissioner, the current toll-free telephone number of the 20 division, and a statement that a consumer may file a complaint 21 with the division, including by filing a complaint on the 22 divisions internet site. 23 s. If a residential service contract relates to heating, 24 cooling, plumbing, or electrical service, and the claim being 25 made by the service contract holder is essential to the health 26 and safety of the service contract holder or, if applicable, 27 the service contract holders family, the service company shall 28 ensure all of the following: 29 (1) Repair or replacement of the essential good commences 30 within forty-eight hours after the report of the claim, and is 31 completed as soon as reasonably practicable. 32 (2) If the service company determines that the service 33 company cannot complete a repair, replacement, or service 34 within three calendar days after the report of the claim, 35 -25- LSB 1437HZ (2) 91 nls/ko 25/ 41
H.F. 986 the service contract holder may seek an outside provider to 1 complete the repair, replacement, or service. The service 2 company shall cover reasonable costs associated with a repair, 3 replacement, or service completed by an outside service 4 provider up to the maximum dollar amount covered by the service 5 contract. 6 (3) Notice is provided to the service contract holder if a 7 repair cannot practicably be completed within three calendar 8 days after the report of the claim. The service company shall 9 provide a status report to the service contract holder by 10 communicating in a verifiable manner as soon as practicable, 11 but no later than three calendar days after the date of the 12 report of the claim. The status report must include all of the 13 following: 14 (a) A list of all required repairs, replacements, or 15 services and the estimated cost to the service contract holder. 16 (b) The primary reason the required repair, replacement, or 17 service will take longer than three calendar days, including 18 the status of all parts required for the repair, replacement, 19 or service. 20 (c) The current estimated length of time to complete the 21 repair, replacement, or service. 22 (d) The telephone number of the service company in the 23 event the service contract holder or the commissioner wants 24 to make an inquiry concerning the claim, and a commitment by 25 the service company to respond to an inquiry no later than one 26 business day after the date the inquiry is received. 27 (e) A statement that if the service contract holder is not 28 satisfied with the manner in which the service company handles 29 the claim under the terms of service contract, the service 30 contract holder may file a complaint with the division pursuant 31 to paragraph r . 32 (f) A notice to the service contract holder that the 33 service contract holder may seek an outside service provider 34 to complete the repair, replacement, or service, and that the 35 -26- LSB 1437HZ (2) 91 nls/ko 26/ 41
H.F. 986 service company will cover reasonable costs associated with a 1 repair, replacement, or service completed by an outside service 2 provider up to the maximum dollar amount covered by the service 3 contract. 4 Sec. 24. NEW SECTION . 523C.8 Service contract forms 5 fees. 6 1. A service company shall file with the division an 7 accurate copy of each service contract form prior to using the 8 service contract form for the sale of a service contract in 9 this state. 10 2. At the time of filing each motor vehicle service contract 11 form with the division a service company shall pay a fee in the 12 amount of thirty-five dollars for each motor vehicle service 13 contract form. 14 3. Notwithstanding section 523C.7, a service company may 15 continue to use a service contract form that is noncompliant 16 with this chapter until June 30, 2026, provided no changes are 17 made to the service contract form and the service contract form 18 was filed with the division in 2024. 19 Sec. 25. Section 523C.9, Code 2025, is amended by striking 20 the section and inserting in lieu thereof the following: 21 523C.9 License denial, nonrenewal, suspension, or revocation. 22 1. The commissioner may suspend or revoke the license of, 23 deny an application for a license from, or refuse to renew the 24 license of, a service company, or may levy a civil penalty as 25 provided in section 523C.13 against a service company, for any 26 of the following reasons: 27 a. The service company violated this chapter, a lawful 28 order, regulation, or subpoena. 29 b. The service company failed to pay a final judgment 30 rendered against the service company in this state within sixty 31 calendar days after the date the judgment became final. 32 c. The service company, without just cause, refused 33 to perform, or negligently or incompetently performed, a 34 service required to be performed under the service companys 35 -27- LSB 1437HZ (2) 91 nls/ko 27/ 41
H.F. 986 service contracts and the refusal, or negligent or incompetent 1 performance, has occurred with such frequency as to indicate 2 the general business practices of the service company are 3 negligent or incompetent, as determined by the commissioner. 4 d. The service company violated section 523C.13. 5 e. The service company failed to demonstrate financial 6 responsibility pursuant to section 523C.5, if applicable. 7 f. The service company failed to maintain a corporate 8 certificate of good standing with the secretary of state. 9 g. The service company provided incorrect, misleading, 10 incomplete, or materially untrue information in the service 11 companys license application. 12 h. The service company obtained or attempted to obtain a 13 license through misrepresentation or fraud. 14 i. The service company improperly withheld, misappropriated, 15 or converted any money or property received in the course of 16 business as a service company. 17 j. The service company intentionally misrepresented the 18 terms of an actual or proposed service contract. 19 k. Within the immediately preceding ten years, an owner, 20 officer, or director of the service company has been convicted 21 of a criminal offense involving any aspect of a business 22 involving securities, commodities, investments, franchises, 23 insurance, banking, or finance. 24 l. An owner, officer, or director of the service company 25 has been convicted of a criminal offense involving dishonesty 26 or a false statement, including but not limited to fraud, 27 theft, misappropriation of funds, falsification of documents, 28 deceptive acts or practices, or other related offenses. 29 m. The service company admitted to committing, or was found 30 to have committed, any unfair trade practice or fraud. 31 n. The service company used fraudulent, coercive, 32 or dishonest practices, or demonstrated incompetence, 33 untrustworthiness, or financial irresponsibility, in conducting 34 business in this state or any other state. 35 -28- LSB 1437HZ (2) 91 nls/ko 28/ 41
H.F. 986 o. The service company had a service company license or its 1 equivalent, denied, suspended, or revoked in any other state, 2 province, district, or territory. 3 p. The service company failed, or refused, to cooperate in 4 an investigation conducted by the commissioner of insurance. 5 2. If the commissioner suspends or revokes the license of, 6 denies the application for licensure of, or refuses to renew 7 the license of, a service company pursuant to this section, the 8 commissioner shall notify the service company, in writing, and 9 provide the reason for the suspension, revocation, denial, or 10 nonrenewal. The licensee or applicant may request a hearing 11 on the suspension, revocation, nonrenewal, or denial, and a 12 hearing shall be conducted according to section 507B.6. 13 Sec. 26. Section 523C.12, Code 2025, is amended to read as 14 follows: 15 523C.12 Optional examination Examinations . 16 The commissioner , or a the commissioners designee , of 17 the commissioner may make an examination of the books and 18 records of a service company, including records involving 19 communications with service contract holders, copies of 20 contracts and records of claims and expenditures, and 21 verify its records related to the service companys assets, 22 liabilities, and reserves. The actual costs of the examination 23 shall be borne by the service company. The costs of an 24 examination under this section shall not exceed an amount equal 25 to ten percent of the service companys reported net income 26 associated with doing business in the state in the previous 27 immediately preceding fiscal year. 28 Sec. 27. Section 523C.13, Code 2025, is amended by striking 29 the section and inserting in lieu thereof the following: 30 523C.13 Prohibited acts or practices penalty violations 31 contracts voided. 32 1. A service company, or the service companys support 33 services, that offers service contracts for sale in this state, 34 shall not, directly or indirectly, represent in any manner, 35 -29- LSB 1437HZ (2) 91 nls/ko 29/ 41
H.F. 986 whether by written solicitation or telemarketing, a false, 1 deceptive, or misleading statement with respect to any of the 2 following: 3 a. The service companys affiliation with a motor vehicle 4 manufacturer or importer. 5 b. The validity or expiration of a warranty. 6 c. A motor vehicle service contract holders coverage 7 under a motor vehicle service contract, including statements 8 suggesting that the service contract holder must purchase a 9 new service contract in order to maintain coverage under the 10 existing service contract or warranty. 11 d. Descriptions of the service contract as a policy. 12 2. A licensed service company which offers service 13 contracts for sale in this state shall not, directly or 14 indirectly, do any of the following: 15 a. Fail to complete, or fail to ensure the completion of, a 16 repair, maintenance, replacement, service, or indemnification 17 of expenses associated with a covered claim within a reasonable 18 period of time. 19 b. Create or use any advertising that does not include the 20 name of the licensed service company. 21 c. Use any method of marketing that may induce the purchase 22 of a service contract through force, fear, or threats, whether 23 explicit or implied. 24 d. Create or use any service contract marketing materials 25 that contain incorrect or misleading information. 26 e. Use, offer for sale, or issue in this state a service 27 contract form that has not been submitted as part of a license 28 application pursuant to section 523C.3, as part of a license 29 application renewal pursuant to section 523C.4, or submitted 30 to the division during the service companys current license 31 period. 32 3. The commissioner may adopt rules pursuant to 33 chapter 17A that regulate service contracts to prohibit 34 misrepresentation, false advertising, defamation, boycotts, 35 -30- LSB 1437HZ (2) 91 nls/ko 30/ 41
H.F. 986 coercion, intimidation, false statements and entries, and 1 unfair discrimination or practices. If the commissioner finds 2 that a person has violated rules adopted under this section, 3 the commissioner may order any or all of the following: 4 a. Payment of a civil penalty of not more than one thousand 5 dollars for each act or violation, not to exceed an aggregate 6 of ten thousand dollars, unless the person knew or reasonably 7 should have known the person was in violation of this section, 8 in which case the civil penalty shall be not more than five 9 thousand dollars for each act or violation, not to exceed an 10 aggregate of fifty thousand dollars in any one consecutive 11 six-month period. If the commissioner finds a violation of 12 this section was directed, encouraged, condoned, ignored, 13 or ratified by the employer of the person the commissioner 14 may assess the penalty to the employer and not the person. 15 Any civil penalties collected under this subsection shall be 16 deposited as provided in section 505.7. 17 b. Suspension or revocation of the persons license, if the 18 person knew or reasonably should have known the person was in 19 violation of this section. 20 4. A violation of this chapter shall constitute an unlawful 21 practice pursuant to section 714.16. 22 5. A person shall not engage, directly or indirectly, in any 23 unfair method of competition, or an unfair or deceptive act or 24 practice, in the business of service contracts. Any violation 25 of this chapter constitutes an unfair method of competition, 26 or an unfair or deceptive act or practice. If, after hearing, 27 the commissioner determines that a person has engaged in an 28 unfair method of competition or an unfair or deceptive act or 29 practice, the provisions of sections 507B.6 through 507B.8 30 shall apply. 31 Sec. 28. Section 523C.22, Code 2025, is amended to read as 32 follows: 33 523C.22 Claim procedures. 34 A licensed service company shall promptly provide a written 35 -31- LSB 1437HZ (2) 91 nls/ko 31/ 41
H.F. 986 explanation to the service contract holder, describing the 1 reasons for denying a claim or for the offer of a compromise 2 settlement, based on all relevant facts or legal requirements 3 and referring to applicable provisions of the service contract. 4 The written explanation shall provide instructions to the 5 service contract holder on the process for an appeal, second 6 review, arbitration, or similar provisions included in the 7 contract, as well as information on how to file a complaint 8 with the division, including the internet site on which to 9 locate the divisions complaint form. 10 Sec. 29. Section 523C.23, subsection 1, paragraph c, Code 11 2025, is amended by striking the paragraph. 12 Sec. 30. Section 523C.23, subsection 2, Code 2025, is 13 amended to read as follows: 14 2. Except as provided in section 523C.19 , a A proceeding 15 instituted under this chapter shall be conducted pursuant to 16 chapter 17A and rules adopted by the commissioner pursuant to 17 chapter 17A . 18 Sec. 31. NEW SECTION . 523C.25 Confidentiality. 19 1. Notwithstanding chapter 22, the commissioner shall 20 maintain the confidentiality of information submitted to 21 the division or obtained by the division in the course of 22 an investigation, examination, or inquiry pursuant to this 23 chapter, including all notes, work papers, or other documents. 24 Information obtained by the commissioner in the course of 25 investigating a complaint or inquiry may, at the discretion 26 of the commissioner, be provided to the service company that 27 is the subject of the complaint or inquiry and the consumer 28 who filed the complaint or inquiry, without waiving the 29 confidentiality afforded to the commissioner or to any other 30 person by this section. The commissioner may disclose or 31 release information that is otherwise confidential under this 32 subsection in the course of an administrative or judicial 33 proceeding. 34 2. Notwithstanding subsection 1, if the commissioner 35 -32- LSB 1437HZ (2) 91 nls/ko 32/ 41
H.F. 986 determines that it is necessary in the public interest, the 1 commissioner may share information with other regulatory 2 authorities or government agencies, or may publish service 3 company-related data or information collected under this 4 chapter. Such information may be redacted so that neither 5 personally identifiable information nor service company 6 identifiable information is made available. 7 Sec. 32. Section 714.16, subsection 2, Code 2025, is amended 8 by adding the following new paragraph: 9 NEW PARAGRAPH . r. It is an unlawful practice for a person 10 to violate chapter 523C. 11 Sec. 33. REPEAL. Section 523C.19, Code 2025, is repealed. 12 DIVISION VIII 13 PUBLIC UTILITY REGULATION CROSS-SUBSIDIZATION 14 Sec. 34. Section 476.78, Code 2025, is amended to read as 15 follows: 16 476.78 Cross-subsidization prohibited. 17 A public utility shall not directly or indirectly include 18 any costs or expenses attributable to providing nonutility 19 service in regulated rates or charges. Except for contracts 20 existing as of July 1, 1996, a public utility or its affiliates 21 shall not use vehicles, service tools and instruments, or 22 employees, the costs, salaries, or benefits of which are 23 recoverable in the regulated rates for electric service 24 or gas service to install, service, or repair residential 25 or commercial gas or electric heating, ventilating, or 26 air conditioning systems, or interior lighting systems and 27 fixtures; or to sell at retail heating, ventilating, air 28 conditioning, or interior lighting equipment. For the purpose 29 of this section , commercial means a place of business 30 primarily used for the storage or sale, at wholesale or retail, 31 of goods, wares, services, or merchandise. Nothing in this 32 section shall be construed to prohibit a public utility from 33 using its utility vehicles, service tools and instruments, 34 and employees to market systems, services, and equipment, to 35 -33- LSB 1437HZ (2) 91 nls/ko 33/ 41
H.F. 986 light pilots, or to eliminate a customer emergency or threat 1 to public safety. 2 EXPLANATION 3 The inclusion of this explanation does not constitute agreement with 4 the explanations substance by the members of the general assembly. 5 This bill relates to matters under the purview of the 6 department of insurance and financial services including 7 financial literacy and exploitation, tax confidentiality, 8 health insurance rates, health savings accounts, insurer 9 withdrawals, property insurance, and service contracts. 10 DIVISION I FINANCIAL LITERACY AND FINANCIAL EXPLOITATION. 11 Division I appropriates $10 of each fee collected from the 12 filing of an application as an agent of a real estate broker or 13 dealer to the financial literacy and investor education fund 14 (education fund), and to the financial exploitation prevention 15 fund (prevention fund), both of which are created in the bill. 16 Initiatives by the commissioner of insurance (commissioner) 17 involving financial literacy and investor education shall 18 comply with the requirements of the bill. 19 Under the bill, nonexamination revenues payable to the 20 insurance division (division) or the department of revenue 21 (DOR) in connection with the regulation of insurance companies 22 shall be deposited in the commerce revolving fund, rather than 23 40 percent as is required under current law. The director of 24 the department of insurance and financial services (director) 25 shall be responsible for identifying and coordinating 26 appropriate opportunities for collaboration on financial 27 literacy and exploitation with the chief administrative 28 officers (CAO) of each division and each CAOs respective 29 regulated entities. 30 The bill creates the education fund under the control of the 31 director. The director shall develop and implement financial 32 literacy and investor education initiatives for the public 33 by providing education on financial topics, including topics 34 required to be offered and taught for grades 9 through 12. The 35 -34- LSB 1437HZ (2) 91 nls/ko 34/ 41
H.F. 986 education fund consists of moneys as detailed in the bill. 1 Notwithstanding any provision of law to the contrary, moneys in 2 the education fund may be moved to the prevention fund at the 3 discretion of the director. 4 The bill creates the prevention fund, under which the 5 director shall develop and implement initiatives to educate 6 the public on financial exploitation; assist individuals 7 who are known, suspected, or potential victims of financial 8 exploitation; and to conduct investigations, refer 9 investigations to other law enforcement, and assist in the 10 prosecution of persons involved in financial exploitation. The 11 prevention fund consists of moneys as detailed in the bill. 12 All investigation files, investigation reports, and all 13 other investigative information in the possession of the 14 department of insurance and financial services (department) 15 shall be confidential and shall not be subject to release by 16 discovery, subpoena, or other means of legal compulsion until 17 opened for public inspection by the department, or upon the 18 consent of the department, or until a court determines the 19 department will not be unnecessarily hindered if opened for 20 public inspection. Investigative information in the possession 21 of the department may be disclosed, shared, or received in 22 the circumstances detailed in the bill. An investigator or 23 staff member of the department shall not be subject to subpoena 24 concerning any pending or continuing investigation conducted 25 by the department. 26 On the effective date of division I of the bill, all 27 unencumbered and unobligated moneys remaining in the securities 28 investor education and financial literacy training fund in Code 29 section 502.601 shall be transferred to the education fund. 30 DIVISION II TAX ON GROSS PREMIUMS CONFIDENTIALITY. 31 Under division II, a tax return filed under Code section 32 432.1 (tax on gross premiums exclusions) or 432.1A (tax on 33 premiums captive companies) shall not be open to inspection. 34 It shall be unlawful for any present or former officer or 35 -35- LSB 1437HZ (2) 91 nls/ko 35/ 41
H.F. 986 employee of the state to willfully or recklessly publish any 1 such tax return. A person who does so is guilty of a serious 2 misdemeanor and, in addition to any other penalty, shall be 3 dismissed from office or discharged from employment. A serious 4 misdemeanor is punishable by confinement for no more than one 5 year and a fine of at least $430 but no more than $2,560. The 6 bill does not prohibit the DOR from turning over information 7 and tax returns in the DORs possession to duly authorized 8 officers of the United States or tax officials of other states 9 pursuant to an agreement. 10 DIVISION III HEALTH INSURANCE RATE INCREASES PUBLIC 11 HEARINGS. Division III permits the commissioner to hold a 12 public hearing at the time a carrier files for proposed health 13 insurance rate increases exceeding the average annual health 14 spending growth rate, rather than requiring the commissioner to 15 hold such public hearing as is the case under current law. 16 DIVISION IV HEALTH SAVINGS ACCOUNTS AND QUALIFIED 17 HIGH-DEDUCTIBLE HEALTH PLANS COST-SHARING. Under division 18 IV, if a copayment, coinsurance, or deductible paid as 19 cost-sharing by an enrollee in an individual or group accident 20 or health insurance plan would result in the enrollee becoming 21 ineligible for a health savings account associated with the 22 enrollees qualified high-deductible health plan (HDHP), the 23 cost-sharing shall apply only to the enrollees qualified HDHP 24 after the enrollee satisfies the enrollees minimum deductible, 25 except for items or services determined to be preventive. 26 DIVISION V INSURANCE COMPANY WITHDRAWAL REQUIREMENTS. 27 Division V requires an insurer, prior to withdrawing, to 28 file a withdrawal plan (plan) with the commissioner if the 29 insurer intends to reduce the insurers total annual premium 30 volume in the state by 50 percent or more, intends to reduce 31 the insurers total annual premium in the state in a line of 32 insurance by 75 percent or more, or intends to reduce the 33 insurers total annual premium volume in the state in a line of 34 private passenger automobile insurance, homeowners insurance, 35 -36- LSB 1437HZ (2) 91 nls/ko 36/ 41
H.F. 986 or dwelling property insurance by 50 percent or more. 1 Withdrawal requirements do not apply to a transfer of business 2 from one insurer to another insurer that are both within the 3 same insurance holding company system if the insurer to whom 4 the business is being transferred is authorized to engage in 5 the business of insurance in the state, and the business is 6 not a reciprocal or interinsurance exchange, a lloyds plan, 7 or a state or county mutual insurance association. Insurer 8 is defined in the bill. 9 If the plan meets all of the requirements as described in 10 the bill, the commissioner shall approve the plan. If the 11 commissioner finds that a plan does not meet all requirements, 12 the commissioner may modify, restrict, limit, or deny the 13 withdrawal plan. An insurer may request a hearing on the 14 commissioners decision as described in the bill. 15 An insurer that withdraws from writing all lines of 16 insurance in the state shall not, without prior approval 17 of the commissioner, resume writing insurance in the state 18 for a minimum of five years. A violation of the withdrawal 19 requirements constitutes an unfair method of competition and 20 unfair or deceptive act or practice. The commissioner may 21 adopt rules to administer and enforce division V. 22 DIVISION VI REPLACEMENT COST, ACTUAL CASH VALUE, AND 23 LINE OF SIGHT. Division VI requires for an insurance policy 24 providing for the adjustment and settlement of first-party 25 losses based on replacement cost when a loss requires repair or 26 replacement of a product or part, consequential physical damage 27 shall be included in the calculation of loss, and the insured 28 shall not be required to pay for betterment or other costs, 29 except for any deductible. When a loss requires replacement of 30 a damaged product and the product is available for purchase, 31 the identical product shall be used, or if it is not available, 32 the insurer shall use a reasonably similar product. 33 For a policy providing for adjustment and settlement of 34 first-party losses based on actual cash value (ACV), for 35 -37- LSB 1437HZ (2) 91 nls/ko 37/ 41
H.F. 986 residential fire and extended coverage, the insurer shall 1 determine the ACV and shall provide a copy of the claim file 2 worksheet. 3 For an insurance policy providing for the adjustment and 4 settlement of first-party losses based on ACV, where the 5 insureds interest is limited because damaged property has 6 nominal or no economic value, or a value disproportionate to 7 replacement cost less depreciation, a determination of ACV 8 shall not be required. 9 DIVISION VII SERVICE COMPANIES, SERVICE CONTRACTS, 10 AND LICENSES. Division VII prohibits a person who shall be 11 contractually obligated to a service contract holder under the 12 terms of a service contract from issuing, offering for sale, or 13 selling a motor vehicle service contract or residential service 14 contract in the state unless the person is a licensed service 15 company. The requirements of the bill do not apply to any 16 person who provides support services. 17 A service company shall maintain a license for the entirety 18 of any service contract that the service company has entered. 19 A service company shall report to the commissioner within 30 20 calendar days any material change to the information submitted 21 in the initial or renewal application. 22 An application for a license as a service company shall 23 be filed with the commissioner and include all required 24 information as described in the bill, and be accompanied 25 by a $500 license fee and a $35 fee for each motor vehicle 26 service contract form provided by the service company in the 27 application. A license shall be valid for one year and shall 28 be renewed on or before the date the license expires. 29 An application for license renewal shall include the 30 information required for an initial license, a list of 31 each service contract form, and the information and fees as 32 described in the bill. If the renewal application meets the 33 requirements, and the commissioner has not refused to renew 34 the license, the commissioner shall renew the license. If the 35 -38- LSB 1437HZ (2) 91 nls/ko 38/ 41
H.F. 986 commissioner denies renewal, the denial shall be in writing. 1 If a service company fails to renew their license on or 2 before the final day of the license period, the companys 3 license shall be deemed expired. Prior to a license expiration 4 date, and if a renewal application was submitted at least 14 5 days prior to the license expiration date, the commissioner may 6 extend the renewal period an additional 30 calendar days. If a 7 service company submits an application or renewal application 8 after the license has expired, the service company shall pay a 9 $800 reinstatement fee and shall file a service company license 10 renewal application, including payment of applicable fees, with 11 the division. Restrictions on a service company whose license 12 term has expired are detailed in the bill. 13 A service contract shall not be issued, sold, or offered 14 for sale unless the service company provides a receipt for 15 the purchase of the service contract to the service contract 16 holder (holder), provides a complete sample copy of the service 17 contract prior to purchase, and provides a completed paper or 18 electronic copy of the service contract to the holder within 19 10 calendar days of purchase. A paper copy of the sample copy 20 of the service contract, or the service contract, shall be 21 provided upon the request of the consumer at the expense of the 22 service company. 23 A service contract issued, sold, or offered for sale in 24 the state shall comply with all of the requirements described 25 in the bill. The requirements for a reimbursement insurance 26 policy that relates to goods that are essential to the health 27 and safety of the service contract holder are detailed in the 28 bill. 29 A service company shall file with the division an accurate 30 copy of each service contract form prior to using the service 31 contract form and, at the time of filing shall pay a $35 fee for 32 each motor vehicle service contract form. A service company 33 may continue to use a noncompliant service contract form until 34 June 30, 2026, provided no changes are made to the form, and 35 -39- LSB 1437HZ (2) 91 nls/ko 39/ 41
H.F. 986 the service contract form was filed with the division in 2024. 1 The commissioner may suspend or revoke the license of, deny 2 an application for license from, or refuse to renew the license 3 of, a service company, or may levy a civil penalty against a 4 service company, for any of the reasons described in the bill. 5 The commissioner shall notify the service company in writing 6 of the reason for the suspension, revocation, nonrenewal, or 7 denial. The licensee or applicant may request a hearing. 8 The commissioner may make examination of the books and 9 records of a service company. The actual costs of the 10 examination shall be borne by the service company, not to 11 exceed 10 percent of the service companys reported net income 12 associated with doing business in the state in the immediately 13 preceding fiscal year. 14 A service company that offers service contracts for sale, 15 or the service companys support services, shall not represent 16 in any manner a false, deceptive, or misleading statement with 17 respect to the service companys affiliation with a motor 18 vehicle manufacturer or importer, the validity or expiration of 19 a warranty, a motor vehicle service contract holders coverage 20 under a motor vehicle service contract, or describing the 21 service contract as a policy. 22 A service company shall not engage in a prohibited act or 23 practice as detailed in the bill. The commissioner may adopt 24 rules pursuant to Code chapter 17A which regulate service 25 contracts to prohibit specified practices. If the commissioner 26 finds that a person has violated such rules, the commissioner 27 may order payment of a civil penalty as described in the bill, 28 or suspend or revoke a service companys license. A person 29 shall not engage in any unfair method of competition, or an 30 unfair or deceptive act or practice, in the service contract 31 business. 32 A written explanation to a service contract holder after a 33 licensed service company denies a claim or offers a compromise 34 settlement shall provide instructions to the service contract 35 -40- LSB 1437HZ (2) 91 nls/ko 40/ 41
H.F. 986 holder on appeals, second reviews, arbitration, or similar 1 provisions included in the contract, as well as information 2 on how to file a complaint with the division, including the 3 internet site to the divisions complaint form. 4 The commissioner shall maintain the confidentiality of 5 information submitted to the division or obtained by the 6 division in the course of an investigation, examination, or 7 inquiry, including all notes, work papers, or other documents 8 and the information as described in the bill. The commissioner 9 may disclose or release information that is otherwise 10 confidential in the circumstances detailed in the bill. 11 Such information may be redacted so that neither personally 12 identifiable information nor service company identifiable 13 information is made available. 14 The division repeals Code section 523C.19. 15 DIVISION VIII PUBLIC UTILITY REGULATION 16 CROSS-SUBSIDIZATION. Division VIII of the bill eliminates 17 the prohibition under current law that, except for contracts 18 existing as of July 1, 1996, a public utility or its affiliates 19 shall not use vehicles, service tools and instruments, or 20 employees to install, service, or repair residential or 21 commercial gas or electric heating, ventilating, or air 22 conditioning systems, or interior lighting systems and 23 fixtures; or to sell at retail heating, ventilating, air 24 conditioning, or interior lighting equipment. 25 -41- LSB 1437HZ (2) 91 nls/ko 41/ 41