SESSION OF 2024
SUPPLEMENTAL NOTE ON HOUSE BILL NO. 2533
As Amended by House Committee on Insurance
Brief*
HB 2533, as amended, would amend existing law to
establish a tiered-fee structure for financial examinations of
insurance companies and societies based on the gross
premiums received by such entities. The bill would also
establish that certain examination costs be “average and
reasonable.”
“Average and Reasonable” Fees
The bill would require the following examination costs be
“average and reasonable”:
●Full compensation for examiners’ services, on a
per diem basis;
●Outside consulting and data processing fees
necessary to perform any examination; and
●Purchase, maintenance, and enhancement of
examination equipment and computer software.
The bill would specify expenses for traveling and
subsistence incurred by examiners in the performance of their
services be “reasonably” necessary.
The bill would require the amount paid to perform any
market regulation examination, including examination of a
company or society’s subsidiaries and the pro rata amount to
____________________
*Supplemental notes are prepared by the Legislative Research
Department and do not express legislative intent. The supplemental
note and fiscal note for this bill may be accessed on the Internet at
http://www.kslegislature.org fund the purchase of examination equipment and computer
software be “reasonable” and not exceed the existing
statutory collective total cap of $25,000.
“Average and reasonable” would mean the amount or
fees that are in line with fees assessed by other people in the
area where the examination occurred who have rendered
similar services.
Tiered-fee Structure
The bill would amend the amounts paid for examination
costs to create a tiered-fee structure. The examination costs
would include:
●Compensation, expenses, and the employer’s
share of the Federal Insurance Contributions Act
taxes;
●The employer’s contribution to the Kansas Public
Employees Retirement System;
●The self-insurance assessment for the Workers
Compensation Act;
●The employer’s cost of the state health care
benefits program;
●A pro rata amount determined by the
Commissioner to provide vacation and sick leave
for the examiner;
●All average and reasonable outside consulting and
data processing fees necessary to perform any
examination; and
●A average and reasonable pro rata amount
determined by the Commissioner to fund the
purchase, maintenance, and enhancement of
examination equipment and computer software.
2- 2533 The bill would specify the amount paid for the above
costs, outside consulting and data processing fees necessary
to perform any financial examination at any one company or
society, including examination of the company’s or society’s
subsidiaries or any combination, and the pro rata amount to
fund the purchase of examination equipment and computer
software could not collectively total more than the following
amounts:
●$50,000 for any insurance company or society that
has less than $5.0 million in gross premiums, both
direct and assumed, in the preceding calendar
year;
●$75,000 for any insurance company or society that
has at least $5.0 million but less than $25.0 million
in gross premiums, both direct and assumed, in the
preceding calendar year;
●$100,000 for any insurance company or society
that has at least $25.0 million but less than $50.0
million in gross premiums, both direct and
assumed, in the preceding calendar year;
●$125,000 for any insurance company or society
that has at least $50.0 million but less than $100.0
million in gross premiums, both direct and
assumed, in the preceding calendar year;
●$175,000 for any insurance company or society
that has at least $100.0 million but less than
$250.0 million in gross premiums, both direct and
assumed, in the preceding calendar year;
●$250,000 for any insurance company or society
that has at least $250.0 million but less than
$500.0 million in gross premiums, both direct and
assumed, in the preceding calendar year; or
3- 2533 ●The actual total costs paid in connection with the
examination for any insurance company or society
that has at least $500.0 million in gross premiums,
both direct and assumed, in the preceding calendar
year.
[Note: Current law provides the amount paid may not
collectively total more than $50,000 for any insurance
company or society that has less than $200.0 million or more
in gross premiums, both direct and assumed, in the preceding
calendar year or not more than $500,000 for any insurance
company or society which has $200.0 million or more in gross
premiums, both direct and assumed, in the previous calendar
year.]
Background
The bill was introduced in the House Committee on
Insurance at the request of a representative of the Kansas
Insurance Department (Department).
[Note: A companion bill, SB 356, has been introduced in
the Senate.]
House Committee on Insurance
In the House Committee hearing, proponent testimony
was provided by representatives of the Department and the
Kansas Association of Property and Casualty Insurance
Companies (KAPCIC). The Department representative stated
the new, seven-tiered financial examination fee schedule
correlates with an insurer’s annual gross premium written.
The fee schedule was developed in collaboration with the
industry to provide regulatory certainty to insurers by creating
an overall cap for both Department expenses and contractual
services. The actual internal costs incurred by the
Department in conducting the required financial examinations
are invoiced to the insurers, but the amount paid by insurers
4- 2533 related to the use of a contracted examiner cannot exceed
the current statutory cap, leaving any contractual services
that exceed the statutory cap to be paid by the Department. It
was also noted Kansas is the only state with a cap on
financial examination fees.
The KAPCIC representative stated the current cap only
applies to work outsourced by the Department, but there is no
cap on Department-incurred charges or on the combined
Department and outsourced charges. The single cap on
charges, regardless of the entity that does the work, would
provide Kansas domiciled companies with the ability to
budget for the costs of the financial examinations. The
representative stated support for the multiple cap levels in the
bill, noting that although the caps are increased, they are
more reflective of total exam costs.
The House Committee amended the bill to define the
term “average and reasonable” and to add “average and”
before “reasonable” regarding per diem compensation for
examiner services; outside consulting and processing fees;
and the purchase, maintenance, and enhancement of
examination equipment and computer software.
Fiscal Information
According to the fiscal note prepared by the Division of
the Budget on the bill, as introduced, the Department
indicates the bill would increase its expenditures by a total of
$305,000 from its Insurance Department Service Regulation
Fee Fund over four years because each insurance company
is examined every four years. Therefore, the average
increase in expenditures per year would be $76,250. This is
because the Department would pay any amount above the
cap defined in the bill when an insurance company’s cost for
the examination is more than the cap on gross premiums.
The estimate is based on past exam costs, including amounts
paid by the companies to contractors, the amount the
Department paid on behalf of the companies, and the amount
5- 2533 paid by the companies to contractors. Any fiscal effect
associated with the bill is not reflected in The FY 2025
Governor’s Budget Report.
Kansas Insurance Department; insurance; financial examinations; market regulation
examination; tiered fee structure; fees
6- 2533