BILL ANALYSIS S.B. 1637 By: Sibley (Duncan) 05-10-95 Committee Report (Unamended) BACKGROUND Current law requires the Texas Department of Insurance (TDI) to verify that an insurance policy complies with state law before an insurance company is authorized to sell the policy to the public. Policy scrutiny has caused a backlog in the policy approval department at TDI. As a result, there are possible delays of approval of up to two years. PURPOSE As proposed, S.B. 1637 provides for the approval and use of certain life, health and accident insurance policy forms. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the commissioner of insurance under SECTION 1 (Art. 3.42(p), V.T.I.C.) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Article 3.42, V.T.I.C., as follows: Art. 3.42. POLICY FORM APPROVAL. (a) Provides that no policy, contract or certificate of life, term or endowment insurance, group life or term insurance, industrial life insurance, accident or health insurance, hospitalization insurance, group hospitalization insurance, medical or surgical insurance, group medical or surgical insurance, or fraternal benefit insurance, and no annuity or pure endowment contract or group annuity contract shall be delivered, issued, or used in this state by a life, accident, health or casualty insurance company, general casualty company, Lloyds, reciprocal or interinsurance exchange, fraternal benefit society, group hospitalization service or any other insurer, unless the form of said policy, contract or certificate has been filed with the Department of Insurance (department), rather than the State Board of Insurance. Makes nonsubstantive and conforming changes. (b) Requires each individual accident and sickness policy application form, which is required to be or is attached to the policy, to comply with the rules and regulations of the commissioner of insurance (commissioner), rather than the State Board of Insurance. Makes nonsubstantive and conforming changes. (c) Requires each filing required under Subsection (a) or (b) of this article to be made prior to any such issuance, delivery or use of such form, contract, or policy (form). Authorizes an insurer, on the filing, to issue, deliver and use such form, provided such filing shall be accompanied by a certification on behalf of the filing insurer, signed by either a licensed attorney, an actuary familiar with the requirements of this code and the applicable rules and regulations, or the chief executive officer of such filing insurer or a person designated by that officer. Requires a contract or policy, at the expiration of 60 days after receipt of a filed form by the department to be deemed approved unless prior thereto the insurer has requested in writing that the approval period be extended for an additional period not to exceed 30, rather than 60, days. Authorizes only one extension to be granted. Provides that on the expiration of the extension, the form is considered approved unless the commissioner has taken affirmative action to either approve or disapprove the form before the expiration of the extension. Provides that in the event it is determined after notice and opportunity for hearing that Texas insureds have been financially damaged by the use of a form filed and used under this subsection but that has not been approved as provided by this subsection and that does not comply with this code and legally adopted applicable rules of the commission, and the commissioner determines that the insurer intentionally used and issued that form with the knowledge that it did not comply with this code or those applicable rules, the commissioner may order the insurer to make complete restitution to those financially damages insureds. Prohibits this section from being construed to be in derogation or to in any way limit the applicability of any otherwise applicable statute, but the commissioner may not impose other sanctions or penalties on an insurer for the issuance of a form filed under this subsection except as specifically provided by this subsection. Makes nonsubstantive and conforming changes. (d) Redesignates existing Paragraph (2). Makes nonsubstantive and conforming changes. Deletes existing Paragraph (3). (e) Redesignates existing Paragraph (4). Prohibits the fee for a filing of policy forms, amendments, endorsements, and riders filed for review under this article, unless exempted pursuant to Section (h) of this article from exceeding $100, rather than $200; and the fee for filing or policy forms, amendments, endorsements, and riders, exempted from review pursuant to Section (h) of this article from exceeding $50, rather than $100. Makes conforming changes. (f) Deletes the requirement that the fees collected under Subsection (e) of this article be deposited to the credit of the State Board of Insurance operating fund in the State Treasury. Makes conforming changes. (g) Redesignates existing Subsection (d). Requires the order of the commissioner disapproving any such form or withdrawing a previous approval to describe the changes necessary to obtain approval. Entitles the insurer to 45 days after the date of the order to make the changes required to correct the deficiencies noted in the order. Provides that the commissioner has 45 days to approve or disapprove the form filed for reconsideration or the form is considered approved for purposes of this article. (h)-(i) Make nonsubstantive and conforming changes. (j) Provides that, if a form subject to Subsection (i) of this article has been on file with the department for at least 180 days and has been previously approved by the commissioner, considered approved under the operation of this article, or exempted from the approval requirements as provided by this article, the commissioner may withdraw the previous approval or the exemption from the approval requirements only if the form violates or does not comply with specific requirements under this code or a rule adopted under this code unless the commissioner finds proof of gross misrepresentation or fraud to the policyholder. (k) Makes conforming changes. (l) Provides that, if a form subject to Subsection (k) of this article has been on file with the department for at least 360 days and has been previously approved by the commissioner, considered approved under the operation of this article, or exempted from the approval requirements as provided by this article, the commissioner may withdraw the previous approval or the exemption from the approval requirements only if the form violates or does not comply with specific requirements under this code or a rule adopted under this code unless the commissioner finds proof of gross misrepresentation or fraud to the policyholder. (m)-(o) Make nonsubstantive and conforming changes. (p) Redesignates existing Subsection (j). Authorizes the commissioner to adopt rules and regulations as are necessary to implement and accomplish the specific provisions of this article and are within the standards and purposes of this article. Requires the commissioner to adopt rules under this article in compliance with Chapter 2001, Government Code. Prohibits a rule adopted under this article from being repealed or amended until the first anniversary of the adoption of the rule unless the commissioner finds in a public hearing after notice that there is a compelling public need for the amendment or repeal of the rule or part of the rule. Deletes existing Subsection (k). SECTION 2. Effective date: September 1, 1995. Makes application of this Act prospective beginning January 1, 1996. SECTION 3. Emergency clause. SUMMARY OF COMMITTEE ACTION In accordance with House rules, S.B. 1637 was heard in a public hearing on May 10, 1995. The Chair laid out S.B. 1637 and recognized Representative Duncan to explain the bill. The Chair recognized the following person to testify in support of S.B. 1637: Will D. Davis, Texas Legal Reserve Officials Association. The Chair recognized the following person to testify neutrally on S.B. 1637: Rhonda Myron, Texas Department of Insurance. The Chair recognized Representative Driver who moved the Committee report S.B. 1637 as engrossed to the full House with the recommendation that it do pass and be printed. Representative Counts seconded the motion and the motion prevailed by the following vote: AYES: (8); NAYES: (0); PNV: (0); ABSENT: (1).