BILL ANALYSIS
C.S.S.B. 1637
By: Sibley
Economic Development
5-1-95
Committee Report (Substituted)
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, C.S.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.