1-1     By:  Turner of Coleman (Senate Sponsor - Ratliff)     H.B. No. 2221

 1-2           (In the Senate - Received from the House May 12, 1997;

 1-3     May 13, 1997, read first time and referred to Committee on Economic

 1-4     Development; May 17, 1997, reported favorably by the following

 1-5     vote:  Yeas 7, Nays 0; May 17, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to limitations on the amount of life insurance risk that

 1-9     may be written by certain agents of or assumed by a  stipulated

1-10     premium insurance company.

1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-12           SECTION 1.  Section 3, Article 21.07, Insurance Code, is

1-13     amended to read as follows:

1-14           Sec. 3.  ISSUANCE OF LICENSE UNDER CERTAIN CIRCUMSTANCES.

1-15     The commissioner [State Board of Insurance] shall issue a license

1-16     to a person or corporation in such form as the department [it] may

1-17     prepare authorizing such applicant to write the types of insurance

1-18     authorized by law to be issued by applicant's appointing insurance

1-19     carrier, except that:

1-20           (a)  Such applicant shall not be authorized to write health

1-21     and accident insurance unless:  (i) applicant, if not a partnership

1-22     or corporation, shall have first passed a written examination as

1-23     provided for in this Article 21.07, as amended, or (ii) applicant

1-24     will act only as a ticket-selling agent of a public carrier with

1-25     respect to accident life insurance covering risks of travel or as

1-26     an agent selling credit life, health and accident insurance issued

1-27     exclusively in connection with credit transactions, or (iii)

1-28     applicant will write policies or riders to policies providing only

1-29     lump sum cash benefits in the event of the accidental death, or

1-30     death by accidental means, or dismemberment, or providing only

1-31     ambulance expense benefits in the event of accident or sickness;

1-32     and

1-33           (b)  Such applicant, if not a partnership or corporation,

1-34     shall not be authorized to write life insurance in excess of

1-35     $10,000 [$7,500] upon any one life unless:  (i) applicant, if not a

1-36     partnership or corporation, shall have first passed a written

1-37     examination as provided for in this Article 21.07, as amended, or

1-38     (ii) applicant will act only as a ticket-selling agent of a public

1-39     carrier with respect to accident life insurance covering risks of

1-40     travel or as an agent selling credit life, health and accident

1-41     insurance issued exclusively in connection with credit

1-42     transactions, or (iii) applicant will write policies or riders to

1-43     policies providing only lump sum cash benefits in the event of the

1-44     accidental death, or death by accidental means, or dismemberment,

1-45     or providing only ambulance expense benefits in the event of

1-46     accident or sickness.

1-47           SECTION 2.  Section 4A, Article 21.07, Insurance Code, is

1-48     amended to read as follows:

1-49           Sec. 4A.  EXAMINATION OF APPLICANT FOR LICENSE TO WRITE LIFE

1-50     INSURANCE UPON ANY ONE LIFE IN EXCESS OF $10,000 [$7,500].  (a)

1-51     Each applicant for a license under the provisions of this Article

1-52     21.07, Insurance Code, as amended, who desires to write life

1-53     insurance in excess of $10,000 [$7,500] upon any one life, other

1-54     than as excepted in Section 3 of this Article 21.07, within this

1-55     state shall submit to a personal written examination prescribed by

1-56     the commissioner [State Board of Insurance] and administered in the

1-57     English or Spanish language to determine the applicant's [his]

1-58     competency with respect to life insurance and the applicant's [his]

1-59     familiarity with the pertinent provisions of the laws of the State

1-60     of Texas relating to life insurance and shall pass the same to the

1-61     satisfaction of the commissioner [State Board of Insurance];

1-62     except that no written examination shall be required of an

1-63     applicant that is a partnership or corporation.

1-64           (b)(i)  The commissioner [State Board of Insurance] shall,

 2-1     within sixty (60) days from the effective date of this Act,

 2-2     establish reasonable rules and regulations with respect to the

 2-3     scope, type and conduct of such written examination and the times

 2-4     and places within this State where such examinations shall be held.

 2-5     The rules and regulations of the commissioner [State Board of

 2-6     Insurance] shall designate textbooks, manuals and other materials

 2-7     to be studied by applicants in preparation for examination pursuant

 2-8     to this Section.  Such textbooks, manuals and other materials may

 2-9     consist of matter available to applicants by purchase from the

2-10     publisher or may consist of matter prepared at the direction of the

2-11     commissioner [State Board of Insurance] and distributed to

2-12     applicants upon request therefor and payment of the reasonable cost

2-13     thereof.  All examination questions shall be prepared from the

2-14     contents of the textbooks, manuals and other materials designated

2-15     or prepared by the commissioner [State Board of Insurance] pursuant

2-16     to this Section.  Unless the commissioner [State Board of

2-17     Insurance]  accepts a qualifying examination administered by a

2-18     testing service, as provided under Article 21.01-1, Insurance Code,

2-19     as amended, the commissioner [State Board of Insurance] shall

2-20     charge each  applicant a fee in an amount not to exceed $20.00 for

2-21     the privilege of taking such written examination and which fee

2-22     shall not be returned under any circumstance other than for failure

2-23     to appear and take the examination after the applicant has given at

2-24     least 24 hours' notice of an emergency situation to the

2-25     commissioner [State Board of Insurance] and received the [board]

2-26     approval of the commissioner.  A new examination fee shall be  paid

2-27     for each and every examination.

2-28                 (ii)  The commissioner [State Board of Insurance] may

2-29     also establish reasonable rules and regulations whereby, in the

2-30     discretion of the commissioner [State Board of Insurance], any

2-31     insurance carrier may be permitted to conduct written examinations

2-32     for its agents, subject to such reasonable conditions, requirements

2-33     and standards as the commissioner [State Board of Insurance] shall

2-34     require and establish as a predicate for the granting of such

2-35     authority and for the reasonable supervision, examination and

2-36     inspection of each such carrier's procedures in giving examinations

2-37     to its agents, but provided further that such authority so granted

2-38     to any insurance carrier to give such examinations may be

2-39     terminated by the commissioner [State Board of Insurance] on notice

2-40     and hearing if it shall find that such authorized insurance carrier

2-41     shall have violated the conditions, requirements and standards

2-42     required of such carrier to qualify to conduct written

2-43     examinations.

2-44           (c)  After the commissioner determines [State Board of

2-45     Insurance shall determine] that such applicant has successfully

2-46     passed the written  examination or it has been waived, the

2-47     commissioner [State Board of Insurance] shall forthwith issue a

2-48     license to such applicant which shall also authorize such applicant

2-49     to write life insurance upon any one life in excess of $10,000

2-50     [$7,500] for the designated insurance carrier.

2-51           (d)  The commissioner [State Board of Insurance] is hereby

2-52     authorized in its sole discretion to appoint an Advisory Board to

2-53     make recommendations to it with respect to the scope, type and

2-54     conduct of written examinations and the Advisory Board, if so

2-55     appointed, shall consist of individuals experienced in the life

2-56     insurance business and may include company officers, managers and

2-57     employees, general managers and licensed agents.  The members of

2-58     the Advisory Board shall serve without pay.

2-59           (e)  When any license shall be issued by the commissioner

2-60     [State Board of Insurance] to an applicant entitled to write life

2-61     insurance upon any one life in excess of $10,000 [$7,500], the

2-62     license shall have stamped thereon the words, "Life Insurance in

2-63     Excess of $10,000 [$7,500]."

2-64           SECTION 3.  Article 21.07, Insurance Code, is amended by

2-65     adding Section 15A to read as  follows:

2-66           Sec. 15A.  CERTAIN AGENTS FOR STIPULATED PREMIUM COMPANIES.

2-67     A person or corporation that holds a license issued under Chapter

2-68     213, Acts of the 54th Legislature, Regular Session, 1955 (Article

2-69     21.07-1, Vernon's Texas Insurance Code), is entitled to write life

 3-1     insurance under that license for a stipulated premium company

 3-2     without obtaining a license under this article.  A stipulated

 3-3     premium company may appoint as its agent a person or corporation

 3-4     that holds a license under Chapter 213, Acts of the 54th

 3-5     Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas

 3-6     Insurance Code).

 3-7           SECTION 4.  Article 22.07, Insurance Code, is amended by

 3-8     adding Section 3 to read as follows:

 3-9           Sec. 3.  If the surplus of a stipulated premium company is at

3-10     least Fifty Thousand Dollars ($50,000.00) but less than Two Hundred

3-11     Thousand Dollars ($200,000.00), the stipulated premium company

3-12     shall reinsure the insurance amount that exceeds Ten Thousand

3-13     Dollars ($10,000.00) on a life insurance risk on any one life.

3-14           SECTION 5.  Section 1(b), Article 22.13, Insurance Code, is

3-15     amended to read as follows:

3-16           (b)  Except as otherwise provided by this subsection, it [It]

3-17     shall be unlawful for any stipulated premium company to assume

3-18     liability on a life insurance risk on any one life in an amount in

3-19     excess of Ten Thousand Dollars ($10,000.00).  If a stipulated

3-20     premium company assumes a  life insurance risk under a life

3-21     insurance policy, the initial death benefit of Ten Thousand Dollars

3-22     ($10,000.00) or less may increase to an amount greater than Ten

3-23     Thousand Dollars ($10,000.00).  For a policy in which the death

3-24     benefit subsequent to issuance exceeds Ten Thousand Dollars

3-25     ($10,000.00), the death benefit at the end of each policy year may

3-26     not exceed the greater of the maximum increase as specified in the

3-27     policy, compounded annually, or the CPI-U, compounded annually.

3-28     The maximum increase that may be specified in a life insurance

3-29     policy subject to this article is five percent, compounded

3-30     annually.  For purposes of this subsection, the CPI-U for a given

3-31     calendar year is the consumer price index for all urban consumers

3-32     for all items and for all regions of the United States, combined as

3-33     determined by the United States Department of Labor, Bureau of

3-34     Labor Statistics, on September 30 of the prior calendar year.

3-35           SECTION 6.  Article 22.23(a), Insurance Code, is amended to

3-36     read as follows:

3-37           (a)  Each stipulated premium company possessing capital and

3-38     unencumbered surplus of at least the combined total sum of

3-39     $100,000.00 may issue policies of life insurance as authorized and

3-40     permitted under the provisions of Chapter Three of this Insurance

3-41     Code provided that:

3-42                 (1)  no individual life shall be insured for more than

3-43     $10,000.00, except as provided by Section 1(b), Article 22.13, of

3-44     this code or Article 22.23A of this code;

3-45                 (2)  each such policy shall be reserved and reinsured

3-46     as required under the provisions of Chapter Three of this Insurance

3-47     Code; and

3-48                 (3)  each such life policy shall be issued only upon an

3-49     endowment or limited pay basis.

3-50           SECTION 7.  (a)  This Act takes effect September 1, 1997, and

3-51     applies only to an insurance policy that is delivered, issued for

3-52     delivery, or renewed on or after that date.  A policy that is

3-53     delivered, issued for delivery, or renewed before September 1,

3-54     1997, is governed by the law as it existed immediately before the

3-55     effective date of this Act, and that law is continued in effect for

3-56     that purpose.

3-57           (b)  For purposes of this section, an insurance policy is

3-58     considered renewed on the date that the policyholder makes a

3-59     payment of a premium on the policy.

3-60           SECTION 8.  The importance of this legislation and the

3-61     crowded condition of the calendars in both houses create an

3-62     emergency and an imperative public necessity that the

3-63     constitutional rule requiring bills to be read on three several

3-64     days in each house be suspended, and this rule is hereby suspended.

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