1-1 AN ACT
1-2 relating to the licensing of banks as insurance agents and to
1-3 certain nonresident agents; providing a penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 1(a) and (b), Article 21.07, Insurance
1-6 Code, are amended to read as follows:
1-7 (a) No person, [or] corporation, or bank shall act as an
1-8 agent of any (i) local mutual aid association, (ii) local mutual
1-9 burial association, (iii) statewide mutual assessment corporation,
1-10 (iv) stipulated premium company, (v) county mutual insurance
1-11 company, (vi) casualty company writing accident and health
1-12 insurance, or (vii) any other type of insurance carrier licensed to
1-13 do business in the State of Texas and which insurance carrier's
1-14 agents are required to be licensed under the provisions of this
1-15 Article [21.07, Texas Insurance Code, 1951, as amended], on the
1-16 date that this Act shall become effective, unless that individual
1-17 [he] or entity [it] shall have first procured a license from the
1-18 department [State Board of Insurance] as in this Article [21.07, as
1-19 amended hereby,] is provided, and no such insurance carrier shall
1-20 appoint any person, [or] corporation, or bank to act as its agent
1-21 unless such person, [or] corporation, or bank shall have obtained a
1-22 license under the provisions of this Article, and no such person,
1-23 [or] corporation, or bank who obtains a license shall engage in
1-24 business as an agent until that individual [he] or entity [it]
2-1 shall have been appointed to act as an agent by some duly
2-2 authorized insurance carrier designated by the provisions of this
2-3 Article [21.07] and authorized to do business in the State of
2-4 Texas. Any person, [or] corporation, or bank desiring to act as an
2-5 agent of any insurance carrier licensed to do business in the State
2-6 of Texas and writing health and accident insurance may obtain a
2-7 separate license as an agent to write health and accident insurance
2-8 provided such person, [or] corporation, or bank complies with the
2-9 provisions of this Article and has been appointed to act as an
2-10 agent by some duly authorized insurance carrier authorized to do
2-11 health and accident insurance business in the State of Texas.
2-12 (b) No insurer or licensed insurance agent doing business in
2-13 this State shall pay directly or indirectly any commission, or
2-14 other valuable consideration, to any person, [or] corporation, or
2-15 bank for services as an insurance agent within this State, unless
2-16 such person, [or] corporation, or bank shall hold a currently valid
2-17 license to act as an insurance agent as required by the laws of
2-18 this State; nor shall any person, [or] corporation, or bank other
2-19 than a duly licensed insurance agent, accept any such commission or
2-20 other valuable consideration; provided, however, that the
2-21 provisions of this Section shall not prevent the payment or receipt
2-22 of renewal or other deferred commissions to or by any person solely
2-23 because such person, [or] corporation, or bank has ceased to hold a
2-24 license to act as an insurance agent.
2-25 SECTION 2. Article 21.07, Insurance Code, is amended by
2-26 adding Section 1C to read as follows:
2-27 Sec. 1C. LICENSING OF BANKS. (a) In this article, "bank"
3-1 means a national banking association organized and existing under
3-2 the National Bank Acts (12 U.S.C. Section 21 et seq.), a state bank
3-3 organized and existing under the Texas Banking Act (Article
3-4 342-1.001 et seq., Vernon's Texas Civil Statutes), a state savings
3-5 bank organized and existing under the Texas Savings Bank Act
3-6 (Article 489e, Vernon's Texas Civil Statutes), a bank branch, or a
3-7 bank operating subsidiary, as defined by state or federal law, that
3-8 is located and doing business in this state in a place with a
3-9 population of 5,000 or less.
3-10 (b) A bank operating subsidiary located and doing business
3-11 in a place with a population of 5,000 or less may own a licensed
3-12 corporate agent that is also located and doing business in a place
3-13 with a population of 5,000 or less, and is subject to Section 18(c)
3-14 of this Article.
3-15 SECTION 3. Sections 2 and 3, Article 21.07, Insurance Code,
3-16 are amended to read as follows:
3-17 Sec. 2. Application for license; to whom license may be
3-18 issued. (a) Any person, [or] corporation, or bank that desires to
3-19 become an agent for a local mutual aid association, a local mutual
3-20 burial association, a statewide mutual assessment corporation, a
3-21 stipulated premium company, a county mutual insurance company, a
3-22 casualty company writing accident and health insurance, or any
3-23 other type of insurance carrier licensed to do business in the
3-24 State of Texas, the agents of which are required to be licensed
3-25 under this Article, shall submit to the department [State Board of
3-26 Insurance] an application for a license in the form required by the
3-27 department [Board].
4-1 (b) The application must bear a signed endorsement by an
4-2 officer or properly authorized representative of the insurance
4-3 carrier that the individual applicant or each member of the
4-4 partnership or each officer, director, and shareholder of the
4-5 corporation or the responsible officer and employee of the bank is
4-6 qualified to hold that individual [himself] or the partnership,
4-7 [or] the corporation, or the bank out in good faith to the general
4-8 public as an insurance agent, and that the insurance carrier
4-9 desires that the applicant act as an insurance agent to represent
4-10 it in this State.
4-11 (c) The department [Board] shall issue a license to an
4-12 individual or to a general partnership engaging in the business of
4-13 insurance. Each partner in the partnership must be licensed
4-14 individually as an agent under this Article.
4-15 (d) The department [Board] shall issue a license to a
4-16 corporation if the department [Board] finds:
4-17 (1) That the corporation is a Texas corporation
4-18 organized or existing under the Texas Business Corporation Act or
4-19 the Texas Professional Corporation Act (Article 1528e, Vernon's
4-20 Texas Civil Statutes) having its principal place of business in the
4-21 State of Texas and having as one of its purposes the authority to
4-22 act as an agent covered by this Article;
4-23 (2) That every officer, director, and shareholder of
4-24 the corporation is individually licensed under the provisions of
4-25 this Article, or that every officer and director of the corporation
4-26 is individually licensed under this Article, that the corporation
4-27 is a wholly owned subsidiary of a parent corporation that is
5-1 licensed under this Article, and that every shareholder of the
5-2 parent corporation is individually licensed under this Article; and
5-3 (3) That such corporation will have the ability to pay
5-4 any sums up to $25,000 which it might become legally obligated to
5-5 pay on account of any claim made against it by any customer and
5-6 caused by any negligent act, error, or omission of the corporation
5-7 or any person for whose acts the corporation is legally liable in
5-8 the conduct of its business under this Article. The term
5-9 "customer" means any person, firm, or corporation to whom such
5-10 corporation sells or attempts to sell a policy of insurance, or
5-11 from whom such corporation accepts an application for insurance.
5-12 Such ability shall be proven in one of the following ways:
5-13 (A) an errors and omissions policy insuring such
5-14 corporation against errors and omissions in at least the sum of
5-15 $100,000 with no more than a $10,000 deductible feature issued by
5-16 an insurance company licensed to do business in the State of Texas
5-17 or, if a policy cannot be obtained from a company licensed to do
5-18 business in Texas, a policy issued by a company not licensed to do
5-19 business in Texas on filing an affidavit with the department [State
5-20 Board of Insurance] stating the inability to obtain coverage and
5-21 receiving the commissioner's [Board's] approval;
5-22 (B) a bond executed by such corporation as
5-23 principal and a surety company authorized to do business in this
5-24 State, as surety, in the principal sum of $25,000, payable to the
5-25 department [State Board of Insurance] for the use and benefit of
5-26 customers of such corporation, conditioned that such corporation
5-27 shall pay any final judgment recovered against it by any customer;
6-1 or
6-2 (C) a deposit of cash or securities of the class
6-3 authorized by Articles 2.08 and 2.10, Insurance Code, as amended,
6-4 having a fair market value of $25,000 with the comptroller [State
6-5 Treasurer]. The comptroller [State Treasurer] is directed to
6-6 accept and receive such deposit and hold it exclusively for the
6-7 protection of any customer of such corporation recovering a final
6-8 judgment against such corporation. Such deposit may be withdrawn
6-9 only upon filing with the department [Board] evidence satisfactory
6-10 to it that the corporation has withdrawn from business and has no
6-11 unsecured liabilities outstanding, or that such corporation has
6-12 provided for the protection of its customers by furnishing an
6-13 errors and omissions policy or a bond as provided. Securities so
6-14 deposited may be exchanged from time to time for other qualified
6-15 securities.
6-16 A binding commitment to issue such a policy or bond, or the
6-17 tender of such securities, shall be sufficient in connection with
6-18 any application for license.
6-19 Nothing contained herein shall be construed to permit any
6-20 unlicensed employee or agent of any corporation to perform any act
6-21 of an agent under this Article without obtaining a license.
6-22 If at any time, any corporation holding an agent's license
6-23 does not maintain the qualifications necessary to obtain a license,
6-24 the license of such corporation to act as an agent shall be
6-25 cancelled or denied in accordance with the provisions of Sections
6-26 10 and 11 of this Article; provided, however, that should any
6-27 person who is not a licensed agent under this Article acquire
7-1 shares in such a corporation by devise or descent, that person
7-2 shall have a period of 90 days from date of acquisition within
7-3 which to obtain a license or to dispose of the shares to a person
7-4 licensed under this Article.
7-5 Should such an unlicensed person acquire shares in a
7-6 corporation and not dispose of them within a period of 90 days to a
7-7 licensed agent, then they must be purchased by the corporation for
7-8 their book value, that is, the value of said shares of stock as
7-9 reflected by the regular books and records of said corporation, as
7-10 of the date of the acquisition of said shares by said unlicensed
7-11 person. Should the corporation fail or refuse to so purchase such
7-12 shares, its license shall be cancelled.
7-13 Any such corporation shall have the power to redeem the
7-14 shares of any shareholder, or the shares of a deceased shareholder,
7-15 upon such terms as may be agreed upon by the board of directors and
7-16 such shareholder or such shareholder's personal representative, or
7-17 at a price and upon such terms as may be provided in the articles
7-18 of incorporation, the bylaws, or an existing contract entered into
7-19 between the shareholders of the corporation.
7-20 Each corporation licensed as an agent under this Article
7-21 shall file, under oath, a list of the names and addresses of all of
7-22 its officers, directors, and shareholders with its application for
7-23 renewal license.
7-24 Each corporation shall notify the department [State Board of
7-25 Insurance] upon any change in its officers, directors, or
7-26 shareholders not later than the 30th day after the date on which
7-27 the change becomes effective.
8-1 Except as provided by Subdivision (2) of this subsection, a
8-2 corporation may not own any interest in another corporation
8-3 licensed under this Article, and each owner of an interest in a
8-4 corporation licensed under this Article shall be a natural person
8-5 who holds a valid license issued under this Article.
8-6 (e) The department shall issue a license to a bank if the
8-7 department finds that:
8-8 (1) the bank satisfies the definition of Section 1C of
8-9 this Article;
8-10 (2) at least one officer of the bank and each
8-11 individual who will be performing any acts as an agent for the bank
8-12 are individually licensed under this Article; and
8-13 (3) the bank will have the ability to pay any sums up
8-14 to $25,000 that it might become legally obligated to pay on account
8-15 of any claim made against it by a customer and caused by a
8-16 negligent act, error, or omission of the bank or any person for
8-17 whose acts the bank is legally liable in the conduct of its
8-18 business under this Article. The term "customer" means any person,
8-19 firm, or corporation to whom the bank sells or attempts to sell a
8-20 policy of insurance or from whom the bank accepts an application
8-21 for insurance. That ability shall be proven through:
8-22 (A) an errors and omissions policy insuring the
8-23 bank against errors and omissions in at least the sum of $100,000
8-24 with not more than a $10,000 deductible feature, issued by an
8-25 insurance company licensed to do business in this state or, if a
8-26 policy cannot be obtained from a company licensed to do business in
8-27 this state, a policy issued by a company not licensed to do
9-1 business in this state on filing an affidavit with the department
9-2 stating the inability to obtain coverage and receiving the
9-3 department's approval;
9-4 (B) a bond executed by the bank as principal and
9-5 a surety company authorized to do business in this state, as
9-6 surety, in the principal sum of $25,000, payable to the department
9-7 for the use and benefit of customers of the bank, conditioned that
9-8 the bank shall pay any final judgment recovered against it by a
9-9 customer; or
9-10 (C) a deposit with the comptroller of cash or
9-11 securities of the class authorized by Articles 2.08 and 2.10 of
9-12 this code, with a fair market value of $25,000. The comptroller
9-13 shall accept and receive the deposit and hold it exclusively for
9-14 the protection of a customer of the bank who recovers a final
9-15 judgment against the bank. The deposit may be withdrawn only on
9-16 filing with the department satisfactory evidence that the bank has
9-17 withdrawn from the business of insurance and has no unsecured
9-18 liabilities outstanding or that the bank has provided for the
9-19 protection of its customers by furnishing an errors and omissions
9-20 policy or a bond as provided by this subdivision. Securities so
9-21 deposited may be exchanged from time to time for other qualified
9-22 securities.
9-23 A binding commitment to issue such a policy or bond, or the
9-24 tender of applicable securities, is sufficient in connection with
9-25 an application for license.
9-26 Nothing in this subsection permits an unlicensed employee or
9-27 agent of a bank to perform any act of an agent under this Article
10-1 without obtaining a license.
10-2 A bank licensed as an agent under this Article may have
10-3 additional offices from which the business of insurance is
10-4 conducted only in a place with a population of 5,000 or less and
10-5 must comply with the department's regulations regarding additional
10-6 offices.
10-7 A bank licensed as an agent under this Article must maintain
10-8 the insurance records of the bank, including all files relating to
10-9 customer complaints, separate from records relating to the banking
10-10 transactions of the bank.
10-11 If at any time, a bank that holds an agent's license does not
10-12 maintain the qualifications necessary to obtain a license, the
10-13 license of that bank to act as an agent shall be canceled or denied
10-14 in accordance with Sections 10 and 11 of this Article.
10-15 Each bank licensed as an agent under this Article shall file
10-16 under oath with its application for license renewal a list of the
10-17 name and address of each individual who will be acting as an agent
10-18 on behalf of the bank and of each officer and director of the bank,
10-19 as defined by Article 21.02 of this code, and other biographical
10-20 information as required by the department.
10-21 Each bank shall notify the department of any change in its
10-22 officers and directors, and any change in other persons who will be
10-23 acting as agents, as defined by Article 21.02 of this code, and
10-24 submit biographical information on those officers, directors, and
10-25 persons as required by the department not later than the 30th day
10-26 after the date on which the change takes effect.
10-27 Sec. 3. Issuance of License Under Certain Circumstances.
11-1 The department [State Board of Insurance] shall issue a license to
11-2 a person, [or] corporation, or bank in such form as it may prepare
11-3 authorizing such applicant to write the types of insurance
11-4 authorized by law to be issued by applicant's appointing insurance
11-5 carrier, except that:
11-6 (a) Such applicant shall not be authorized to write health
11-7 and accident insurance unless: (i) applicant, if not a
11-8 partnership, [or] corporation, or bank shall have first passed a
11-9 written examination as provided for in this Article [21.07, as
11-10 amended], or (ii) applicant will act only as a ticket-selling agent
11-11 of a public carrier with respect to accident life insurance
11-12 covering risks of travel or as an agent selling credit life, health
11-13 and accident insurance issued exclusively in connection with credit
11-14 transactions, or (iii) applicant will write policies or riders to
11-15 policies providing only lump sum cash benefits in the event of the
11-16 accidental death, or death by accidental means, or dismemberment,
11-17 or providing only ambulance expense benefits in the event of
11-18 accident or sickness; and
11-19 (b) Such applicant, if not a partnership, [or] corporation,
11-20 or bank shall not be authorized to write life insurance in excess
11-21 of $7,500 upon any one life unless: (i) applicant, if not a
11-22 partnership, [or] corporation, or bank shall have first passed a
11-23 written examination as provided for in this Article [21.07, as
11-24 amended], or (ii) applicant will act only as a ticket-selling agent
11-25 of a public carrier with respect to accident life insurance
11-26 covering risks of travel or as an agent selling credit life, health
11-27 and accident insurance issued exclusively in connection with credit
12-1 transactions, or (iii) applicant will write policies or riders to
12-2 policies providing only lump sum cash benefits in the event of the
12-3 accidental death, or death by accidental means, or dismemberment,
12-4 or providing only ambulance expense benefits in the event of
12-5 accident or sickness.
12-6 SECTION 4. Section 4(a), Article 21.07, Insurance Code, is
12-7 amended to read as follows:
12-8 (a) Each applicant for a license under the provisions of
12-9 this Article [21.07, Texas Insurance Code, 1951, as amended,] who
12-10 desires to write health and accident insurance, other than as
12-11 excepted in Section 3 of this Article [21.07], within this State
12-12 shall submit to a personal written examination prescribed by the
12-13 department [State Board of Insurance] and administered in the
12-14 English or Spanish language to determine the applicant's [his]
12-15 competency with respect to health and accident insurance,
12-16 specifically including medicare supplement insurance, and the
12-17 applicant's [his] familiarity with the pertinent provisions of the
12-18 laws of the State of Texas relating to health and accident
12-19 insurance, specifically including medicare supplement insurance,
12-20 and shall pass the same to the satisfaction of the department
12-21 [State Board of Insurance]; except that no written examination
12-22 shall be required of:
12-23 (i) An applicant for the renewal of a license issued
12-24 by the department [State Board of Insurance] pursuant to this
12-25 Article [21.07, Texas Insurance Code, 1951, as amended], which is
12-26 currently in force at the effective date of this Act;
12-27 (ii) An applicant whose license expired less than one
13-1 year prior to the date of application may, in the discretion of the
13-2 department [State Board of Insurance], be issued a license without
13-3 written examination, provided such prior license granted such
13-4 applicant the right to sell health and accident insurance; or
13-5 (iii) An applicant that is a partnership, [or]
13-6 corporation, or bank.
13-7 SECTION 5. Sections 12, 13, and 16, Article 21.07,
13-8 Insurance Code, are amended to read as follows:
13-9 Sec. 12. Penalty. Any person or officer, director, or
13-10 shareholder of a corporation or bank required to be licensed by
13-11 this Article who individually, or as an officer or employee of an
13-12 insurance carrier, or other corporation, wilfully violates any of
13-13 the provisions of this Article shall, in addition to any other
13-14 penalty specifically provided, be guilty of a misdemeanor and, upon
13-15 conviction, shall be fined not more than $500.00 or imprisoned not
13-16 more than six (6) months, or both, each such violation being a
13-17 separate offense hereunder. In addition, if such offender or the
13-18 corporation or bank of which he is an officer, director, or
13-19 shareholder holds a license as an agent, such license shall
13-20 automatically expire upon such conviction.
13-21 Sec. 13. TEXAS DEPARTMENT [STATE BOARD] OF INSURANCE MAY
13-22 ESTABLISH RULES AND REGULATIONS. The commissioner [State Board of
13-23 Insurance] is hereby authorized to establish, and from time to time
13-24 to amend, reasonable rules and regulations to comply with federal
13-25 law applicable to the sale of insurance and for the administration
13-26 of this Article [21.07].
13-27 Sec. 16. WORDING ON [STAMPING OF] LICENSE. When any license
14-1 shall be issued by the department [State Board of Insurance] to an
14-2 applicant entitled to write health and accident insurance, the
14-3 license shall have [stamped] thereon the words HEALTH AND ACCIDENT
14-4 INSURANCE.
14-5 SECTION 6. Section 18, Article 21.07, Insurance Code, is
14-6 amended by adding Subsection (c) to read as follows:
14-7 (c) Notwithstanding any provision of this Article or this
14-8 code to the contrary, a bank located and doing business in a place
14-9 with a population of 5,000 or less that owns a licensed bank
14-10 operating subsidiary as defined by state or federal law, that is
14-11 also located and doing business in a place with a population of
14-12 5,000 or less may receive profits from the licensed bank operating
14-13 subsidiary. To advertise under the bank name or participate in the
14-14 insurance operation other than by receiving profits from the
14-15 insurance business, the bank must hold an agent license. Nothing
14-16 in this section permits a bank or any affiliate to pay commissions
14-17 or other valuable consideration to any nonlicensed employees, and a
14-18 bank may not pay, credit, or otherwise reward particular
14-19 nonlicensed units or geographic locations of the bank or any of its
14-20 affiliates with a portion of the commission.
14-21 SECTION 7. Section 1(b), Chapter 213, Acts of the 54th
14-22 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
14-23 Insurance Code), is amended to read as follows:
14-24 (b) The term "life insurance agent" for the purpose of this
14-25 Act means any person, [or] corporation, or bank that is an
14-26 authorized agent of a legal reserve life insurance company, and any
14-27 person who is a sub-agent of such agent, who acts as such in the
15-1 solicitation of, negotiation for, or procurement of, or collection
15-2 of premiums on, an insurance or annuity contract with a legal
15-3 reserve life insurance company; except that the term "life
15-4 insurance agent" shall not include:
15-5 (1) any regular salaried officer or employee of a
15-6 legal reserve life insurance company, or of a licensed life
15-7 insurance agent, who devotes substantially all of his or her time
15-8 to activities other than the solicitation of applications for
15-9 insurance or annuity contracts and receives no commission or other
15-10 compensation directly dependent upon the business obtained, and who
15-11 does not solicit or accept from the public applications for
15-12 insurance or annuity contracts;
15-13 (2) employers or their officers or employees, or the
15-14 trustees of any employee benefit plan, to the extent that such
15-15 employers, officers, employees or trustees are engaged in the
15-16 administration or operation of any program of employee benefits
15-17 involving the use of insurance or annuities issued by a legal
15-18 reserve life insurance company, provided that such employers,
15-19 officers, employees or trustees are not in any manner compensated,
15-20 directly or indirectly, by the legal reserve life insurance company
15-21 issuing such insurance or annuity contracts;
15-22 (3) except as provided by Section 4(f) of this Act,
15-23 banks, savings and loan associations, or credit unions, or the
15-24 officers and employees of banks, savings and loan associations, or
15-25 credit unions, to the extent that such banks, savings and loan
15-26 associations, credit unions, or officers and employees collect and
15-27 remit premiums by charging same against accounts of depositors on
16-1 the orders of such depositors;
16-2 (4) a ticket-selling agent of a public carrier with
16-3 respect to accident life insurance tickets covering risks of
16-4 travel;
16-5 (5) an agent selling credit life, health and accident
16-6 insurance issued exclusively in connection with credit
16-7 transactions, or acting as agent or solicitor for health and
16-8 accident insurance under license issued pursuant to the provisions
16-9 of Article 21.14 of the Texas Insurance Code.
16-10 SECTION 8. Chapter 213, Acts of the 54th Legislature,
16-11 Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance
16-12 Code), is amended by adding Section 1C to read as follows:
16-13 Sec. 1C. DEFINITION. In this Act, "bank" means a national
16-14 banking association organized and existing under the National Bank
16-15 Acts (12 U.S.C. Section 21 et seq.), a state bank organized and
16-16 existing under the Texas Banking Act (Article 342-1.001 et seq.,
16-17 Vernon's Texas Civil Statutes), a state savings bank organized and
16-18 existing under the Texas Savings Bank Act (Article 489e, Vernon's
16-19 Texas Civil Statutes), a bank branch, or a bank operating
16-20 subsidiary, as defined by state or federal law, that is located and
16-21 doing business in this state in a place with a population of 5,000
16-22 or less. A bank operating subsidiary located and doing business in
16-23 a place with a population of 5,000 or less may own a licensed
16-24 corporate agent that is also located and doing business in a place
16-25 with a population of 5,000 or less, and is subject to Section 3(b)
16-26 of this Act.
16-27 SECTION 9. Section 2(a), Chapter 213, Acts of the 54th
17-1 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
17-2 Insurance Code), is amended to read as follows:
17-3 (a) No person, [or] corporation, or bank shall, within this
17-4 State, solicit, procure, receive, or forward applications for life
17-5 insurance or annuities, or issue or deliver policies for, or in any
17-6 manner secure, help, or aid in the placing of any contract of life
17-7 insurance or annuity for any other person, directly or indirectly,
17-8 with any life insurance company not authorized to do business in
17-9 this State.
17-10 SECTION 10. Sections 3(a) and (b), Chapter 213, Acts of the
17-11 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
17-12 Texas Insurance Code), are amended to read as follows:
17-13 (a) No person, [or] corporation, or bank shall act as a life
17-14 insurance agent within this State until that individual [he] or
17-15 entity [it] shall have procured a license as required by the laws
17-16 of this State.
17-17 (b) No insurer or licensed life insurance agent doing
17-18 business in this State shall pay directly or indirectly any
17-19 commission, or other valuable consideration, to any person, [or]
17-20 corporation, or bank for services as a life insurance agent within
17-21 this State, unless such person, [or] corporation, or bank shall
17-22 hold a currently valid license to act as a life insurance agent as
17-23 required by the laws of this State; nor shall any person, [or]
17-24 corporation, or bank other than a duly licensed life insurance
17-25 agent, accept any such commission or other valuable consideration;
17-26 provided, however, that the provisions of this Section shall not
17-27 prevent the payment or receipt of renewal or other deferred
18-1 commissions to or by any person solely because such person, [or]
18-2 corporation, or bank has ceased to hold a license to act as a life
18-3 insurance agent. This subsection does not prevent a bank located
18-4 in a place with a population of 5,000 or less that owns a licensed
18-5 bank operating subsidiary as defined by state or federal law, that
18-6 is also located and doing business in a place with a population of
18-7 5,000 or less from receiving profits from that licensed bank
18-8 operating subsidiary. To advertise under the bank name or
18-9 participate in the insurance operation other than by receiving
18-10 profits from the insurance business, the bank must hold an agent
18-11 license. Nothing in this Section permits a bank or any affiliate
18-12 to pay commissions or other valuable consideration to nonlicensed
18-13 employees, and a bank may not pay, credit, or otherwise reward
18-14 particular nonlicensed units or geographic locations of the bank or
18-15 any of its affiliates with a portion of the commission.
18-16 SECTION 11. Section 4, Chapter 213, Acts of the 54th
18-17 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
18-18 Insurance Code), is amended by amending Subsections (e) and (f) and
18-19 by adding Subsection (g) to read as follows:
18-20 (e) The department [Commissioner] shall issue a license to a
18-21 corporation if the department [Commissioner] finds:
18-22 (1) That the corporation is a Texas corporation
18-23 organized or existing under the Texas Business Corporation Act or
18-24 the Texas Professional Corporation Act having its principal place
18-25 of business in the State of Texas and having as one of its purposes
18-26 the authority to act as agent under this Act;
18-27 (2) That every officer, director, and shareholder of
19-1 the corporation is individually licensed as an agent under the
19-2 provisions of this Act, or that every officer and director of the
19-3 corporation is individually licensed under this Act, that the
19-4 corporation is a wholly owned subsidiary of a parent corporation
19-5 that is licensed under this Act, and that every shareholder of the
19-6 parent corporation is individually licensed under this Act; and
19-7 (3) That such corporation will have the ability to pay
19-8 any sums up to $25,000 which it might become legally obligated to
19-9 pay on account of any claim made against it by any customer and
19-10 caused by any negligent act, error, or omission of the corporation
19-11 or any person for whose acts the corporation is legally liable in
19-12 the conduct of its business as under this Act. The term "customer"
19-13 as used herein shall mean any person, firm, or corporation to whom
19-14 such corporation sells or attempts to sell a policy of insurance or
19-15 from whom such corporation accepts an application for insurance.
19-16 Such ability shall be proven in one of the following ways:
19-17 (A) An errors and omissions policy insuring such
19-18 corporation against errors and omissions in at least the sum of
19-19 $100,000 with no more than a $10,000 deductible feature issued by
19-20 an insurance company licensed to do business in the State of Texas
19-21 or, if a policy cannot be obtained from a company licensed to do
19-22 business in Texas, a policy issued by a company not licensed to do
19-23 business in Texas on filing an affidavit with the department [State
19-24 Board of Insurance] stating the inability to obtain coverage and
19-25 receiving the department's [Board's] approval; [or]
19-26 (B) A bond executed by such corporation as
19-27 principal and a surety company authorized to do business in this
20-1 State, as surety, in the principal sum of $25,000, payable to the
20-2 department [State Board of Insurance] for the use and benefit of
20-3 customers of such corporation, conditioned that such corporation
20-4 shall pay any final judgment recovered against it by any customer;
20-5 or
20-6 (C) A deposit of cash or securities of the class
20-7 authorized by Articles 2.08 and 2.10 of the Insurance Code, having
20-8 a fair market value of $25,000 with the comptroller [State
20-9 Treasurer]. The comptroller [State Treasurer] is hereby authorized
20-10 and directed to accept and receive such deposit and hold it
20-11 exclusively for the protection of any customer of such corporation
20-12 recovering a final judgment against such corporation. Such deposit
20-13 may be withdrawn only upon filing with the department
20-14 [Commissioner] satisfactory evidence that the corporation has
20-15 withdrawn from business and has no unsecured liabilities
20-16 outstanding, or that such corporation has provided for the
20-17 protection of its customers by furnishing an errors and omissions
20-18 policy or a bond as provided. Securities so deposited may be
20-19 exchanged from time to time for other qualified securities.
20-20 A binding commitment to issue such a policy or bond, or the
20-21 tender of such securities, shall be sufficient in connection with
20-22 any application for license.
20-23 Nothing contained herein shall be construed to permit any
20-24 unlicensed employee or agent of any corporation to perform any act
20-25 of an agent under this Act without obtaining a license.
20-26 If at any time, any corporation holding a license under this
20-27 Act does not maintain the qualifications necessary to obtain a
21-1 license, the license of such corporation to act as an agent shall
21-2 be cancelled or denied in accordance with the provisions of
21-3 Sections 12 and 13 of this Act; provided, however, that should any
21-4 person who is not an agent licensed under this Act acquire shares
21-5 in such a corporation by devise or descent, they shall have a
21-6 period of 90 days from date of acquisition within which to obtain a
21-7 license as an agent or to dispose of the shares to an agent
21-8 licensed under this Act.
21-9 Should such an unlicensed person acquire shares in such a
21-10 corporation and not dispose of them within said period of 90 days
21-11 to a licensed agent, then they must be purchased by the corporation
21-12 for their book value, that is, the value of said shares of stock as
21-13 reflected by the regular books and records of said corporation as
21-14 of the date of the acquisition of said shares by said unlicensed
21-15 person. Should the corporation fail or refuse to so purchase such
21-16 shares, its license shall be cancelled.
21-17 Any such corporation shall have the power to redeem the
21-18 shares of any shareholder, or the shares of a deceased shareholder,
21-19 upon such terms as may be agreed upon by the board of directors and
21-20 such shareholder or such shareholder's personal representative, or
21-21 at such price and upon such terms as may be provided in the
21-22 articles of incorporation, the bylaws, or an existing contract
21-23 entered into between the shareholders of the corporation.
21-24 Each corporation licensed as an agent under this Act shall
21-25 file, under oath, a list of the names and addresses of all of its
21-26 officers, directors, and shareholders with its application for
21-27 renewal license.
22-1 Each corporation licensed as an agent under this Act shall
22-2 notify the department [State Board of Insurance] upon any change in
22-3 its officers, directors, or shareholders not later than the 30th
22-4 day after the date on which the change became effective.
22-5 Except as provided by Subdivision (2) of this subsection, a
22-6 corporation may not own any interest in another corporation
22-7 licensed under this Act, and each owner of an interest in a
22-8 corporation licensed under this Act shall be a natural person who
22-9 holds a valid license issued under this Act.
22-10 No association or any legal entity of any nature, other than
22-11 an individual person, general partnership, [or] corporation, or
22-12 bank may be licensed as a life insurance agent.
22-13 (f) The department shall issue a license to a bank if the
22-14 department finds that:
22-15 (1) the bank satisfies the definition of Section 1C of
22-16 this Article;
22-17 (2) at least one officer of the bank and each
22-18 individual who will be performing any acts as an agent for the bank
22-19 are individually licensed under this Act; and
22-20 (3) the bank will have the ability to pay any sums up
22-21 to $25,000 that it might become legally obligated to pay on account
22-22 of any claim made against it by a customer and caused by a
22-23 negligent act, error, or omission of the bank or any person for
22-24 whose acts the bank is legally liable in the conduct of its
22-25 business under this Act. The term "customer" means any person,
22-26 firm, or corporation to whom the bank sells or attempts to sell a
22-27 policy of insurance or from whom the bank accepts an application
23-1 for insurance. That ability shall be proven through:
23-2 (A) an errors and omissions policy insuring the
23-3 bank against errors and omissions in at least the sum of $100,000
23-4 with not more than a $10,000 deductible feature, issued by an
23-5 insurance company licensed to do business in this state or, if a
23-6 policy cannot be obtained from a company licensed to do business in
23-7 this state, a policy issued by a company not licensed to do
23-8 business in this state on filing an affidavit with the department
23-9 stating the inability to obtain coverage and receiving the
23-10 department's approval;
23-11 (B) a bond executed by the bank as principal and
23-12 a surety company authorized to do business in this state, as
23-13 surety, in the principal sum of $25,000, payable to the department
23-14 for the use and benefit of customers of the bank, conditioned that
23-15 the bank shall pay any final judgment recovered against it by a
23-16 customer; or
23-17 (C) a deposit with the comptroller of cash or
23-18 securities of the class authorized by Articles 2.08 and 2.10 of the
23-19 Insurance Code, with a fair market value of $25,000. The
23-20 comptroller shall accept and receive the deposit and hold it
23-21 exclusively for the protection of a customer of the bank who
23-22 recovers a final judgment against the bank. The deposit may be
23-23 withdrawn only on filing with the department satisfactory evidence
23-24 that the bank has withdrawn from the business of insurance and has
23-25 no unsecured liabilities outstanding or that the bank has provided
23-26 for the protection of its customers by furnishing an errors and
23-27 omissions policy or a bond as provided by this subsection.
24-1 Securities so deposited may be exchanged from time to time for
24-2 other qualified securities.
24-3 A binding commitment to issue such a policy or bond, or the
24-4 tender of applicable securities, is sufficient in connection with
24-5 an application for license.
24-6 Nothing in this subsection permits an unlicensed employee or
24-7 agent of a bank to perform any act of an agent under this Act
24-8 without obtaining a license.
24-9 A bank licensed as an agent under this Act may have
24-10 additional offices from which the business of insurance is
24-11 conducted only in a place with a population of 5,000 or less and
24-12 must comply with the department's regulations regarding additional
24-13 offices.
24-14 A bank licensed as an agent under this Act must maintain the
24-15 insurance records of the bank, including all files relating to
24-16 customer complaints, separate from records relating to the banking
24-17 transactions of the bank.
24-18 If a bank that holds a license under this Act does not
24-19 maintain the qualifications necessary to obtain a license, the
24-20 license of that bank to act as an agent shall be canceled or denied
24-21 in accordance with Sections 12 and 13 of this Act.
24-22 Each bank licensed as an agent under this Act shall file
24-23 under oath with its application for license renewal a list of the
24-24 name and address of each individual who will be acting as an agent
24-25 on behalf of the bank and of each officer and director of the bank,
24-26 as defined by Article 21.02 of the Insurance Code, and other
24-27 biographical information as required by the department.
25-1 Each bank shall notify the department of any change in its
25-2 officers and directors, and any change in other persons who will be
25-3 acting as agents, as defined by Article 21.02, Insurance Code, and
25-4 submit biographical information on those officers, directors, and
25-5 persons as required by the department not later than the 30th day
25-6 after the date on which the change takes effect.
25-7 (g) Each applicant, prior to sitting for the written
25-8 examination as provided for in Section 5 of this Act, shall
25-9 complete, under the supervision of such sponsoring insurer, an
25-10 educational program that shall include:
25-11 (1) such texts as may be prescribed by the
25-12 Commissioner [of Insurance] on the recommendation of the Advisory
25-13 Board as provided in Subsection (c) of Section 5 of this Act; and
25-14 (2) materials that will provide the applicant with the
25-15 basic knowledge of:
25-16 (A) the broad principles of insurance,
25-17 licensing, and regulatory laws of this State;
25-18 (B) principles related to medicare supplement
25-19 insurance; and
25-20 (C) the obligations and duties of a life
25-21 insurance agent.
25-22 SECTION 12. Sections 5(a) and (d), Chapter 213, Acts of the
25-23 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
25-24 Texas Insurance Code), are amended to read as follows:
25-25 (a) Each prospective applicant for a license to act as a
25-26 life insurance agent within this State shall submit to a personal
25-27 written examination administered in the English or Spanish
26-1 language, as prescribed by the department [State Board of
26-2 Insurance], to determine the applicant's competence with respect to
26-3 insurance and annuity contracts, including medicare supplement
26-4 contracts, and the applicant's familiarity with the pertinent
26-5 provisions of the laws of this State and the obligations and duties
26-6 of a life insurance agent, and shall pass the same to the
26-7 satisfaction of the department [State Board of Insurance]. A
26-8 nonrefundable examination fee, in an amount determined by the
26-9 Commissioner [Board] but not more than $20, must accompany the
26-10 application to take the examination. The department shall charge
26-11 the fee each time the examination is taken. The department shall
26-12 give certifications of a passing score to those applicants that
26-13 obtain such a score. No written examination shall be required of:
26-14 (1) An applicant for the renewal of a license issued
26-15 by the department [State Board of Insurance] pursuant to Article
26-16 21.07, [Texas] Insurance Code, [1951,] which is currently in force
26-17 at the time of the effective date of this Act;
26-18 (2) An applicant whose license as a life insurance
26-19 agent expired less than one year prior to the date of application
26-20 may, in the discretion of the department [State Board of
26-21 Insurance], be issued a license without written examination;
26-22 (3) A person who holds the designation Chartered Life
26-23 Underwriter (CLU);
26-24 (4) An applicant that is a partnership, [or]
26-25 corporation, or bank.
26-26 (d) An applicant other than a partnership, [or] corporation,
26-27 or bank for a license to act as a combination life insurance agent
27-1 for a combination company, or as an industrial life agent for an
27-2 industrial company, may, in lieu of taking and passing to the
27-3 satisfaction of the Commissioner a personal written examination as
27-4 provided in Sub-section (a) of this Section 5, submit to a personal
27-5 written examination given by the combination or industrial insurer
27-6 for which the applicant is to be licensed, subject to the following
27-7 definitions and conditions:
27-8 (1) A combination life insurance agent is hereby
27-9 defined as an agent writing weekly premium life insurance or
27-10 monthly ordinary life insurance on a debit basis, provided that a
27-11 combination life insurance agent may also write ordinary contracts
27-12 of life insurance. An industrial life agent is an agent writing
27-13 only weekly life insurance on a debit basis. A combination company
27-14 is hereby defined as an insurer actually writing weekly premium
27-15 life insurance or monthly ordinary life insurance on a debit basis,
27-16 provided that a combination company may also write ordinary
27-17 contracts of life insurance. An industrial company is an insurer
27-18 writing only weekly premium life insurance on a debit basis.
27-19 (2) Any combination or industrial insurer desiring to
27-20 qualify to administer the examination to its agents shall file with
27-21 the Commissioner a complete outline and explanation of the course
27-22 of study and instruction to be given such applicants and the nature
27-23 and manner of conducting the examinations of applicants and, after
27-24 official approval thereof by the Commissioner, may administer such
27-25 examinations.
27-26 (3) The combination or industrial insurer shall
27-27 certify as to each applicant that the applicant [he] has completed
28-1 the approved course of study and instruction and has successfully
28-2 passed the examination in writing without aid.
28-3 (4) It shall be the duty of the Commissioner to
28-4 investigate the manner and method of instruction and examination of
28-5 each combination and industrial insurer as often as deemed
28-6 necessary by the Commissioner and the Commissioner may[, in his
28-7 discretion,] withdraw from any insurer the privilege of examining
28-8 agents in lieu of the examination prescribed in Sub-section (a) of
28-9 this Section 5.
28-10 (5) The license to act as a life insurance agent
28-11 issued to an applicant pursuant to the provisions of this
28-12 Sub-section (d) shall include [be stamped] COMBINATION OR
28-13 INDUSTRIAL LICENSE on its face and shall automatically expire and
28-14 be of no further force and effect when the holder ceases to act as
28-15 a combination or industrial agent for a combination or industrial
28-16 company.
28-17 SECTION 13. Section 7(b), Chapter 213, Acts of the 54th
28-18 Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas
28-19 Insurance Code), is amended to read as follows:
28-20 (b) The [Life Insurance] Commissioner is further authorized
28-21 to enter into reciprocal agreements with the appropriate official
28-22 or any other State waiving the written examination of any applicant
28-23 resident in such other State, provided:
28-24 (1) That a written examination is required of
28-25 applicants for a life insurance agent's license in such other
28-26 State;
28-27 (2) That the appropriate official of such other State
29-1 certifies that the applicant holds a currently valid license as a
29-2 life insurance agent in such other State and either passed such
29-3 written examination or was the holder of a life insurance agent's
29-4 license prior to the time such written examination was required;
29-5 (3) That the applicant has no place of business within
29-6 this State in the transaction of business as a life insurance
29-7 agent;
29-8 (4) That in such other State, a resident of this State
29-9 is privileged to procure a life insurance agent's license upon the
29-10 foregoing conditions and without discrimination as to fees or
29-11 otherwise in favor of the residents of such other State.
29-12 SECTION 14. Sections 14 and 15, Chapter 213, Acts of the
29-13 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
29-14 Texas Insurance Code), are amended to read as follows:
29-15 Sec. 14. Penalty. Any person or officer, director, or
29-16 shareholder of a corporation or bank required to be licensed by
29-17 this Act who individually, or as an officer or employee of a legal
29-18 reserve life insurance company, or other corporation, violates any
29-19 of the provisions of this Act shall, in addition to any other
29-20 penalty specifically provided, be guilty of a misdemeanor and, upon
29-21 conviction, shall be fined not more than $500.00 or imprisoned not
29-22 more than six months, or both, each such violation being a separate
29-23 offense hereunder. In addition, if such offender or corporation or
29-24 bank of which that person [he] is an officer, director, or
29-25 shareholder holds a license as a life insurance agent, such license
29-26 shall automatically expire upon such conviction.
29-27 Sec. 15. Commissioner May Establish Rules and Regulations.
30-1 The [Life Insurance] Commissioner is authorized to establish, and
30-2 from time to time to amend, reasonable rules and regulations to
30-3 comply with federal law applicable to the sale of insurance and for
30-4 the administration of this Act.
30-5 SECTION 15. Sections 16(a)-(d), Chapter 213, Acts of the
30-6 54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's
30-7 Texas Insurance Code), are amended to read as follows:
30-8 (a) In this section, "accident and health insurance agent"
30-9 means any person, [or] corporation, or bank that is an authorized
30-10 agent of a legal reserve life insurance company and who acts as
30-11 such agent only in the solicitation of, negotiation for,
30-12 procurement of, or collection of premiums on an accident and health
30-13 insurance contract with a legal reserve life insurance company, but
30-14 does not include:
30-15 (1) a regular salaried officer or employee of a legal
30-16 reserve life insurance company, or of a licensed life or accident
30-17 and health insurance agent, who devotes substantially all of his or
30-18 her time to activities other than the solicitation of applications
30-19 for insurance contracts and receives no commission or other
30-20 compensation directly dependent upon the business obtained and who
30-21 does not solicit or accept from the public applications for
30-22 insurance contracts;
30-23 (2) employers or their officers or employees, or the
30-24 trustees of any employee benefit plan, to the extent that those
30-25 employers, officers, employees, or trustees are engaged in the
30-26 administration or operation of any program of employee benefits
30-27 involving the use of insurance issued by a legal reserve life
31-1 insurance company, provided that those employers, officers,
31-2 employees, or trustees are not in any manner compensated directly
31-3 or indirectly by the legal reserve life insurance company issuing
31-4 the insurance contracts;
31-5 (3) banks or their officers and employees to the
31-6 extent that the banks, or their officers, and employees collect and
31-7 remit premiums by charging the premiums against the account of a
31-8 depositor on the orders of the depositor;
31-9 (4) a ticket-selling agent of a public carrier with
31-10 respect to accident and health insurance tickets covering risks of
31-11 travel; or
31-12 (5) an agent selling credit health and accident
31-13 insurance issued exclusively in connection with credit
31-14 transactions, or acting as agent or solicitor for health and
31-15 accident insurance under a license issued under [either] Article
31-16 21.07[, Article 21.07-1,] or Article 21.14, Insurance Code, or this
31-17 Act.
31-18 (b) The department [State Board of Insurance] may issue a
31-19 license to a person, [or] a corporation, or a bank to act only as
31-20 an accident and health insurance agent for a legal reserve life
31-21 insurance company as provided by this section.
31-22 (c) Each applicant for a license under this section who
31-23 desires to act as an accident and health insurance agent within
31-24 this state shall submit to a personal written examination
31-25 prescribed by the department [State Board of Insurance] and
31-26 administered in the English or Spanish language to determine the
31-27 applicant's competency with respect to accident and health
32-1 insurance and familiarity with the pertinent provisions of the
32-2 health and accident insurance laws of this state. Except as
32-3 provided by Subsection (d) of this section, each applicant must
32-4 pass the examination to the satisfaction of the department [State
32-5 Board of Insurance].
32-6 (d) A written examination is not required of:
32-7 (1) an applicant for license under this Section 16 if
32-8 the applicant has previously been licensed and currently holds on
32-9 the effective date of this section a valid license issued by the
32-10 department [State Board of Insurance] under [either] Article
32-11 21.07[, Article 21.07-1,] or Article 21.14 of this code, or this
32-12 Act;
32-13 (2) an applicant whose license expires less than one
32-14 year before the date of application and who may, in the discretion
32-15 of the department [State Board of Insurance], be issued a license
32-16 without written examination, provided the prior expired license
32-17 granted the applicant the right to act as an agent for accident and
32-18 health insurance; or
32-19 (3) an applicant that is a partnership, [or]
32-20 corporation, or bank; provided, however, that a partnership, [or]
32-21 corporation, or bank may be licensed hereunder only if it otherwise
32-22 complies with the provisions of Section 4 of this article, but in
32-23 the application of such section to such compensation hereunder, any
32-24 requirement pertaining to or reference therein to "life insurance"
32-25 shall be changed and limited to "health and accident insurance"
32-26 only as is intended by the terms of the Section 16.
32-27 SECTION 16. Section 3, Article 21.14, Insurance Code, is
33-1 amended by amending Subsections (a) and (d)-(e), and by adding
33-2 Subsections (f) and (g) to read as follows:
33-3 (a) When any person, partnership, registered limited
33-4 liability partnership, limited liability company, [or] corporation,
33-5 or bank shall desire to engage in business as a local recording
33-6 agent for an insurance company, or insurance carrier, that person
33-7 [he] or entity [it] shall make application for a license to the
33-8 Texas Department of Insurance, in such form as the Department may
33-9 require. Such application shall bear a signed endorsement by a
33-10 general, state or special agent of a qualified insurance company,
33-11 or insurance carrier that applicant or each member of the
33-12 partnership or each stockholder of the corporation or each member
33-13 of the limited liability company is a resident of this state.
33-14 (d) The department shall issue a license to a bank if the
33-15 department finds that:
33-16 (1) the bank is a national banking association
33-17 organized and existing under the National Bank Acts (12 U.S.C.
33-18 Section 21 et seq.), a state bank organized and existing under the
33-19 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
33-20 Statutes), a state savings bank organized and existing under the
33-21 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
33-22 Statutes), or a bank operating subsidiary, as defined by state or
33-23 federal law, that is located and doing business in this state in a
33-24 place with a population of 5,000 or less;
33-25 (2) at least one officer of the bank and each
33-26 individual who will be performing any acts of an agent for the bank
33-27 are individually licensed under this Article; and
34-1 (3) the bank will have the ability to pay any sums up
34-2 to $25,000 that it might become legally obligated to pay on account
34-3 of any claim made against it by a customer and caused by a
34-4 negligent act, error, or omission of the bank or any person for
34-5 whose acts the bank is legally liable in the conduct of its
34-6 business as a local recording agent. The term "customer" means any
34-7 person, firm, or corporation to whom the bank sells or attempts to
34-8 sell a policy of insurance or from whom the bank accepts an
34-9 application for insurance. That ability shall be proven through:
34-10 (A) an errors and omissions policy insuring the
34-11 bank against errors and omissions, in at least the sum of $100,000
34-12 with not more than a $10,000 deductible feature, or the sum of at
34-13 least $300,000 with not more than a $25,000 deductible feature,
34-14 issued by an insurance company licensed to do business in this
34-15 state or, if a policy cannot be obtained from a company licensed to
34-16 do business in this state, a policy issued by a company not
34-17 licensed to do business in this state, on filing an affidavit with
34-18 the department stating the inability to obtain coverage and
34-19 receiving the department's approval;
34-20 (B) a bond executed by the bank as principal and
34-21 a surety company authorized to do business in this state, as
34-22 surety, in the principal sum of $25,000, payable to the department
34-23 for the use and benefit of customers of the bank, conditioned that
34-24 the bank shall pay any final judgment recovered against it by a
34-25 customer; or
34-26 (C) a deposit with the comptroller of cash or
34-27 securities of the class authorized by Articles 2.08 and 2.10 of
35-1 this code, with a fair market value of $25,000. The comptroller
35-2 shall accept and receive the deposit and hold it exclusively for
35-3 the protection of a customer of the bank who recovers a final
35-4 judgment against the bank. The deposit may be withdrawn only on
35-5 filing with the department satisfactory evidence that the bank has
35-6 withdrawn from the business of insurance and has no unsecured
35-7 liabilities outstanding or that the bank has provided for the
35-8 protection of its customers by furnishing an errors and omissions
35-9 policy or a bond as provided by this subsection. Securities so
35-10 deposited may be exchanged from time to time for other qualified
35-11 securities.
35-12 A binding commitment to issue such a policy or bond, or the
35-13 tender of applicable securities, is sufficient in connection with
35-14 an application for license.
35-15 Nothing in this subsection shall be construed to permit an
35-16 unlicensed employee or agent of a bank to perform any act of a
35-17 local recording agent without obtaining a local recording agent's
35-18 license. The department may not require a bank to take the
35-19 examination provided by Section 6 of this Article.
35-20 A bank licensed as an agent under this Article may have
35-21 additional offices from which the business of insurance is
35-22 conducted only in a place with a population of 5,000 or less and
35-23 must comply with the department's regulations regarding additional
35-24 offices.
35-25 A bank licensed as an agent under this article must maintain
35-26 its insurance records, including all files relating to and
35-27 reflecting customer complaints, separate from records relating to
36-1 banking transactions of the bank.
36-2 If a bank that holds a local recording agent's license does
36-3 not maintain the qualifications necessary to obtain a license, the
36-4 license of that bank to act as a local recording agent shall be
36-5 canceled or denied in accordance with Sections 16 and 18 of this
36-6 article.
36-7 Each bank licensed as a local recording agent shall file
36-8 under oath with its application for license renewal a list of the
36-9 name and address of each individual who will be acting as an agent
36-10 on behalf of the bank and of each officer and director of the bank,
36-11 as defined by Article 21.02 of this code, and other biographical
36-12 information as required by the department.
36-13 Each bank licensed as a local recording agent shall notify
36-14 the department of any change in its officers and directors and any
36-15 change in other persons who will be performing any acts of an
36-16 agent, as defined by Article 21.02 of this code, and submit
36-17 biographical information on those officers, directors, and persons
36-18 as required by the department not later than the 30th day after the
36-19 date on which the change takes effect.
36-20 The term "firm," as that term applies to local recording
36-21 agents in Sections 2, 12, and 16 of this article, includes
36-22 corporations and banks.
36-23 (e) The term "partnership" or "agency partnership" as used
36-24 in this Article means a general partnership or a registered limited
36-25 liability partnership domiciled in Texas.
36-26 (f) [(e)] In this Article, the term "corporation" or
36-27 "corporations" shall mean a corporation organized under the Texas
37-1 Business Corporation Act, The Texas Professional Corporation Act
37-2 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
37-3 domiciled limited liability company organized or existing under the
37-4 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
37-5 Civil Statutes) having its principal place of business in this
37-6 state and having as one of its purposes the authority to act as an
37-7 insurance agent. Each officer, manager, and member of a limited
37-8 liability company must be licensed under this Article. The
37-9 licensing and regulation of a limited liability company shall be
37-10 subject to the same provisions and requirements of this Article
37-11 that are applicable to corporations licensed under this Article.
37-12 (g) In this article, the term "bank" means a national
37-13 banking association organized and existing under the National Bank
37-14 Acts (12 U.S.C. Section 21 et seq.), a state bank organized and
37-15 existing under the Texas Banking Act (Article 342-1.001 et seq.,
37-16 Vernon's Texas Civil Statutes), a state savings bank organized and
37-17 existing under the Texas Savings Bank Act (Article 489e, Vernon's
37-18 Texas Civil Statutes), a bank branch, or a bank operating
37-19 subsidiary, as defined by state or federal law, that is located and
37-20 doing business in this state in a place with a population of 5,000
37-21 or less. A bank operating subsidiary, as defined by state or
37-22 federal law, located and doing business in a place in this state
37-23 with a population of 5,000 or less may own a licensed corporate
37-24 agent that is also located and doing business in a place with a
37-25 population of 5,000 or less, and is subject to Section 3a(5) of
37-26 this Article.
37-27 SECTION 17. Section 3a, Article 21.14, Insurance Code, is
38-1 amended by adding Subsection (5) to read as follows:
38-2 (5) Notwithstanding any provision of this article or
38-3 this code to the contrary, a bank located and doing business in a
38-4 place with a population of 5,000 or less that owns a licensed bank
38-5 operating subsidiary, as defined by state or federal law, that is
38-6 also located and doing business in a place with a population of
38-7 5,000 or less may receive profits from the licensed bank operating
38-8 subsidiary. To advertise under the bank name or participate in the
38-9 insurance operation other than by receiving profits from the
38-10 insurance business, the bank must hold an agent license. Nothing
38-11 in this section permits a bank or any affiliate to pay commissions
38-12 or other valuable consideration to any nonlicensed employees, and a
38-13 bank may not pay, credit, or otherwise reward particular
38-14 nonlicensed units or geographic locations of the bank or any of its
38-15 affiliates with a portion of the commission.
38-16 SECTION 18. Sections 4(a)-(c), Article 21.14, Insurance
38-17 Code, are amended to read as follows:
38-18 (a) It shall be unlawful for any person, firm, partnership,
38-19 [or] corporation or bank, or any partner, officer, director,
38-20 employee, or shareholder of a corporation, or any officer,
38-21 director, or employee of a bank to act as a local recording agent
38-22 or solicitor in procuring business for any insurance company,
38-23 corporation, interinsurance exchange, mutual, reciprocal,
38-24 association, Lloyds or other insurance carrier, until that person
38-25 [he] or entity [it] shall have in force the license provided for
38-26 herein.
38-27 (b) No insurer doing business in this state shall pay
39-1 directly or indirectly any commission, or other valuable
39-2 consideration, to any person, firm, partnership, [or] corporation,
39-3 or bank for services as a local recording agent within this state,
39-4 unless such person, firm, partnership, [or] corporation, or bank
39-5 shall hold a currently valid license and appointment to act as a
39-6 local recording agent as required by the laws of this state; nor
39-7 shall any person, firm, partnership, [or] corporation, or bank
39-8 other than a duly licensed and appointed local recording agent
39-9 accept any such commission or other valuable consideration;
39-10 provided, however, that nothing contained in this subsection shall
39-11 prohibit an assigned risk pool or assigned risk plan, duly
39-12 authorized to operate by the laws of this state, from paying
39-13 commissions, or other valuable consideration, to a duly licensed
39-14 person, firm, partnership, [or] corporation, or bank for services
39-15 as a local recording agent.
39-16 (c) No licensed local recording agent, managing general
39-17 agent, or surplus lines agent doing business in this state shall
39-18 pay directly or indirectly any commission, or other valuable
39-19 consideration, to any person, firm, partnership, [or] corporation,
39-20 or bank for services as a local recording agent within this state,
39-21 unless such person, firm, partnership, [or] corporation, or bank
39-22 shall hold a currently valid license to act as a local recording
39-23 agent as required by the laws of this state; nor shall any person,
39-24 firm, partnership, [or] corporation, or bank other than a duly
39-25 licensed local recording agent accept any such commission or other
39-26 valuable consideration.
39-27 SECTION 19. Section 5, Article 21.14, Insurance Code, is
40-1 amended to read as follows:
40-2 Sec. 5. Active agents or solicitors only to be licensed. No
40-3 license shall be granted to any person, firm, partnership, [or]
40-4 corporation, or bank as a local recording agent or to a person as a
40-5 solicitor, for the purpose of writing any form of insurance, unless
40-6 it is found by the department [State Board of Insurance] that such
40-7 person, firm, partnership, [or] corporation, or bank is or intends
40-8 to be, actively engaged in the soliciting or writing of insurance
40-9 for the public generally; that each person or individual of a firm
40-10 is a resident of Texas and is to be actively engaged in good faith
40-11 in the business of insurance, and that the application is not being
40-12 made in order to evade the laws against rebating and discrimination
40-13 either for the applicant or for some other person, firm,
40-14 partnership, [or] corporation, or bank. Nothing herein contained
40-15 shall prohibit an applicant insuring property which the applicant
40-16 owns or in which the applicant has an interest; but it is the
40-17 intent of this Section to prohibit coercion of insurance and to
40-18 preserve to each citizen the right to choose that individual's
40-19 [his] own agent or insurance carrier, and to prohibit the licensing
40-20 of an individual, firm, partnership, [or] corporation, or bank to
40-21 engage in the insurance business principally to handle business
40-22 which the applicant controls only through ownership, mortgage or
40-23 sale, family relationship or employment, which shall be taken to
40-24 mean that an applicant who is making an original application for
40-25 license shall show the department [State Board of Insurance] that
40-26 the applicant has a bona fide intention to engage in business in
40-27 which, in any calendar year, at least twenty-five per cent (25%) of
41-1 the total volume of premiums shall be derived from persons or
41-2 organizations other than applicant and from property other than
41-3 that on which the applicant shall control the placing of insurance
41-4 through ownership, mortgage, sale, family relationship or
41-5 employment. Nothing herein contained shall be construed to
41-6 authorize a partnership, [or] corporation, or bank to receive a
41-7 license as a solicitor.
41-8 SECTION 20. Section 24, Article 21.14, Insurance Code, is
41-9 amended to read as follows:
41-10 Sec. 24. VIOLATION OF ACT. Any person or any member of any
41-11 firm, or any corporation or bank, or any officer, director,
41-12 shareholder or employee of any corporation or bank who violates any
41-13 of the provisions of Sections 4, 15 and 22 of this Article shall be
41-14 guilty of a misdemeanor, and on conviction in a court of competent
41-15 jurisdiction, shall be punished by a fine of not less than One
41-16 Dollar ($1.00) nor more than One Hundred Dollars ($100.00).
41-17 SECTION 21. Article 21.14, Insurance Code, is amended by
41-18 adding Section 27 to read as follows:
41-19 Sec. 27. RULES. In addition to other rules required or
41-20 authorized by this article, the commissioner may adopt rules in
41-21 accordance with federal law applicable to the regulation of the
41-22 sale of insurance that are necessary and proper to carry out the
41-23 provisions of this article.
41-24 SECTION 22. Subchapter B, Chapter 21, Insurance Code, is
41-25 amended by adding Article 21.21-9 to read as follows:
41-26 Art. 21.21-9. UNFAIR METHODS OF COMPETITION AND UNFAIR
41-27 PRACTICES BY FINANCIAL INSTITUTIONS
42-1 Sec. 1. DEFINITIONS. In this article:
42-2 (1) "Affiliate" means a person who, directly or
42-3 indirectly or through one or more intermediaries, controls or is
42-4 controlled by another person or is under common control with
42-5 another person.
42-6 (2) "Bank" means a national banking association
42-7 organized and existing under the National Bank Acts (12 U.S.C.
42-8 Section 21 et seq.), a state bank organized and existing under the
42-9 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
42-10 Statutes), a state savings bank organized and existing under the
42-11 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
42-12 Statutes), a bank branch, or a bank operating subsidiary, as
42-13 defined by state or federal law, that is located and doing business
42-14 in this state in a place with a population of 5,000 or less.
42-15 Sec. 2. UNFAIR METHODS OF COMPETITION AND UNFAIR PRACTICES
42-16 DEFINED. (a) The following are unfair methods of competition and
42-17 unfair practices in the sale of insurance by banks:
42-18 (1) Tying. (A) When the agent is a bank, requiring
42-19 the purchase of insurance from the bank, its subsidiary or
42-20 affiliate, or from or through any particular agent, solicitor,
42-21 insurer, or any other person or entity, as a condition of extending
42-22 or renewing credit, leasing or selling property, or furnishing
42-23 services;
42-24 (B) Conditioning the terms of credit or the sale
42-25 or lease of property on acquisition of insurance from or through
42-26 the bank, its subsidiary or affiliate, or any other particular
42-27 person or entity;
43-1 (C) Rejecting any required policy solely because
43-2 that policy has been issued or underwritten by a person or entity
43-3 who is not associated with the bank; or
43-4 (D) Imposing any requirement on an agent or
43-5 broker not associated with the bank that is not imposed on an agent
43-6 or broker who is associated with the bank or the bank's subsidiary
43-7 or affiliate; and
43-8 (2) Bank affiliated agent disclosures. When a bank is
43-9 soliciting the purchase of or is selling insurance, or any person
43-10 is soliciting the purchase of or is selling insurance recommended
43-11 or sponsored by the bank, on the premises of the bank, or in
43-12 connection with a product offering of the bank, failing to disclose
43-13 clearly in all promotional materials relating to insurance products
43-14 that are distributed to customers and potential customers that:
43-15 (A) insurance products sold through or in the
43-16 bank or its subsidiary or affiliate are not insured by the Federal
43-17 Deposit Insurance Corporation;
43-18 (B) the products are not issued, guaranteed, or
43-19 underwritten by the bank or the Federal Deposit Insurance
43-20 Corporation; and
43-21 (C) the products involve investment risk, if
43-22 appropriate, including potential loss of principal.
43-23 (b) Subsection (a)(1) of this section does not prevent a
43-24 person who lends money or extends credit from placing insurance on
43-25 real or personal property if the mortgagor, borrower, or purchaser
43-26 has failed to provide required insurance in accordance with the
43-27 terms of the loan or credit document.
44-1 Sec. 3. DISCLOSURE REQUIRED BY BANKS. (a) The following
44-2 disclosure requirements apply to each agent that is a bank, or that
44-3 solicits the purchase of or sells insurance recommended or
44-4 sponsored by a bank, on the premises of a bank, or in connection
44-5 with a product offering of a bank. Promotional materials relating
44-6 to insurance products distributed to customers and potential
44-7 customers must clearly disclose that insurance products sold
44-8 through the bank affiliated agent:
44-9 (1) are not insured by the Federal Deposit Insurance
44-10 Corporation;
44-11 (2) are not issued, guaranteed, or underwritten by the
44-12 bank or the Federal Deposit Insurance Corporation; and
44-13 (3) involve investment risk, if appropriate, including
44-14 potential loss of principal.
44-15 (b) At the time a loan application is made, a bank shall
44-16 provide to the customer a written disclosure in substantially the
44-17 form provided by this subsection. The disclosure form must be
44-18 separate and apart from any loan application or loan document. The
44-19 bank employee who presents the disclosure and the customer shall
44-20 sign and date the disclosure form. One copy of the disclosure form
44-21 shall be maintained by the bank in the loan file and one copy shall
44-22 be provided to the customer for his or her records. The disclosure
44-23 must be in substantially the following form:
44-24 "CUSTOMER DISCLOSURE
44-25 "You have applied for a loan with the bank. As permitted by
44-26 the Texas Credit Code, the bank is requiring that collateral used
44-27 to secure the loan be insured to cover the amount of the loan to
45-1 the extent insurance is available on the property to be insured,
45-2 against the usual and customary casualty losses.
45-3 "You have the right to provide this insurance either through
45-4 existing policies already owned or controlled by you or by
45-5 procuring the insurance through any insurance agent or company
45-6 authorized to transact business in Texas.
45-7 "The bank, through its own insurance agency, can also make
45-8 this insurance available to you. However, federal and state laws
45-9 provide that the bank cannot require you to obtain insurance
45-10 through the bank, its subsidiary, an affiliate, or any particular
45-11 unaffiliated third party, either as a condition to obtaining this
45-12 credit or to obtain special terms or consideration.
45-13 "Insurance products sold through or in the bank or its
45-14 affiliate or subsidiary are not insured by the Federal Deposit
45-15 Insurance Corporation and are not issued, guaranteed, or
45-16 underwritten by the bank or the Federal Deposit Insurance
45-17 Corporation.
45-18 "You are not required or obligated to purchase insurance from
45-19 the bank or any subsidiary, affiliate, or particular unaffiliated
45-20 third party as a condition to obtaining your loan, and your
45-21 decision as to insurance agents will not affect your credit terms
45-22 in any way.
45-23 ____________________ ____________________
45-24 Customer Date
45-25 ____________________
45-26 Employee of Bank"
45-27 (c) An individual who is an employee or agent of a bank, or
46-1 a subsidiary or affiliate of a bank, may not, directly or
46-2 indirectly, make an insurance-related referral related to, or
46-3 solicit the purchase of any insurance from, a customer knowing that
46-4 the customer has applied for a loan or extension of credit from a
46-5 financial institution, before the customer has received a written
46-6 commitment with respect to that loan or extension of credit, or, if
46-7 a written commitment has not been or will not be issued in
46-8 connection with the loan or extension of credit, before the
46-9 customer receives notification of approval of the loan or extension
46-10 of credit by the person and that person creates a written record of
46-11 the loan or extension of credit approval. This subsection does not
46-12 prohibit a bank from:
46-13 (1) informing a customer that insurance is required in
46-14 connection with a loan;
46-15 (2) contacting persons in the course of a direct or
46-16 mass mailing to a group of persons in a manner that is not related
46-17 to the person's loan application or credit decision; or
46-18 (3) selling credit life, credit disability, credit
46-19 property, or involuntary unemployment insurance specifically
46-20 authorized by this code and approved for sale in this state, that
46-21 is sold in conjunction with a credit transaction.
46-22 (d) The commissioner may amend the disclosure form as
46-23 necessary to comply with federal or state law.
46-24 (e) This section does not apply to a credit life, credit
46-25 accident and health, credit property, or credit involuntary
46-26 unemployment insurance policy that is otherwise specifically
46-27 authorized by this code, approved for sale in this state, and sold
47-1 in connection with a credit transaction.
47-2 Sec. 4. INDEPENDENCE OF BANK AGENTS FROM LOAN TRANSACTIONS.
47-3 (a) If insurance is offered or sold to a bank customer in
47-4 connection with a loan transaction by a bank, the insurance sales
47-5 person involved in that insurance transaction may not be involved
47-6 in that loan transaction and may not also be the person making that
47-7 loan.
47-8 (b) This section does not apply to a bank that has $40
47-9 million or less in total assets, as reported on the most recent
47-10 Federal Financial Institutions Examination Council (FFIEC)
47-11 Consolidated Report of Condition and Income or any successor report
47-12 required by federal or state law. In addition, this section does
47-13 not apply to a credit life, credit disability, credit property, or
47-14 involuntary unemployment insurance product that is specifically
47-15 authorized by this code, approved for sale in this state, and sold
47-16 in conjunction with a credit transaction.
47-17 Sec. 5. CUSTOMER PRIVACY. (a) In this section:
47-18 (1) "Customer" means a person with an investment,
47-19 security, deposit, trust, or credit relationship with a financial
47-20 institution.
47-21 (2) "Nonpublic customer information" means information
47-22 regarding an individual that is derived from a bank record. The
47-23 term does not include customer names, addresses, and telephone
47-24 numbers but does include information concerning insurance premiums,
47-25 the terms and conditions of insurance coverage, insurance
47-26 expirations, insurance claims, and insurance history of the
47-27 individual.
48-1 (b) A person may not use nonpublic customer information for
48-2 the purpose of selling or soliciting the purchase of insurance, or
48-3 provide nonpublic customer information to a third party for the
48-4 purpose of another's sale or solicitation of the purchase of
48-5 insurance, unless it is clearly and conspicuously disclosed that
48-6 the information may be so used and the customer has been provided
48-7 an opportunity to object before the use of that information for
48-8 this purpose.
48-9 Sec. 6. PHYSICAL LOCATION OF INSURANCE ACTIVITIES. The
48-10 place of solicitation or sale of insurance by a bank or on the
48-11 premises of a bank must be clearly and conspicuously indicated by
48-12 signs in order to be readily distinguishable by the public as
48-13 separate and distinct from the lending and deposit-taking
48-14 activities of the bank. If a person who would otherwise be subject
48-15 to the requirements of this section does not have the physical
48-16 space to comply, the commissioner may grant a waiver from the
48-17 requirements of this section on written request by that person
48-18 demonstrating that, due to the size of the physical premises of the
48-19 person, compliance is not possible if the person also identifies
48-20 other steps that will be taken to minimize customer confusion.
48-21 Sec. 7. RULES. The commissioner may adopt reasonable rules
48-22 to comply with federal law applicable to the sale of insurance and
48-23 for the implementation and administration of this article.
48-24 SECTION 23. Article 21.11, Insurance Code, is amended to
48-25 read as follows:
48-26 Art. 21.11. NONRESIDENT [COMMISSIONS TO NON-RESIDENTS;
48-27 CANCELLATION OF NON-RESIDENT AGENT'S LICENSE; NON-RESIDENT AGENT
49-1 NOT TO ACT AS SURPLUS LINES] AGENT
49-2 Sec. 1. NONRESIDENT AGENT LICENSE. (a) Notwithstanding
49-3 Sections 3(a) and (b), Article 21.14, of this code, the department
49-4 shall license a person who is not a resident of this state to act
49-5 as a nonresident agent in accordance with Article 21.14 of this
49-6 code, subject to the limitations of this article.
49-7 (b) An applicant for issuance of a license under this
49-8 section must meet the requirements for issuance of a license under
49-9 Article 21.14 of this code, except that the department shall waive
49-10 any of those license requirements for an applicant with a valid
49-11 license from another state or jurisdiction that has license
49-12 requirements substantially equivalent to those of this state.
49-13 Sec. 2. RIGHTS OF LICENSE HOLDER. (a) Except as provided
49-14 by this section, a license issued under this article to an
49-15 individual who is not a resident of this state grants the same
49-16 rights and privileges afforded under a license issued under Article
49-17 21.14 of this code.
49-18 (b) A person who holds a license issued under this article
49-19 may not:
49-20 (1) maintain an office in this state;
49-21 (2) solicit insurance business in this state by any
49-22 method, including an oral, written, or electronic communication; or
49-23 (3) employ solicitors or others to directly or
49-24 indirectly solicit insurance in this state.
49-25 (c) The commissioner shall impose on a resident of another
49-26 state or jurisdiction of the United States who is an applicant for
49-27 a license or a holder of a license issued under this article any
50-1 requirement or restriction that:
50-2 (1) the other state or jurisdiction of the United
50-3 States imposes on a resident of this state who is a nonresident
50-4 applicant or license holder in that state or jurisdiction; and
50-5 (2) is in addition to or stricter than the
50-6 requirements or restrictions imposed under the insurance law of
50-7 this state on an applicant or license holder who is not a resident
50-8 of this state.
50-9 (d) For purposes of Subsection (c) of this section,
50-10 "requirement or restriction" includes a requirement or restriction
50-11 imposed by a law or regulation that:
50-12 (1) limits the rights or privileges of a person;
50-13 (2) affects a commission or other compensation paid to
50-14 a person; or
50-15 (3) imposes a condition precedent on a person.
50-16 Sec. 3. LIMITATIONS. (a) This article does not permit:
50-17 (1) [Any person, agent, firm, or corporation licensed
50-18 by the Board to act as a fire and marine, marine, tornado, rent,
50-19 accident, casualty, liability, health, elevator, disability, plate
50-20 glass, burglary, bonding, title, surety or fidelity insurance agent
50-21 in the State of Texas, is hereby prohibited from paying, directly
50-22 or indirectly, any commission, brokerage or other valuable
50-23 consideration on account of any policy or policies covering
50-24 property, person or persons in this State, to any person, persons,
50-25 agent, firm or corporation that is a non-resident of this State, or
50-26 to any person or persons, agent, firm or corporation not duly
50-27 licensed by the Board as a fire, fire and marine, marine, tornado,
51-1 rent, accident, casualty, liability, health, elevator, disability,
51-2 plate glass, burglary, bonding, title, surety or fidelity insurance
51-3 agent; excepting however, that on any policy of insurance
51-4 originated by a Licensed Non-Resident Insurance Agent, as
51-5 hereinafter defined, and covering property or persons in this
51-6 State, a Texas local Recording Agent may divide the commission with
51-7 the originating Licensed Non-Resident Insurance Agent, but in any
51-8 such case the insurance company or carrier shall pay to the Texas
51-9 Local Recording Agent through which such policy is issued, signed
51-10 or countersigned, his minimum share, which shall be a sum not less
51-11 than the amount of commission or brokerage required to be paid by
51-12 the laws or regulations of the State of such originating
51-13 Non-Resident Agent when a similar policy of insurance is originated
51-14 by a Texas Local Recording Agent covering persons or property in
51-15 such other State.]
51-16 [Nothing herein shall prevent a Texas Local Recording Agent
51-17 from dividing with, or paying commissions to, another Texas Local
51-18 Recording Agent. Nothing herein shall relieve any insurance
51-19 company or carrier covered thereby from writing Texas risks through
51-20 Texas agents as provided in Article 21.09, Insurance Code.]
51-21 [A Licensed Non-Resident Insurance Agent is any person, firm
51-22 or corporation residing or domiciled in another State and having a
51-23 Non-Resident Insurance Agent's license as is hereinafter
51-24 authorized.]
51-25 [Upon application, in such form as the Board of Insurance
51-26 Commissioners may require, a non-resident of this State who is duly
51-27 licensed to transact insurance other than life under the laws of
52-1 the State wherein such applicant resides, if such State does not
52-2 prohibit residents of this State from acting as insurance agent
52-3 therein, the Board of Insurance Commissioners may issue to such
52-4 applicant a Non-Resident Agent's license.]
52-5 [The issuance of a Non-Resident Agent's license shall be for
52-6 the purpose of permitting a Local Recording Agent of Texas to
52-7 divide commission with an agent of another State on insurance
52-8 covering property or persons in this State placed with or through a
52-9 Local Recording Agent, and to permit an agent of another State, who
52-10 qualifies and is licensed as a Non-Resident Agent, to inspect and
52-11 service such risks in Texas, which license shall be subject to the
52-12 same fees, qualifications, requirements and restrictions as apply
52-13 to Local Recording Agents of this State, except that an office
52-14 shall not be maintained in this State by a Non-Resident Agent and
52-15 all such insurance transacted shall be through licensed Local
52-16 Recording Agents as provided in Article 21.09 of the Texas
52-17 Insurance Code; and provided further that a Non-Resident Agent
52-18 shall transact all matters with the Board of Insurance
52-19 Commissioners relating to rates and rate engineering and
52-20 terminology of standard policy forms through Local Recording
52-21 Agents, and nothing contained herein shall be construed as granting
52-22 authority to a Non-Resident Agent to transact such matters directly
52-23 with the Board of Insurance Commissioners; and, except that the
52-24 Board of Insurance Commissioners, at its discretion, on payment by
52-25 applicant of the examination fee, may enter into a reciprocal
52-26 arrangement with the officer having jurisdiction of insurance
52-27 business in any other State to accept in lieu of the written
53-1 examination of such an applicant residing therein, a certificate of
53-2 such officer to the effect that the applicant is licensed as an
53-3 insurance agent in such State and has complied with its
53-4 qualification standards in respect to the following:]
53-5 [(a) Experience or training;]
53-6 [(b) Reasonable familiarity with the broad principles
53-7 of insurance, licensing and regulatory laws, and with provisions,
53-8 terms, and conditions of the insurance which applicant proposes to
53-9 transact; and]
53-10 [(c) A fair and general understanding of the
53-11 obligations and duties of an insurance agent.]
53-12 [Nothing contained herein shall be construed to permit] any
53-13 person or firm [who is] licensed solely as a broker in the person's
53-14 or firm's state [State] of [his] residence to be granted a
53-15 [Non-Resident] license under this article [as referred to herein];
53-16 (2) [provided further that nothing contained herein
53-17 shall be construed to permit] a holder of a [Non-Resident Agent's]
53-18 license issued under this article to act as a surplus lines agent
53-19 [Surplus Lines Agent] under [the provisions of] Article 1.14-2 of
53-20 this code [the Insurance Code] or to perform any of the acts
53-21 permitted under Article 1.14-2 of this code, except as provided
53-22 under Section 10, Article 21.54, of this code; [thereunder] or
53-23 (3) [to permit] any person or firm who holds a
53-24 [Non-Resident Agent's] license issued under this article [as
53-25 authorized herein] to engage in any form of direct solicitation of
53-26 insurance within this state [State].
53-27 (b) The commissioner shall revoke a nonresident agent's [A
54-1 Non-Resident Agent's] license issued under this article if the
54-2 commissioner finds [shall be cancelled and not be subject to
54-3 reissuance when it is found by the Board of Insurance
54-4 Commissioners] that the [such] license was obtained or is being
54-5 used for the purpose of transacting insurance through a local
54-6 recording agent [Local Recording Agent] in [such] a manner that
54-7 permits the individual licensed under this article [as to permit a
54-8 Non-Resident Agent], by subterfuge, to transact insurance as a
54-9 local recording agent.
54-10 (c) In the circumstances described by Subsection (b) of this
54-11 section, the commissioner shall also revoke [Local Recording Agent,
54-12 and in which event] the license of the affected local recording
54-13 agent.
54-14 (d) A license revoked under Subsection (b) or (c) of this
54-15 section is [Local Recording Agent likewise shall be cancelled and]
54-16 not [be] subject to reissuance before the fifth anniversary of the
54-17 date the revocation is effective.
54-18 (e) The commissioner shall order that any [and all]
54-19 insurance transacted under an [such] arrangement described by
54-20 Subsection (b) of this section [shall] be cancelled[, provided
54-21 further that the provisions of Sections 16 and 17, Article 21.14 of
54-22 the Insurance Code shall apply to such cancellation].
54-23 (f) Article 21.01-2 of this code applies to licensing of a
54-24 nonresident agent under this article.
54-25 Sec. 4. HOME OFFICE EMPLOYEE. This article does not affect
54-26 the authority established under Section 20, Article 21.14, of this
54-27 code of an actual full-time home office salaried employee of an
55-1 insurance carrier licensed to do business in this state.
55-2 Sec. 5. RULES. The commissioner may adopt rules to
55-3 implement this article.
55-4 SECTION 24. Article 21.09, Insurance Code, is repealed.
55-5 SECTION 25. (a) Except as provided by Subsection (b) of
55-6 this section, this Act takes effect September 1, 1997.
55-7 (b) Sections 23 and 24 of this Act take effect July 1, 1997.
55-8 SECTION 26. The importance of this legislation and the
55-9 crowded condition of the calendars in both houses create an
55-10 emergency and an imperative public necessity that the
55-11 constitutional rule requiring bills to be read on three several
55-12 days in each house be suspended, and this rule is hereby suspended,
55-13 and that this Act take effect and be in force according to its
55-14 terms, and it is so enacted.
_______________________________ _______________________________
President of the Senate Speaker of the House
I certify that H.B. No. 3391 was passed by the House on May
8, 1997, by the following vote: Yeas 130, Nays 1, 1 present, not
voting; and that the House concurred in Senate amendments to H.B.
No. 3391 on May 23, 1997, by the following vote: Yeas 141, Nays 0,
1 present, not voting.
_______________________________
Chief Clerk of the House
I certify that H.B. No. 3391 was passed by the Senate, with
amendments, on May 21, 1997, by the following vote: Yeas 29, Nays
0, 1 present, not voting.
_______________________________
Secretary of the Senate
APPROVED: _____________________
Date
_____________________
Governor