Bill not drafted by TLC or Senate E&E.
Line and page numbers may not match official copy.
By Smithee H.B. No. 3391
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the licensing of banks as insurance agents; providing a
1-3 penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subsections (a) and (b), Section 1, Article
1-6 21.07, Insurance 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 he or it shall
1-17 have first procured a license from the department [State Board of
1-18 Insurance] as in this Article [21.07, as amended hereby], is
1-19 provided, and no such insurance carrier shall appoint any person,
1-20 [or] corporation, or bank to act as its agent unless such person,
1-21 [or] corporation, or bank shall have obtained a license under the
1-22 provisions of this Article, and no such person, [or] corporation,
1-23 or bank who obtains a license shall engage in business as an agent
1-24 until he or it shall have been appointed to act as an agent by some
2-1 duly authorized insurance carrier designated by the provisions of
2-2 this Article [21.07] and authorized to do business in the State of
2-3 Texas. Any person, [or] corporation, or bank desiring to act as an
2-4 agent of any insurance carrier licensed to do business in the State
2-5 of Texas and writing health and accident insurance may obtain a
2-6 separate license as an agent to write health and accident insurance
2-7 provided such person, [or] corporation, or bank complies with the
2-8 provisions of this Article and has been appointed to act as an
2-9 agent by some duly authorized insurance carrier authorized to do
2-10 health and accident insurance business in the State of Texas.
2-11 (b) No insurer or licensed insurance agent doing business in
2-12 this State shall pay directly or indirectly any commission, or
2-13 other valuable consideration, to any person, [or] corporation, or
2-14 bank for services as an insurance agent within this State, unless
2-15 such person, [or] corporation, or bank shall hold a currently valid
2-16 license to act as an insurance agent as required by the laws of
2-17 this State; nor shall any person, [or] corporation, or bank other
2-18 than a duly licensed insurance agent, accept any such commission or
2-19 other valuable consideration; provided, however, that the
2-20 provisions of this Section shall not prevent the payment or receipt
2-21 of renewal or other deferred commissions to or by any person solely
2-22 because such person, [or] corporation, or bank has ceased to hold a
2-23 license to act as an insurance agent.
2-24 SECTION 2. Article 21.07, Insurance Code, is amended by
2-25 adding Section 1C to read as follows:
2-26 Sec. 1C. LICENSING OF BANKS. In this Article, "bank" means
2-27 a national banking association organized and existing under the
2-28 National Bank Act (12 U.S.C. Section 21 et seq.), a state bank
2-29 organized and existing under the Texas Banking Act (Articles
2-30 342-1.001 et seq., Vernon's Texas Civil Statutes), a state savings
3-1 bank organized and existing under the Texas Savings Bank Act
3-2 (Article 489e, Vernon's Texas Civil Statutes), a bank branch, or a
3-3 bank operating subsidiary, located in this state in a municipality
3-4 or county with a population of 5,000 or less. A bank located in a
3-5 municipality or county with a population of 5,000 or less may own
3-6 at least 51 percent of a licensed corporate agent which is also
3-7 located in and doing business in a municipality or county with a
3-8 population of 5,000 or less, and is subject to the provisions of
3-9 Section 18(c) of this Article.
3-10 SECTION 3. Sections 2 and 3, Article 21.07, Insurance Code,
3-11 are amended to read as follows:
3-12 Sec. 2. Application for license; to whom license may be
3-13 issued. (a) Any person, [or] corporation, or bank that desires to
3-14 become an agent for a local mutual aid association, a local mutual
3-15 burial association, a statewide mutual assessment corporation, a
3-16 stipulated premium company, a county mutual insurance company, a
3-17 casualty company writing accident and health insurance, or any
3-18 other type of insurance carrier licensed to do business in the
3-19 State of Texas, the agents of which are required to be licensed
3-20 under this Article, shall submit to the department [State Board of
3-21 Insurance] an application for a license in the form required by the
3-22 department [Board].
3-23 (b) The application must bear a signed endorsement by an
3-24 officer or properly authorized representative of the insurance
3-25 carrier that the individual applicant or each member of the
3-26 partnership or each officer, director, and shareholder of the
3-27 corporation or the responsible officer and employee of the bank is
3-28 qualified to hold himself or the partnership, [or] the corporation,
3-29 or the bank out in good faith to the general public as an insurance
3-30 agent, and that the insurance carrier desires that the applicant
4-1 act as an insurance agent to represent it in this State.
4-2 (c) The department [Board] shall issue a license to an
4-3 individual or to a general partnership engaging in the business of
4-4 insurance. Each partner in the partnership must be licensed
4-5 individually as an agent under this Article.
4-6 (d) The department [Board] shall issue a license to a
4-7 corporation if the department [Board] finds:
4-8 (1) That the corporation is a Texas corporation
4-9 organized or existing under the Texas Business Corporation Act or
4-10 the Texas Professional Corporation Act (Article 1528e, Vernon's
4-11 Texas Civil Statutes) having its principal place of business in the
4-12 State of Texas and having as one of its purposes the authority to
4-13 act as an agent covered by this Article;
4-14 (2) That every officer, director, and shareholder of
4-15 the corporation is individually licensed under the provisions of
4-16 this Article, or that every officer and director of the corporation
4-17 is individually licensed under this Article, that the corporation
4-18 is a wholly owned subsidiary of a parent corporation that is
4-19 licensed under this Article, and that every shareholder of the
4-20 parent corporation is individually licensed under this Article; and
4-21 (3) That such corporation will have the ability to pay
4-22 any sums up to $25,000 which it might become legally obligated to
4-23 pay on account of any claim made against it by any customer and
4-24 caused by any negligent act, error, or omission of the corporation
4-25 or any person for whose acts the corporation is legally liable in
4-26 the conduct of its business under this Article. The term
4-27 "customer" means any person, firm, or corporation to whom such
4-28 corporation sells or attempts to sell a policy of insurance, or
4-29 from whom such corporation accepts an application for insurance.
4-30 Such ability shall be proven in one of the following ways:
5-1 (A) an errors and omissions policy insuring such
5-2 corporation against errors and omissions in at least the sum of
5-3 $100,000 with no more than a $10,000 deductible feature issued by
5-4 an insurance company licensed to do business in the State of Texas
5-5 or, if a policy cannot be obtained from a company licensed to do
5-6 business in Texas, a policy issued by a company not licensed to do
5-7 business in Texas on filing an affidavit with the State Board of
5-8 Insurance stating the inability to obtain coverage and receiving
5-9 the Board's approval;
5-10 (B) a bond executed by such corporation as
5-11 principal and a surety company authorized to do business in this
5-12 State, as surety, in the principal sum of $25,000, payable to the
5-13 State Board of Insurance for the use and benefit of customers of
5-14 such corporation, conditioned that such corporation shall pay any
5-15 final judgment recovered against it by any customer; or
5-16 (C) a deposit of cash or securities of the class
5-17 authorized by Articles 2.08 and 2.10, Insurance Code, as amended,
5-18 having a fair market value of $25,000 with the State Treasurer.
5-19 The State Treasurer is directed to accept and receive such deposit
5-20 and hold it exclusively for the protection of any customer of such
5-21 corporation recovering a final judgment against such corporation.
5-22 Such deposit may be withdrawn only upon filing with the Board
5-23 evidence satisfactory to it that the corporation has withdrawn from
5-24 business and has no unsecured liabilities outstanding, or that such
5-25 corporation has provided for the protection of its customers by
5-26 furnishing an errors and omissions policy or a bond as provided.
5-27 Securities so deposited may be exchanged from time to time for
5-28 other qualified securities.
5-29 A binding commitment to issue such a policy or bond, or the
5-30 tender of such securities, shall be sufficient in connection with
6-1 any application for license.
6-2 Nothing contained herein shall be construed to permit any
6-3 unlicensed employee or agent of any corporation to perform any act
6-4 of an agent under this Article without obtaining a license.
6-5 If at any time, any corporation holding an agent's license
6-6 does not maintain the qualifications necessary to obtain a license,
6-7 the license of such corporation to act as an agent shall be
6-8 cancelled or denied in accordance with the provisions of Sections
6-9 10 and 11 of this Article; provided, however, that should any
6-10 person who is not a licensed agent under this Article acquire
6-11 shares in such a corporation by devise or descent, that person
6-12 shall have a period of 90 days from date of acquisition within
6-13 which to obtain a license or to dispose of the shares to a person
6-14 licensed under this Article.
6-15 Should such an unlicensed person acquire shares in a
6-16 corporation and not dispose of them within a period of 90 days to a
6-17 licensed agent, then they must be purchased by the corporation for
6-18 their book value, that is, the value of said shares of stock as
6-19 reflected by the regular books and records of said corporation, as
6-20 of the date of the acquisition of said shares by said unlicensed
6-21 person. Should the corporation fail or refuse to so purchase such
6-22 shares, its license shall be cancelled.
6-23 Any such corporation shall have the power to redeem the
6-24 shares of any shareholder, or the shares of a deceased shareholder,
6-25 upon such terms as may be agreed upon by the board of directors and
6-26 such shareholder or such shareholder's personal representative, or
6-27 at a price and upon such terms as may be provided in the articles
6-28 of incorporation, the bylaws, or an existing contract entered into
6-29 between the shareholders of the corporation.
6-30 Each corporation licensed as an agent under this Article
7-1 shall file, under oath, a list of the names and addresses of all of
7-2 its officers, directors, and shareholders with its application for
7-3 renewal license.
7-4 Each corporation shall notify the State Board of Insurance
7-5 upon any change in its officers, directors, or shareholders not
7-6 later than the 30th day after the date on which the change becomes
7-7 effective.
7-8 Except as provided by Subdivision (2) of this subsection, a
7-9 corporation may not own any interest in another corporation
7-10 licensed under this Article, and each owner of an interest in a
7-11 corporation licensed under this Article shall be a natural person
7-12 who holds a valid license issued under this Article.
7-13 (e) The department shall issue a license to a bank if the
7-14 department finds:
7-15 (1) That the bank is a national banking association
7-16 organized and existing under the National Bank Act (12 U.S.C.
7-17 Section 21 et seq.), a state bank organized and existing under the
7-18 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
7-19 Statutes), a state savings bank organized and existing under the
7-20 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
7-21 Statutes), or a bank operating subsidiary, located in this State in
7-22 a municipality or county with a population of 5,000 or less;
7-23 (2) That at least one officer of the bank and each
7-24 individual who will be performing any acts as an agent for the bank
7-25 is individually licensed under the provisions of this Article; and
7-26 (3) That such bank will have the ability to pay any
7-27 sums up to $25,000 which it might become legally obligated to pay
7-28 on account of any claim made against it by any customer and caused
7-29 by any negligent act, error, or omission of the bank or any person
7-30 for whose acts the bank is legally liable in the conduct of its
8-1 business under this Article. The term "customer" means any person,
8-2 firm, or corporation to whom such bank sells or attempts to sell a
8-3 policy of insurance or from whom such bank accepts an application
8-4 for insurance. Such ability shall be proven in one of the
8-5 following ways:
8-6 (A) an errors and omissions policy ensuring such
8-7 bank against errors and omissions in at least the sum of $100,000
8-8 with no more than a $10,000 deductible feature issued by an
8-9 insurance company licensed to do business in the State of Texas or,
8-10 if a policy cannot be obtained from a company licensed to do
8-11 business in Texas, a policy issued by a company not licensed to do
8-12 business in Texas on filing an affidavit with the department
8-13 stating the inability to obtain coverage and receiving the
8-14 department's approval;
8-15 (B) a bond executed by such bank as principal
8-16 and a surety company authorized to do business in this State, as
8-17 surety, in the principal sum of $25,000, payable to the department
8-18 for the use and benefit of customers of such bank, conditioned that
8-19 such bank shall pay any final judgment recovered against it by any
8-20 customer; or
8-21 (C) a deposit of cash or securities of the class
8-22 authorized by Articles 2.08 and 2.10 of this code, having a fair
8-23 market value of $25,000 with the comptroller. The comptroller is
8-24 directed to accept and receive such deposit and hold it exclusively
8-25 for the protection of any customer of such bank recovering a final
8-26 judgment against such bank. Such deposit may be withdrawn only on
8-27 filing with the department evidence satisfactory to it that the
8-28 bank has withdrawn from the business of insurance and has no
8-29 unsecured liabilities outstanding or that such bank has provided
8-30 for the protection of its customers by furnishing an errors and
9-1 omissions policy or a bond as provided. Securities so deposited
9-2 may be exchanged from time to time for other qualified securities.
9-3 A binding commitment to issue such a policy or bond, or the
9-4 tender of such securities, shall be sufficient in connection with
9-5 any application for license.
9-6 Nothing contained herein shall be construed to permit any
9-7 unlicensed employee or agent of any bank to perform any act of an
9-8 agent under this Article without obtaining a license.
9-9 A bank licensed as an agent under this Article may have
9-10 additional offices from which the business of insurance is
9-11 conducted only in a municipality or county with a population of
9-12 5,000 or less and must comply with the department's regulations
9-13 regarding additional offices.
9-14 A bank licensed as an agent under this Article must maintain
9-15 the insurance records of the bank, including all files relating to
9-16 customer complaints, separate and apart from records relating to
9-17 banking transactions of the bank.
9-18 If at any time, any bank holding an agent's license does not
9-19 maintain the qualifications necessary to obtain a license, the
9-20 license of such bank to act as an agent shall be canceled or denied
9-21 in accordance with the provisions of Sections 10 and 11 of this
9-22 Article.
9-23 Each bank licensed as an agent under this Article shall file
9-24 under oath with its application for renewal a list of the names and
9-25 addresses of all individuals who will be acting as agents on behalf
9-26 of the bank and all officers and directors of the bank, as defined
9-27 in Article 21.02 of this code, and other biographical information
9-28 as required by the department.
9-29 Each bank shall notify the department on any change in its
9-30 officers and directors, and any change in other persons who will be
10-1 acting as agents, as defined in Article 21.02 of this code, and
10-2 submit biographical information on such officers, directors, and
10-3 persons as required by the department not later than the 30th day
10-4 after the date on which the change becomes effective.
10-5 Sec. 3. Issuance of License Under Certain Circumstances.
10-6 The department [State Board of Insurance] shall issue a license to
10-7 a person, [or] corporation, or bank in such form as it may prepare
10-8 authorizing such applicant to write the types of insurance
10-9 authorized by law to be issued by applicant's appointing insurance
10-10 carrier, except that:
10-11 (a) Such applicant shall not be authorized to write health
10-12 and accident insurance unless: (i) applicant, if not a
10-13 partnership, [or] corporation, or bank shall have first passed a
10-14 written examination as provided for in this Article [21.07, as
10-15 amended], or (ii) applicant will act only as a ticket-selling agent
10-16 of a public carrier with respect to accident life insurance
10-17 covering risks of travel or as an agent selling credit life, health
10-18 and accident insurance issued exclusively in connection with credit
10-19 transactions, or (iii) applicant will write policies or riders to
10-20 policies providing only lump sum cash benefits in the event of the
10-21 accidental death, or death by accidental means, or dismemberment,
10-22 or providing only ambulance expense benefits in the event of
10-23 accident or sickness; and
10-24 (b) Such applicant, if not a partnership, [or] corporation,
10-25 or bank shall not be authorized to write life insurance in excess
10-26 of $7,500 upon any one life unless: (i) applicant, if not a
10-27 partnership, [or] corporation, or bank shall have first passed a
10-28 written examination as provided for in this Article [21.07, as
10-29 amended], or (ii) applicant will act only as a ticket-selling agent
10-30 of a public carrier with respect to accident life insurance
11-1 covering risks of travel or as an agent selling credit life, health
11-2 and accident insurance issued exclusively in connection with credit
11-3 transactions, or (iii) applicant will write policies or riders to
11-4 policies providing only lump sum cash benefits in the event of the
11-5 accidental death, or death by accidental means, or dismemberment,
11-6 or providing only ambulance expense benefits in the event of
11-7 accident or sickness.
11-8 SECTION 4. Subsection (a), Section 4, Article 21.07,
11-9 Insurance Code, is amended to read as follows:
11-10 (a) Each applicant for a license under the provisions of
11-11 this Article [21.07, Texas Insurance Code, 1951, as amended,] who
11-12 desires to write health and accident insurance, other than as
11-13 excepted in Section 3 of this Article [21.07], within this State
11-14 shall submit to a personal written examination prescribed by the
11-15 department [State Board of Insurance] and administered in the
11-16 English or Spanish language to determine his competency with
11-17 respect to health and accident insurance, specifically including
11-18 medicare supplement insurance, and his familiarity with the
11-19 pertinent provisions of the laws of the State of Texas relating to
11-20 health and accident insurance, specifically including medicare
11-21 supplement insurance, and shall pass the same to the satisfaction
11-22 of the department [State Board of Insurance]; except that no
11-23 written examination shall be required of:
11-24 (i) An applicant for the renewal of a license issued
11-25 by the department [State Board of Insurance] pursuant to this
11-26 Article [21.07, Texas Insurance Code, 1951, as amended], which is
11-27 currently in force at the effective date of this Act;
11-28 (ii) An applicant whose license expired less than one
11-29 year prior to the date of application may, in the discretion of the
11-30 department [State Board of Insurance], be issued a license without
12-1 written examination, provided such prior license granted such
12-2 applicant the right to sell health and accident insurance; or
12-3 (iii) An applicant that is a partnership, [or]
12-4 corporation, or bank.
12-5 SECTION 5. Sections 12, 13, and 16, Article 21.07, Insurance
12-6 Code, are amended to read as follows:
12-7 Sec. 12. Penalty. Any person or officer, director, or
12-8 shareholder of a corporation or bank required to be licensed by
12-9 this Article who individually, or as an officer or employee of an
12-10 insurance carrier, or other corporation, wilfully violates any of
12-11 the provisions of this Article shall, in addition to any other
12-12 penalty specifically provided, be guilty of a misdemeanor and, upon
12-13 conviction, shall be fined not more than $500.00 or imprisoned not
12-14 more than six (6) months, or both, each such violation being a
12-15 separate offense hereunder. In addition, if such offender or the
12-16 corporation or bank of which he is an officer, director, or
12-17 shareholder holds a license as an agent, such license shall
12-18 automatically expire upon such conviction.
12-19 Sec. 13. TEXAS DEPARTMENT [STATE BOARD] OF INSURANCE MAY
12-20 ESTABLISH RULES AND REGULATIONS. The commissioner [State Board of
12-21 Insurance] is hereby authorized to establish, and from time to time
12-22 to amend, reasonable rules and regulations to comply with federal
12-23 law applicable to the sale of insurance and for the administration
12-24 of this Article [21.07].
12-25 Sec. 16. Stamping of License. When any license shall be
12-26 issued by the department [State Board of Insurance] to an applicant
12-27 entitled to write health and accident insurance, the license shall
12-28 have [stamped] thereon the words HEALTH AND ACCIDENT INSURANCE.
12-29 SECTION 6. Section 18, Article 21.07, Insurance Code, is
12-30 amend by adding Subsection (c) to read as follows:
13-1 (c) Notwithstanding any provision of this Article or this
13-2 code to the contrary, a bank located in a municipality or county
13-3 with a population of 5,000 or less which owns at least 51 percent
13-4 of a licensed bank operating subsidiary which is also located and
13-5 doing business in a municipality or county with a population of
13-6 5,000 or less may receive profits from the licensed bank operating
13-7 subsidiary. To advertise under the bank name or participate in the
13-8 insurance operation other than by receiving profits from the
13-9 insurance business, the bank must hold an agent license. Nothing
13-10 in this section permits a bank or any affiliate to pay commissions
13-11 or other valuable consideration to any nonlicensed employees, nor
13-12 may a bank pay, credit, or otherwise reward particular nonlicensed
13-13 units or geographic locations of the bank or any of its affiliates
13-14 with a portion of the commission.
13-15 SECTION 7. Subsection (b), Section 1, Chapter 213, Acts of
13-16 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
13-17 Insurance Code), is amended to read as follows:
13-18 (b) The term "life insurance agent" for the purpose of this
13-19 Act means any person, [or] corporation, or bank that is an
13-20 authorized agent of a legal reserve life insurance company, and any
13-21 person who is a sub-agent of such agent, who acts as such in the
13-22 solicitation of, negotiation for, or procurement of, or collection
13-23 of premiums on, an insurance or annuity contract with a legal
13-24 reserve life insurance company; except that the term "life
13-25 insurance agent" shall not include:
13-26 (1) any regular salaried officer or employee of a
13-27 legal reserve life insurance company, or of a licensed life
13-28 insurance agent, who devotes substantially all of his or her time
13-29 to activities other than the solicitation of applications for
13-30 insurance or annuity contracts and receives no commission or other
14-1 compensation directly dependent upon the business obtained, and who
14-2 does not solicit or accept from the public applications for
14-3 insurance or annuity contracts;
14-4 (2) employers or their officers or employees, or the
14-5 trustees of any employee benefit plan, to the extent that such
14-6 employers, officers, employees or trustees are engaged in the
14-7 administration or operation of any program of employee benefits
14-8 involving the use of insurance or annuities issued by a legal
14-9 reserve life insurance company, provided that such employers,
14-10 officers, employees or trustees are not in any manner compensated,
14-11 directly or indirectly, by the legal reserve life insurance company
14-12 issuing such insurance or annuity contracts;
14-13 (3) except as provided in Section 4(f) of this Act,
14-14 banks, savings and loan associations, or credit unions, or the
14-15 officers and employees of banks, savings and loan associations, or
14-16 credit unions, to the extent that such banks, savings and loan
14-17 associations, credit unions, or officers and employees collect and
14-18 remit premiums by charging same against accounts of depositors on
14-19 the orders of such depositors;
14-20 (4) a ticket-selling agent of a public carrier with
14-21 respect to accident life insurance tickets covering risks of
14-22 travel;
14-23 (5) an agent selling credit life, health and accident
14-24 insurance issued exclusively in connection with credit
14-25 transactions, or acting as agent or solicitor for health and
14-26 accident insurance under license issued pursuant to the provisions
14-27 of Article 21.14 of the Texas Insurance Code.
14-28 SECTION 8. Chapter 213, Acts of the 54th Legislature, 1955
14-29 (Article 21.07-1, Vernon's Texas Insurance Code), is amended by
14-30 adding Section 1C to read as follows:
15-1 Sec. 1C. DEFINITION. In this Act, "bank" means a national
15-2 banking association organized and existing under the National Bank
15-3 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
15-4 existing under the Texas Banking Act (Article 342-1.001 et seq.,
15-5 Vernon's Texas Civil Statutes), a state savings bank organized and
15-6 existing under the Texas Savings Bank Act (Article 489e, Vernon's
15-7 Texas Civil Statutes), a bank branch, or a bank operating
15-8 subsidiary, located in this state in a municipality or county with
15-9 a population of 5,000 or less. A bank located in a municipality or
15-10 county with a population of 5,000 or less may own at least 51
15-11 percent of a licensed corporate agent which is also located in and
15-12 doing business in a municipality or county with a population of
15-13 5,000 or less and is subject to the provisions of Section 3(b) of
15-14 this Act.
15-15 SECTION 9. Subsection (a), Section 2, Chapter 213, Acts of
15-16 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
15-17 Insurance Code), is amended to read as follows:
15-18 (a) No person, [or] corporation, or bank shall, within this
15-19 State, solicit, procure, receive, or forward applications for life
15-20 insurance or annuities, or issue or deliver policies for, or in any
15-21 manner secure, help, or aid in the placing of any contract of life
15-22 insurance or annuity for any other person, directly or indirectly,
15-23 with any life insurance company not authorized to do business in
15-24 this State.
15-25 SECTION 10. Subsections (a) and (b), Section 3, Chapter 213,
15-26 Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
15-27 Insurance Code), are amended to read as follows:
15-28 (a) No person, [or] corporation, or bank shall act as a life
15-29 insurance agent within this State until he or it shall have
15-30 procured a license as required by the laws of this State.
16-1 (b) No insurer or licensed life insurance agent doing
16-2 business in this State shall pay directly or indirectly any
16-3 commission, or other valuable consideration, to any person, [or]
16-4 corporation, or bank for services as a life insurance agent within
16-5 this State, unless such person, [or] corporation, or bank shall
16-6 hold a currently valid license to act as a life insurance agent as
16-7 required by the laws of this State; nor shall any person, [or]
16-8 corporation, or bank other than a duly licensed life insurance
16-9 agent, accept any such commission or other valuable consideration;
16-10 provided, however, that the provisions of this Section shall not
16-11 prevent the payment or receipt of renewal or other deferred
16-12 commissions to or by any person solely because such person, [or]
16-13 corporation, or bank has ceased to hold a license to act as a life
16-14 insurance agent. Nothing herein shall be construed to prevent a
16-15 bank located in a municipality or county with a population of 5,000
16-16 or less which owns at least 51 percent of a licensed bank operating
16-17 subsidiary which is also located in and doing business in a
16-18 municipality or county with a population of 5,000 or less from
16-19 receiving profits from the licensed bank operating subsidiary. To
16-20 advertise under the bank name or participate in the insurance
16-21 operation other than by receiving profits from the insurance
16-22 business, the bank must hold an agent license. Nothing in this
16-23 Section permits a bank or any affiliate to pay commissions or other
16-24 valuable consideration to any nonlicensed employees, nor may a bank
16-25 pay, credit, or otherwise reward particular nonlicensed units or
16-26 geographic locations of the bank or any of its affiliates with a
16-27 portion of the commission.
16-28 SECTION 11. Section 4, Chapter 213, Acts of the 54th
16-29 Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance Code),
16-30 is amended to amending Subsection (e) and adding a new Subsection
17-1 (f) and relettering existing Subsection (f) to read as follows:
17-2 (e) The department [Commissioner] shall issue a license to a
17-3 corporation if the department [Commissioner] finds:
17-4 (1) That the corporation is a Texas corporation
17-5 organized or existing under the Texas Business Corporation Act or
17-6 the Texas Professional Corporation Act having its principal place
17-7 of business in the State of Texas and having as one of its purposes
17-8 the authority to act as agent under this Act;
17-9 (2) That every officer, director, and shareholder of
17-10 the corporation is individually licensed as an agent under the
17-11 provisions of this Act, or that every officer and director of the
17-12 corporation is individually licensed under this Act, that the
17-13 corporation is a wholly owned subsidiary of a parent corporation
17-14 that is licensed under this Act, and that every shareholder of the
17-15 parent corporation is individually licensed under this Act; and
17-16 (3) That such corporation will have the ability to pay
17-17 any sums up to $25,000 which it might become legally obligated to
17-18 pay on account of any claim made against it by any customer and
17-19 caused by any negligent act, error, or omission of the corporation
17-20 or any person for whose acts the corporation is legally liable in
17-21 the conduct of its business as under this Act. The term "customer"
17-22 as used herein shall mean any person, firm, or corporation to whom
17-23 such corporation sells or attempts to sell a policy of insurance or
17-24 from whom such corporation accepts an application for insurance.
17-25 Such ability shall be proven in one of the following ways:
17-26 (A) An errors and omissions policy insuring such
17-27 corporation against errors and omissions in at least the sum of
17-28 $100,000 with no more than a $10,000 deductible feature issued by
17-29 an insurance company licensed to do business in the State of Texas
17-30 or, if a policy cannot be obtained from a company licensed to do
18-1 business in Texas, a policy issued by a company not licensed to do
18-2 business in Texas on filing an affidavit with the department [State
18-3 Board of Insurance] stating the inability to obtain coverage and
18-4 receiving the department's [Board's] approval; or
18-5 (B) A bond executed by such corporation as
18-6 principal and a surety company authorized to do business in this
18-7 State, as surety, in the principal sum of $25,000, payable to the
18-8 department [State Board of Insurance] for the use and benefit of
18-9 customers of such corporation, conditioned that such corporation
18-10 shall pay any final judgment recovered against it by any customer;
18-11 or
18-12 (C) A deposit of cash or securities of the class
18-13 authorized by Articles 2.08 and 2.10 of the Insurance Code, having
18-14 a fair market value of $25,000 with the comptroller [State
18-15 Treasurer]. The comptroller [State Treasurer] is hereby authorized
18-16 and directed to accept and receive such deposit and hold it
18-17 exclusively for the protection of any customer of such corporation
18-18 recovering a final judgment against such corporation. Such deposit
18-19 may be withdrawn only upon filing with the department
18-20 [Commissioner] satisfactory evidence that the corporation has
18-21 withdrawn from business and has no unsecured liabilities
18-22 outstanding, or that such corporation has provided for the
18-23 protection of its customers by furnishing an errors and omissions
18-24 policy or a bond as provided. Securities so deposited may be
18-25 exchanged from time to time for other qualified securities.
18-26 A binding commitment to issue such a policy or bond, or the
18-27 tender of such securities, shall be sufficient in connection with
18-28 any application for license.
18-29 Nothing contained herein shall be construed to permit any
18-30 unlicensed employee or agent of any corporation to perform any act
19-1 of an agent under this Act without obtaining a license.
19-2 If at any time, any corporation holding a license under this
19-3 Act does not maintain the qualifications necessary to obtain a
19-4 license, the license of such corporation to act as an agent shall
19-5 be cancelled or denied in accordance with the provisions of
19-6 Sections 12 and 13 of this Act; provided, however, that should any
19-7 person who is not an agent licensed under this Act acquire shares
19-8 in such a corporation by devise or descent, they shall have a
19-9 period of 90 days from date of acquisition within which to obtain a
19-10 license as an agent or to dispose of the shares to an agent
19-11 licensed under this Act.
19-12 Should such an unlicensed person acquire shares in such a
19-13 corporation and not dispose of them within said period of 90 days
19-14 to a licensed agent, then they must be purchased by the corporation
19-15 for their book value, that is, the value of said shares of stock as
19-16 reflected by the regular books and records of said corporation as
19-17 of the date of the acquisition of said shares by said unlicensed
19-18 person. Should the corporation fail or refuse to so purchase such
19-19 shares, its license shall be cancelled.
19-20 Any such corporation shall have the power to redeem the
19-21 shares of any shareholder, or the shares of a deceased shareholder,
19-22 upon such terms as may be agreed upon by the board of directors and
19-23 such shareholder or such shareholder's personal representative, or
19-24 at such price and upon such terms as may be provided in the
19-25 articles of incorporation, the bylaws, or an existing contract
19-26 entered into between the shareholders of the corporation.
19-27 Each corporation licensed as an agent under this Act shall
19-28 file, under oath, a list of the names and addresses of all of its
19-29 officers, directors, and shareholders with its application for
19-30 renewal license.
20-1 Each corporation licensed as an agent under this Act shall
20-2 notify the department [State Board of Insurance] upon any change in
20-3 its officers, directors, or shareholders not later than the 30th
20-4 day after the date on which the change became effective.
20-5 Except as provided by Subdivision (2) of this subsection, a
20-6 corporation may not own any interest in another corporation
20-7 licensed under this Act, and each owner of an interest in a
20-8 corporation licensed under this Act shall be a natural person who
20-9 holds a valid license issued under this Act.
20-10 No association or any legal entity of any nature, other than
20-11 an individual person, general partnership, [or] corporation, or
20-12 bank may be licensed as a life insurance agent.
20-13 (f) The department shall issue a license to a bank if the
20-14 department finds:
20-15 (1) That the bank is a national banking association
20-16 organized and existing under the National Bank Act (12 U.S.C.
20-17 Section 21 et seq.), a state bank organized and existing under the
20-18 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
20-19 Statutes), a state savings bank organized and existing under the
20-20 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
20-21 Statutes), or a bank operating subsidiary, located in this state in
20-22 a municipality or county with a population of 5,000 or less;
20-23 (2) That at least one officer of the bank and each
20-24 individual who will be performing any acts as an agent for the bank
20-25 are individually licensed under the provisions of this Act; and
20-26 (3) That such bank will have the ability to pay any
20-27 sums up to $25,000 which it might become legally obligated to pay
20-28 on account of any claim made against it by any customer and caused
20-29 by any negligent act, error, or omission of the bank or any person
20-30 for whose acts the bank is legally liable in the conduct of its
21-1 business under this Act. The term "customer" means any person,
21-2 firm, or corporation to whom such bank sells or attempts to sell a
21-3 policy of insurance or from whom such bank accepts an application
21-4 for insurance. Such ability shall be proven in one of the
21-5 following ways:
21-6 (A) An errors and omissions policy insuring such
21-7 bank against errors and omissions in at least the sum of $100,000
21-8 with no more than a $10,000 deductible feature issued by an
21-9 insurance company licensed to do business in the State of Texas or,
21-10 if a policy cannot be obtained from a company licensed to do
21-11 business in Texas, a policy issued by a company not licensed to do
21-12 business in Texas on filing an affidavit with the department
21-13 stating the inability to obtain coverage and receiving the
21-14 department's approval; or
21-15 (B) A bond executed by such bank as principal
21-16 and a surety company authorized to do business in this State, as
21-17 surety, in the principal sum of $25,000, payable to the department
21-18 for the use and benefit of customers of such bank, conditioned that
21-19 such bank shall pay any final judgment recovered against it by any
21-20 customer; or
21-21 (C) A deposit of cash or securities of the class
21-22 authorized by Articles 2.08 and 2.10 of the Insurance Code, having
21-23 a fair market value of $25,000 with the comptroller. The
21-24 comptroller is hereby authorized and directed to accept and receive
21-25 such deposit and hold it exclusively for the protection of any
21-26 customer of such bank recovering a final judgment against such
21-27 bank. Such deposit may be withdrawn only on filing with the
21-28 department satisfactory evidence that the bank has withdrawn from
21-29 the business of insurance and has no unsecured liabilities
21-30 outstanding or that such bank has provided for the protection of
22-1 its customers by furnishing an errors and omissions policy or a
22-2 bond as provided. Securities so deposited may be exchanged from
22-3 time to time for other qualified securities.
22-4 A binding commitment to issue such a policy or bond, or the
22-5 tender of such securities, shall be sufficient in connection with
22-6 any application for license.
22-7 Nothing contained herein shall be construed to permit any
22-8 unlicensed employee or agent of any bank to perform any act of an
22-9 agent under this Act without obtaining a license.
22-10 A bank licensed as an agent under this Act may have
22-11 additional offices from which the business of insurance is
22-12 conducted only in a municipality or county with a population of
22-13 5,000 or less and must comply with the department's regulations
22-14 regarding additional offices.
22-15 A bank licensed as an agent under this Act must maintain the
22-16 insurance records of the bank, including all files relating to
22-17 customer complaints, separate and apart from records relating to
22-18 banking transactions of the bank.
22-19 If at any time, any bank holding a license under this Act
22-20 does not maintain the qualifications necessary to obtain a license,
22-21 the license of such bank to act as an agent shall be canceled or
22-22 denied in accordance with the provisions of Sections 12 and 13 of
22-23 this Act.
22-24 Each bank licensed as an agent under this Act shall file
22-25 under oath with its application for renewal license a list of the
22-26 names and addresses of all individuals who will be acting as agents
22-27 on behalf of the bank and all officers and directors of the bank,
22-28 as defined in Article 21.02 of the Insurance Code, and other
22-29 biographical information as required by the department.
22-30 Each bank shall notify the department upon any change in its
23-1 officers and directors, and any change in other persons who will be
23-2 acting as agents, as defined in Article 21.02 of the Insurance
23-3 Code, and submit biographical information on such officers,
23-4 directors, and persons as required by the department not later than
23-5 the 30th day after the date on which the change becomes effective.
23-6 (g) Each applicant, prior to sitting for the written
23-7 examination as provided for in Section 5 of this Act, shall
23-8 complete, under the supervision of such sponsoring insurer, an
23-9 educational program that shall include:
23-10 (1) such texts as may be prescribed by the
23-11 Commissioner of Insurance on the recommendation of the Advisory
23-12 Board as provided in Subsection (c) of Section 5 of this Act; and
23-13 (2) materials that will provide the applicant with the
23-14 basic knowledge of:
23-15 (A) the broad principles of insurance,
23-16 licensing, and regulatory laws of this State;
23-17 (B) principles related to medicare supplement
23-18 insurance; and
23-19 (C) the obligations and duties of a life
23-20 insurance agent.
23-21 SECTION 12. Subsections (a) and (d), Section 5, Chapter
23-22 213, Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's
23-23 Texas Insurance Code), are amended to read as follows:
23-24 (a) Each prospective applicant for a license to act as a
23-25 life insurance agent within this State shall submit to a personal
23-26 written examination administered in the English or Spanish
23-27 language, as prescribed by the department [State Board of
23-28 Insurance], to determine the applicant's competence with respect to
23-29 insurance and annuity contracts, including medicare supplement
23-30 contracts, and the applicant's familiarity with the pertinent
24-1 provisions of the laws of this State and the obligations and duties
24-2 of a life insurance agent, and shall pass the same to the
24-3 satisfaction of the department [State Board of Insurance]. A
24-4 nonrefundable examination fee, in an amount determined by the
24-5 Commissioner [Board] but not more than $20, must accompany the
24-6 application to take the examination. The department shall charge
24-7 the fee each time the examination is taken. The department shall
24-8 give certifications of a passing score to those applicants that
24-9 obtain such a score. No written examination shall be required of:
24-10 (1) An applicant for the renewal of a license issued
24-11 by the department [State Board of Insurance] pursuant to Article
24-12 21.07, [Texas] Insurance Code, [1951,] which is currently in force
24-13 at the time of the effective date of this Act;
24-14 (2) An applicant whose license as a life insurance
24-15 agent expired less than one year prior to the date of application
24-16 may, in the discretion of the department [State Board of
24-17 Insurance], be issued a license without written examination;
24-18 (3) A person who holds the designation Chartered Life
24-19 Underwriter (CLU);
24-20 (4) An applicant that is a partnership, [or]
24-21 corporation, or bank.
24-22 (d) An applicant other than a partnership, [or] corporation,
24-23 or bank for a license to act as a combination life insurance agent
24-24 for a combination company, or as an industrial life agent for an
24-25 industrial company, may, in lieu of taking and passing to the
24-26 satisfaction of the Commissioner a personal written examination as
24-27 provided in Sub-section (a) of this Section 5, submit to a personal
24-28 written examination given by the combination or industrial insurer
24-29 for which the applicant is to be licensed, subject to the following
24-30 definitions and conditions:
25-1 (1) A combination life insurance agent is hereby
25-2 defined as an agent writing weekly premium life insurance or
25-3 monthly ordinary life insurance on a debit basis, provided that a
25-4 combination life insurance agent may also write ordinary contracts
25-5 of life insurance. An industrial life agent is an agent writing
25-6 only weekly life insurance on a debit basis. A combination company
25-7 is hereby defined as an insurer actually writing weekly premium
25-8 life insurance or monthly ordinary life insurance on a debit basis,
25-9 provided that a combination company may also write ordinary
25-10 contracts of life insurance. An industrial company is an insurer
25-11 writing only weekly premium life insurance on a debit basis.
25-12 (2) Any combination or industrial insurer desiring to
25-13 qualify to administer the examination to its agents shall file with
25-14 the Commissioner a complete outline and explanation of the course
25-15 of study and instruction to be given such applicants and the nature
25-16 and manner of conducting the examinations of applicants and, after
25-17 official approval thereof by the Commissioner, may administer such
25-18 examinations.
25-19 (3) The combination or industrial insurer shall
25-20 certify as to each applicant that he has completed the approved
25-21 course of study and instruction and has successfully passed the
25-22 examination in writing without aid.
25-23 (4) It shall be the duty of the Commissioner to
25-24 investigate the manner and method of instruction and examination of
25-25 each combination and industrial insurer as often as deemed
25-26 necessary by the Commissioner and the Commissioner may, in his
25-27 discretion, withdraw from any insurer the privilege of examining
25-28 agents in lieu of the examination prescribed in Subsection (a) of
25-29 this Section 5.
25-30 (5) The license to act as a life insurance agent
26-1 issued to an applicant pursuant to the provisions of this
26-2 Sub-section (d) shall include [be stamped] COMBINATION OR
26-3 INDUSTRIAL LICENSE on its face and shall automatically expire and
26-4 be of no further force and effect when the holder ceases to act as
26-5 a combination or industrial agent for a combination or industrial
26-6 company.
26-7 SECTION 13. Subsection (b), Section 7, Chapter 213, Acts of
26-8 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
26-9 Insurance Code), is amended to read as follows:
26-10 (b) The [Life Insurance] Commissioner is further authorized
26-11 to enter into reciprocal agreements with the appropriate official
26-12 or any other State waiving the written examination of any applicant
26-13 resident in such other State, provided:
26-14 (1) That a written examination is required of
26-15 applicants for a life insurance agent's license in such other
26-16 State;
26-17 (2) That the appropriate official of such other State
26-18 certifies that the applicant holds a currently valid license as a
26-19 life insurance agent in such other State and either passed such
26-20 written examination or was the holder of a life insurance agent's
26-21 license prior to the time such written examination was required;
26-22 (3) That the applicant has no place of business within
26-23 this State in the transaction of business as a life insurance
26-24 agent;
26-25 (4) That in such other State, a resident of this State
26-26 is privileged to procure a life insurance agent's license upon the
26-27 foregoing conditions and without discrimination as to fees or
26-28 otherwise in favor of the residents of such other State.
26-29 SECTION 14. Sections 14 and 15, Chapter 213, Acts of the
26-30 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance
27-1 Code), are amended to read as follows:
27-2 Sec. 14. Penalty. Any person or officer, director, or
27-3 shareholder of a corporation or bank required to be licensed by
27-4 this Act who individually, or as an officer or employee of a legal
27-5 reserve life insurance company, or other corporation, violates any
27-6 of the provisions of this Act shall, in addition to any other
27-7 penalty specifically provided, be guilty of a misdemeanor and, upon
27-8 conviction, shall be fined not more than $500.00 or imprisoned not
27-9 more than six months, or both, each such violation being a separate
27-10 offense hereunder. In addition, if such offender or corporation or
27-11 bank of which he is an officer, director, or shareholder holds a
27-12 license as a life insurance agent, such license shall automatically
27-13 expire upon such conviction.
27-14 Sec. 15. Commissioner May Establish Rules and Regulations.
27-15 The [Life Insurance] Commissioner is authorized to establish, and
27-16 from time to time to amend, reasonable rules and regulations to
27-17 comply with federal law applicable to the sale of insurance and for
27-18 the administration of this Act.
27-19 SECTION 15. Subsections (a) through (d), Section 16, Chapter
27-20 213, Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's
27-21 Texas Insurance Code), are amended to read as follows:
27-22 (a) In this section, "accident and health insurance agent"
27-23 means any person, [or] corporation, or bank that is an authorized
27-24 agent of a legal reserve life insurance company and who acts as
27-25 such agent only in the solicitation of, negotiation for,
27-26 procurement of, or collection of premiums on an accident and health
27-27 insurance contract with a legal reserve life insurance company, but
27-28 does not include:
27-29 (1) a regular salaried officer or employee of a legal
27-30 reserve life insurance company, or of a licensed life or accident
28-1 and health insurance agent, who devotes substantially all of his or
28-2 her time to activities other than the solicitation of applications
28-3 for insurance contracts and receives no commission or other
28-4 compensation directly dependent upon the business obtained and who
28-5 does not solicit or accept from the public applications for
28-6 insurance contracts;
28-7 (2) employers or their officers or employees, or the
28-8 trustees of any employee benefit plan, to the extent that those
28-9 employers, officers, employees, or trustees are engaged in the
28-10 administration or operation of any program of employee benefits
28-11 involving the use of insurance issued by a legal reserve life
28-12 insurance company, provided that those employers, officers,
28-13 employees, or trustees are not in any manner compensated directly
28-14 or indirectly by the legal reserve life insurance company issuing
28-15 the insurance contracts;
28-16 (3) banks or their officers and employees to the
28-17 extent that the banks, or their officers, and employees collect and
28-18 remit premiums by charging the premiums against the account of a
28-19 depositor on the orders of the depositor;
28-20 (4) a ticket-selling agent of a public carrier with
28-21 respect to accident and health insurance tickets covering risks of
28-22 travel; or
28-23 (5) an agent selling credit health and accident
28-24 insurance issued exclusively in connection with credit
28-25 transactions, or acting as agent or solicitor for health and
28-26 accident insurance under a license issued under either Article
28-27 21.07, Article 21.07-1, or Article 21.14, Insurance Code.
28-28 (b) The department [State Board of Insurance] may issue a
28-29 license to a person, [or] a corporation, or a bank to act only as
28-30 an accident and health insurance agent for a legal reserve life
29-1 insurance company as provided by this section.
29-2 (c) Each applicant for a license under this section who
29-3 desires to act as an accident and health insurance agent within
29-4 this state shall submit to a personal written examination
29-5 prescribed by the department [State Board of Insurance] and
29-6 administered in the English or Spanish language to determine the
29-7 applicant's competency with respect to accident and health
29-8 insurance and familiarity with the pertinent provisions of the
29-9 health and accident insurance laws of this state. Except as
29-10 provided by Subsection (d) of this section, each applicant must
29-11 pass the examination to the satisfaction of the department [State
29-12 Board of Insurance].
29-13 (d) A written examination is not required of:
29-14 (1) an applicant for license under this Section 16 if
29-15 the applicant has previously been licensed and currently holds on
29-16 the effective date of this section a valid license issued by the
29-17 department [State Board of Insurance] under either Article 21.07,
29-18 Article 21.07-1, or Article 21.14 of this code;
29-19 (2) an applicant whose license expires less than one
29-20 year before the date of application and who may, in the discretion
29-21 of the department [State Board of Insurance], be issued a license
29-22 without written examination, provided the prior expired license
29-23 granted the applicant the right to act as an agent for accident and
29-24 health insurance; or
29-25 (3) an applicant that is a partnership, [or]
29-26 corporation, or bank; provided, however, that a partnership, [or]
29-27 corporation, or bank may be licensed hereunder only if it otherwise
29-28 complies with the provisions of Section 4 of this article, but in
29-29 the application of such section to such compensation hereunder, any
29-30 requirement pertaining to or reference therein to "life insurance"
30-1 shall be changed and limited to "health and accident insurance"
30-2 only as is intended by the terms of the Section 16.
30-3 SECTION 16. Section 3, Article 21.14, Insurance Code, is
30-4 amended by amending Subsection (a), adding Subsection (g), and
30-5 relettering existing Subsections (d) and (e) to read as follows:
30-6 (a) When any person, partnership, registered limited
30-7 liability partnership, limited liability company, [or] corporation,
30-8 or bank shall desire to engage in business as a local recording
30-9 agent for an insurance company, or insurance carrier, he or it
30-10 shall make application for a license to the Texas Department of
30-11 Insurance, in such form as the Department may require. Such
30-12 application shall bear a signed endorsement by a general, state or
30-13 special agent of a qualified insurance company, or insurance
30-14 carrier that applicant or each member of the partnership or each
30-15 stockholder of the corporation or each member of the limited
30-16 liability company is a resident of this state.
30-17 (d) The Department shall issue a license to a bank if the
30-18 Department finds:
30-19 (1) That the bank is a national banking association
30-20 organized and existing under the National Bank Act (12 U.S.C.
30-21 Section 21 et seq.), a state bank organized and existing under the
30-22 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
30-23 Statutes), a state savings bank organized and existing under the
30-24 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
30-25 Statutes), or a bank operating subsidiary, located in this state in
30-26 a municipality or county with a population of 5,000 or less;
30-27 (2) That at least one officer of the bank and each
30-28 individual who will be performing any acts of an agent for the bank
30-29 are individually licensed under the provisions of this Article; and
30-30 (3) That such bank will have the ability to pay any
31-1 sums up to $25,000 which it might become legally obligated to pay
31-2 on account of any claim made against it by any customer and caused
31-3 by any negligent act, error, or omission of the bank or any person
31-4 for whose acts the bank is legally liable in the conduct of its
31-5 business as a local recording agent. The term "customer" means any
31-6 person, firm, or corporation to whom such bank sells or attempts to
31-7 sell a policy of insurance or from whom such bank accepts an
31-8 application for insurance. Such ability shall be proven in one of
31-9 the following ways:
31-10 (A) An errors and omissions policy insuring such
31-11 bank against errors and omissions, in at least the sum of $100,000
31-12 with no more than a $10,000 deductible feature or the sum of at
31-13 least $300,000 with no more than a $25,000 deductible feature,
31-14 issued by an insurance company licensed to do business in the State
31-15 of Texas or, if a policy cannot be obtained from a company licensed
31-16 to do business in Texas, a policy issued by a company not licensed
31-17 to do business in Texas, on filing an affidavit with the Department
31-18 stating the inability to obtain coverage and receiving the
31-19 Department's approval; or
31-20 (B) A bond executed by such bank as principal
31-21 and a surety company authorized to do business in this state, as
31-22 surety, in the principal sum of $25,000, payable to the Department
31-23 for the use and benefit of customers of such bank, conditioned that
31-24 such bank shall pay any final judgment recovered against it by any
31-25 customer; or
31-26 (C) A deposit of cash or securities of the class
31-27 authorized by Articles 2.08 and 2.10 of this Code, having a fair
31-28 market value of $25,000 with the comptroller. The comptroller is
31-29 hereby authorized and directed to accept and receive such deposit
31-30 and hold it exclusively for the protection of any customer of such
32-1 bank recovering a final judgment against such bank. Such deposit
32-2 may be withdrawn only on filing with the Department evidence
32-3 satisfactory to it that the bank has withdrawn from the business of
32-4 insurance and has no unsecured liabilities outstanding or that such
32-5 bank has provided for the protection of its customers by furnishing
32-6 an errors and omissions policy or a bond as provided under this
32-7 subsection. Securities so deposited may be exchanged from time to
32-8 time for other qualified securities.
32-9 A binding commitment to issue such a policy or bond, or the
32-10 tender of such securities, shall be sufficient in connection with
32-11 any application for license.
32-12 Nothing contained herein shall be construed to permit any
32-13 unlicensed employee or agent of any bank to perform any act of a
32-14 local recording agent without obtaining a local recording agent's
32-15 license. The Department shall not require a bank to take the
32-16 examination provided in Section 6 of this Article.
32-17 A bank licensed as an agent under this Article may have
32-18 additional offices from which the business of insurance is
32-19 conducted only in a municipality or county with a population of
32-20 5,000 or less and must comply with the Department's regulations
32-21 regarding additional offices.
32-22 A bank licensed as an agent under this Article must maintain
32-23 its insurance records, including all files relating to and
32-24 reflecting customer complaints, separate and apart from records
32-25 relating to banking transactions of the bank.
32-26 If at any time, any bank holding a local recording agent's
32-27 license does not maintain the qualifications necessary to obtain a
32-28 license, the license of such bank to act as a local recording agent
32-29 shall be canceled or denied in accordance with the provisions of
32-30 Sections 16 and 18 of this Article.
33-1 Each bank licensed as a local recording agent shall file
33-2 under oath with its application for renewal license a list of the
33-3 names and addresses of all individuals who will be acting as agents
33-4 on behalf of the bank and all officers and directors of the bank,
33-5 as defined in Article 21.02 of this code, and other biographical
33-6 information as required by the Department.
33-7 Each bank licensed as a local recording agent shall notify
33-8 the Department on any change in its officers and directors and any
33-9 change in other persons who will be performing any acts of an
33-10 agent, as defined in Article 21.02 of this code, and submit
33-11 biographical information on such officers, directors, and persons
33-12 as required by the Department not later than the 30th day after the
33-13 date on which the change became effective.
33-14 The term "firm" as it applies to local recording agents in
33-15 Sections 2, 12, and 16 of this Article shall be construed to
33-16 include corporations and banks.
33-17 (e) The term "partnership" or "agency partnership" as used
33-18 in this Article means a general partnership or a registered limited
33-19 liability partnership domiciled in Texas.
33-20 (f) [(e)] In this Article, the term "corporation" or
33-21 "corporations" shall mean a corporation organized under the Texas
33-22 Business Corporation Act, The Texas Professional Corporation Act
33-23 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
33-24 domiciled limited liability company organized or existing under the
33-25 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
33-26 Civil Statutes) having its principal place of business in this
33-27 state and having as one of its purposes the authority to act as an
33-28 insurance agent. Each officer, manager, and member of a limited
33-29 liability company must be licensed under this Article. The
33-30 licensing and regulation of a limited liability company shall be
34-1 subject to the same provisions and requirements of this Article
34-2 that are applicable to corporations licensed under this Article.
34-3 (g) In this Article, the term "bank" means a national
34-4 banking association organized and existing under the National Bank
34-5 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
34-6 existing under the Texas Banking Act (Article 342-1.001 et seq.,
34-7 Vernon's Texas Civil Statutes), a state savings bank organized and
34-8 existing under the Texas Savings Bank Act (Article 489e, Vernon's
34-9 Texas Civil Statutes), a bank branch, or a bank operating
34-10 subsidiary, located in this state in a municipality or county with
34-11 a population of 5,000 or less. A bank located in a municipality or
34-12 county with a population of 5,000 or less may own at least 51
34-13 percent of a licensed corporate agent which is also located and
34-14 doing business in a municipality or county with a population of
34-15 5,000 or less, and is subject to the provisions of Section 3a(5) of
34-16 this Article.
34-17 SECTION 17. Section 3a, Article 21.14, Insurance Code, is
34-18 amended by adding Subsection (5) to read as follows:
34-19 (5) Notwithstanding any provisions of either this Article or
34-20 of this Code to the contrary, a bank located in a municipality or
34-21 county with a population of 5,000 or less which owns at least 51
34-22 percent of a licensed bank operating subsidiary which is also
34-23 located and doing business in a municipality or county with a
34-24 population of 5,000 or less, may receive profits from the licensed
34-25 bank operating subsidiary. To advertise under the bank name or
34-26 participate in the insurance operation other than by receiving
34-27 profits from the insurance business, the bank must hold an agent
34-28 license. Nothing in this section permits a bank or any affiliate
34-29 to pay commissions or other valuable consideration to any
34-30 nonlicensed employees, nor may a bank pay, credit, or otherwise
35-1 reward particular nonlicensed units or geographic locations of the
35-2 bank or any of its affiliates with a portion of the commission.
35-3 SECTION 18. Subsections (a), (b), and (c), Section 4,
35-4 Article 21.14, Insurance Code, are amended to read as follows:
35-5 (a) It shall be unlawful for any person, firm, partnership,
35-6 [or] corporation or bank, or any partner, officer, director,
35-7 employee, or shareholder of a corporation or any officer, director,
35-8 or employee of a bank to act as a local recording agent or
35-9 solicitor in procuring business for any insurance company,
35-10 corporation, interinsurance exchange, mutual, reciprocal,
35-11 association, Lloyds or other insurance carrier, until he or it
35-12 shall have in force the license provided for herein.
35-13 (b) No insurer doing business in this state shall pay
35-14 directly or indirectly any commission, or other valuable
35-15 consideration, to any person, firm, partnership, [or] corporation,
35-16 or bank for services as a local recording agent within this state,
35-17 unless such person, firm, partnership, [or] corporation, or bank
35-18 shall hold a currently valid license and appointment to act as a
35-19 local recording agent as required by the laws of this state; nor
35-20 shall any person, firm, partnership, [or] corporation, or bank
35-21 other than a duly licensed and appointed local recording agent
35-22 accept any such commission or other valuable consideration;
35-23 provided, however, that nothing contained in this subsection shall
35-24 prohibit an assigned risk pool or assigned risk plan, duly
35-25 authorized to operate by the laws of this state, from paying
35-26 commissions, or other valuable consideration, to a duly licensed
35-27 person, firm, partnership, [or] corporation, or bank for services
35-28 as a local recording agent.
35-29 (c) No licensed local recording agent, managing general
35-30 agent, or surplus lines agent doing business in this state shall
36-1 pay directly or indirectly any commission, or other valuable
36-2 consideration, to any person, firm, partnership, [or] corporation,
36-3 or bank for services as a local recording agent within this state,
36-4 unless such person, firm, partnership, [or] corporation, or bank
36-5 shall hold a currently valid license to act as a local recording
36-6 agent as required by the laws of this state; nor shall any person,
36-7 firm, partnership, [or] corporation, or bank other than a duly
36-8 licensed local recording agent accept any such commission or other
36-9 valuable consideration.
36-10 SECTION 19. Section 5, Article 21.14, Insurance Code, is
36-11 amended to read as follows:
36-12 Sec. 5. Active agents or solicitors only to be licensed. No
36-13 license shall be granted to any person, firm, partnership, [or]
36-14 corporation, or bank as a local recording agent or to a person as a
36-15 solicitor, for the purpose of writing any form of insurance, unless
36-16 it is found by the Department [State Board of Insurance] that such
36-17 person, firm, partnership, [or] corporation, or bank is or intends
36-18 to be, actively engaged in the soliciting or writing of insurance
36-19 for the public generally; that each person or individual of a firm
36-20 is a resident of Texas and is to be actively engaged in good faith
36-21 in the business of insurance, and that the application is not being
36-22 made in order to evade the laws against rebating and discrimination
36-23 either for the applicant or for some other person, firm,
36-24 partnership, [or] corporation, or bank. Nothing herein contained
36-25 shall prohibit an applicant insuring property which the applicant
36-26 owns or in which the applicant has an interest; but it is the
36-27 intent of this Section to prohibit coercion of insurance and to
36-28 preserve to each citizen the right to choose his own agent or
36-29 insurance carrier, and to prohibit the licensing of an individual,
36-30 firm, partnership, [or] corporation, or bank to engage in the
37-1 insurance business principally to handle business which the
37-2 applicant controls only through ownership, mortgage or sale, family
37-3 relationship or employment, which shall be taken to mean that an
37-4 applicant who is making an original application for license shall
37-5 show the Department [State Board of Insurance] that the applicant
37-6 has a bona fide intention to engage in business in which, in any
37-7 calendar year, at least twenty-five per cent (25%) of the total
37-8 volume of premiums shall be derived from persons or organizations
37-9 other than applicant and from property other than that on which the
37-10 applicant shall control the placing of insurance through ownership,
37-11 mortgage, sale, family relationship or employment. Nothing herein
37-12 contained shall be construed to authorize a partnership, [or]
37-13 corporation, or bank to receive a license as a solicitor.
37-14 SECTION 20. Section 24, Article 21.14, Insurance Code, is
37-15 amended to read as follows:
37-16 Sec. 24. VIOLATION OF ARTICLE. Any person or any member of
37-17 any firm, or any corporation or bank, or any officer, director,
37-18 shareholder or employee of any corporation or bank who violates any
37-19 of the provisions of Sections 4, 15 and 22 of this Article shall be
37-20 guilty of a misdemeanor, and on conviction in a court of competent
37-21 jurisdiction, shall be punished by a fine of not less than One
37-22 Dollar ($1.00) nor more than One Hundred Dollars ($100.00).
37-23 SECTION 21. Article 21.14, Insurance Code, is amended by
37-24 adding Section 27 to read as follows:
37-25 Sec. 27. RULES. In addition to other rules required or
37-26 authorized by this article, the Commissioner may adopt rules in
37-27 accordance with federal law applicable to the regulation of sales
37-28 of insurance that are necessary and proper to carry out the
37-29 provisions of this Code.
37-30 SECTION 22. Subchapter B, Chapter 21, Insurance Code, is
38-1 amended by adding Article 21.21-9 to read as follows:
38-2 Art. 21.21-9. UNFAIR METHODS OF COMPETITION AND UNFAIR
38-3 PRACTICES BY FINANCIAL INSTITUTIONS
38-4 Sec. 1. DEFINITION. In this article "bank" means a national
38-5 banking association organized and existing under the National Bank
38-6 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
38-7 existing under the Texas Banking Act (Article 342-1.001 et seq.,
38-8 Vernon's Texas Civil Statutes), a state savings bank organized and
38-9 existing under the Texas Savings Bank Act (Article 489e, Vernon's
38-10 Texas Civil Statutes), a bank branch, or a bank operating
38-11 subsidiary, located in this state in a municipality or county with
38-12 a population of 5,000 or less.
38-13 Sec. 2. UNFAIR METHODS OF COMPETITION AND UNFAIR PRACTICES
38-14 DEFINED. (a) The following are unfair methods of competition and
38-15 unfair practices in the sale of insurance by banks:
38-16 (1) Tying. (A) When the agent is a bank, requiring
38-17 the purchase of insurance from the bank, its subsidiary or
38-18 affiliate, or from or through any particular agent, solicitor,
38-19 insurer, or any other person or entity, as a condition of extending
38-20 or renewing credit, leasing or selling property, or furnishing
38-21 services;
38-22 (B) Conditioning the terms of credit or the sale
38-23 or lease of property upon acquisition of insurance from or through
38-24 the bank, its affiliate or subsidiary, or any other particular
38-25 person or entity;
38-26 (C) Rejecting any required policy solely because
38-27 such policy has been issued or underwritten by a person or entity
38-28 who is not associated with such bank; or
38-29 (D) Imposing any requirement on any agent or
38-30 broker not associated with the bank that is not imposed on any
39-1 agent or broker who is associated with such bank, subsidiary, or
39-2 affiliate.
39-3 (2) Bank Affiliated Agent Disclosures. When the agent
39-4 is a bank, affiliated with a bank for the purpose of the sale of
39-5 insurance products through common ownership, management, or
39-6 control, or offers or sells insurance from a bank's premises,
39-7 failing to disclose clearly in all promotional materials relating
39-8 to insurance products distributed to customers and potential
39-9 customers that insurance products sold through or in the bank or
39-10 its affiliate or subsidiary are not insured by the Federal Deposit
39-11 Insurance Corporation and that the products are not issued,
39-12 guaranteed, or underwritten by the bank or the Federal Deposit
39-13 Insurance Corporation.
39-14 (b) Subsection (a)(1) of this section shall not prevent a
39-15 person who lends money or extends credit from placing insurance on
39-16 real or personal property in the event the mortgagor, borrower, or
39-17 purchaser has failed to provide required insurance in accordance
39-18 with the terms of the loan or credit document.
39-19 Sec. 3. DISCLOSURE REQUIRED BY BANKS. (a) The following
39-20 disclosure requirements apply to all agents which are banks, or
39-21 which offer or sell insurance from a bank's premises. Promotional
39-22 materials relating to insurance products distributed to customers
39-23 and potential customers shall clearly disclose that insurance
39-24 products sold through the bank affiliated agent are not insured by
39-25 the Federal Deposit Insurance Corporation and that the product is
39-26 not issued, guaranteed, or underwritten by the bank or the Federal
39-27 Deposit Insurance Corporation.
39-28 (b) At the time a loan application is made, a bank must
39-29 provide to the customer a written disclosure in substantially the
39-30 form provided by this subsection. The disclosure form must be
40-1 separate and apart from any loan application or loan document. The
40-2 bank employee who presents the disclosure and the customer shall
40-3 sign and date the disclosure form. One copy of the disclosure form
40-4 shall be maintained by the bank in the loan file and one copy shall
40-5 be provided to the customer for his or her records.
40-6 The disclosure shall be in substantially the following form:
40-7 "CUSTOMER DISCLOSURE
40-8 "You have applied for a loan with the bank. As permitted by
40-9 the Texas Credit Code, the bank is requiring that collateral used
40-10 to secure the loan be insured to cover the amount of the loan to
40-11 the extent insurance is available on the property to be insured,
40-12 against the usual and customary casualty losses.
40-13 "You have the right to provide this insurance either through
40-14 existing policies already owned or controlled by you or by
40-15 procuring the insurance through any insurance agent or company
40-16 authorized to transact business in Texas.
40-17 "The bank, through its own insurance agency, can also make
40-18 this insurance available to you. However, federal and state laws
40-19 provide that the bank cannot require you to obtain insurance
40-20 through the bank, its subsidiary, an affiliate, or any particular
40-21 unaffiliated third party either as a condition to obtaining this
40-22 credit or to obtain special terms or consideration.
40-23 "Insurance products sold through or in the bank or its
40-24 affiliate or subsidiary are not insured by the Federal Deposit
40-25 Insurance Corporation nor are the products issued, guaranteed, or
40-26 underwritten by the bank or the Federal Deposit Insurance
40-27 Corporation.
40-28 "You are not required or obligated to purchase insurance from
40-29 the bank or any subsidiary, affiliate, or particular unaffiliated
40-30 third party as a condition to obtaining your loan, nor will your
41-1 decision as to insurance agents affect your credit terms in any
41-2 way.
41-3 ____________________ ____________________
41-4 "Customer Date
41-5 ____________________
41-6 Employee of Bank"
41-7 (c) An agent that is affiliated with a bank for the purpose
41-8 of the sale of insurance products through common ownership,
41-9 management, or control may not complete a sale of insurance
41-10 covering the collateral securing or proposed to secure a loan with
41-11 the same bank prior to the bank making a commitment on such loan
41-12 transaction.
41-13 (d) The commissioner may amend the disclosure form as
41-14 necessary to comply with federal or state law.
41-15 Sec. 4. INDEPENDENCE OF BANK AGENTS FROM LOAN TRANSACTIONS.
41-16 (a) If insurance is offered or sold to a bank customer in
41-17 connection with a loan transaction by a bank, the insurance sales
41-18 person involved in that insurance transaction must be independent
41-19 of that lending transaction and may not also be the person or
41-20 persons making that loan.
41-21 (b) This provision shall not apply to banks which have $40
41-22 million or less in total assets as reported on the most recent
41-23 Federal Financial Institutions Examination Council (FFIEC)
41-24 Consolidated Report of Condition and Income or any successor report
41-25 required by federal or state law. In addition, this provision
41-26 shall not apply to transactions in which the insurance sold is a
41-27 credit life, credit disability, credit property, or involuntary
41-28 unemployment product sold in conjunction with a credit transaction.
41-29 Sec. 5. COMMISSIONER OF INSURANCE MAY ESTABLISH RULES AND
41-30 REGULATIONS. The commissioner is authorized to establish, and from
42-1 time to time to amend, reasonable rules and regulations to comply
42-2 with federal law applicable to the sale of insurance and for the
42-3 implementation and administration of this article.
42-4 SECTION 23. This Act takes effect September 1, 1997.
42-5 SECTION 24. The importance of this legislation and the
42-6 crowded condition of the calendars in both houses create an
42-7 emergency and an imperative public necessity that the
42-8 constitutional rule requiring bills to be read on three several
42-9 days in each house be suspended, and this rule is hereby suspended.