1-1     By:  Smithee (Senate Sponsor - Sibley)                H.B. No. 3391

 1-2           (In the Senate - Received from the House May 9, 1997;

 1-3     May 12, 1997, read first time and referred to Committee on Economic

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

 1-5     vote:  Yeas 6, Nays 0; May 17, 1997, sent to printer.)

 1-6                            A BILL TO BE ENTITLED

 1-7                                   AN ACT

 1-8     relating to the licensing of banks as insurance agents and to

 1-9     certain nonresident agents; providing a penalty.

1-10           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-11           SECTION 1.   Sections 1(a) and (b), Article 21.07, Insurance

1-12     Code, are amended to read as follows:

1-13           (a)  No person, [or] corporation, or bank shall act as an

1-14     agent of any (i) local mutual aid association, (ii) local mutual

1-15     burial association, (iii) statewide mutual assessment corporation,

1-16     (iv) stipulated premium company, (v) county mutual insurance

1-17     company, (vi) casualty company writing accident and health

1-18     insurance, or (vii) any other type of insurance carrier licensed to

1-19     do business in the State of Texas and which insurance carrier's

1-20     agents are required to be licensed under the provisions of this

1-21     Article [21.07, Texas Insurance Code, 1951, as amended], on the

1-22     date that this Act shall become effective, unless that individual

1-23     [he] or entity [it] shall have first procured a license from the

1-24     department [State Board of Insurance] as in this Article [21.07, as

1-25     amended hereby,] is provided, and no such insurance carrier shall

1-26     appoint any person, [or] corporation, or bank to act as its agent

1-27     unless such person, [or] corporation, or bank shall have obtained a

1-28     license under the provisions of this Article, and no such person,

1-29     [or] corporation, or bank who obtains a license shall engage in

1-30     business as an agent until that individual [he] or entity [it]

1-31     shall have been appointed to act as an agent by some duly

1-32     authorized insurance carrier designated by the provisions of this

1-33     Article [21.07] and authorized to do business in the State of

1-34     Texas.  Any person, [or] corporation, or bank desiring to act as an

1-35     agent of any insurance carrier licensed to do business in the State

1-36     of Texas and writing health and accident insurance may obtain a

1-37     separate license as an agent to write health and accident insurance

1-38     provided such person, [or] corporation, or bank complies with the

1-39     provisions of this Article and has been appointed to act as an

1-40     agent by some duly authorized insurance carrier authorized to do

1-41     health and accident insurance business in the State of Texas.

1-42           (b)  No insurer or licensed insurance agent doing business in

1-43     this State shall pay directly or indirectly any commission, or

1-44     other valuable consideration, to any person, [or] corporation, or

1-45     bank for services as an insurance agent within this State, unless

1-46     such person, [or] corporation, or bank shall hold a currently valid

1-47     license to act as an insurance agent as required by the laws of

1-48     this State; nor shall any person, [or] corporation, or bank other

1-49     than a duly licensed insurance agent, accept any such commission or

1-50     other valuable consideration; provided, however, that the

1-51     provisions of this Section shall not prevent the payment or receipt

1-52     of renewal or other deferred commissions to or by any person solely

1-53     because such person, [or] corporation, or bank has ceased to hold a

1-54     license to act as an insurance agent.

1-55           SECTION 2.   Article 21.07, Insurance Code, is amended by

1-56     adding Section 1C to read as follows:

1-57           Sec. 1C.  LICENSING OF BANKS.  (a)  In this article, "bank"

1-58     means a national banking association organized and existing under

1-59     the National Bank Acts (12 U.S.C. Section 21 et seq.), a state bank

1-60     organized and existing under the Texas Banking Act (Article

1-61     342-1.001 et seq., Vernon's Texas Civil Statutes), a state savings

1-62     bank organized and existing under the Texas Savings Bank Act

1-63     (Article 489e, Vernon's Texas Civil Statutes), a bank branch, or a

1-64     bank operating subsidiary, as defined by state or federal law, that

 2-1     is located and doing business in this state in a place with a

 2-2     population of 5,000 or less.

 2-3           (b)  A bank operating subsidiary located and doing business

 2-4     in a place with a population of 5,000 or less may own a licensed

 2-5     corporate agent that is also located and doing business in a place

 2-6     with a population of 5,000 or less, and is subject to Section 18(c)

 2-7     of this Article.

 2-8           SECTION 3.   Sections 2 and 3, Article 21.07, Insurance Code,

 2-9     are amended to read as follows:

2-10           Sec. 2.  Application for license; to whom license may be

2-11     issued.  (a)  Any person, [or] corporation, or bank that desires to

2-12     become an agent for a local mutual aid association, a local mutual

2-13     burial association, a statewide mutual assessment corporation, a

2-14     stipulated premium company, a county mutual insurance company, a

2-15     casualty company writing accident and health insurance, or any

2-16     other type of insurance carrier licensed to do business in the

2-17     State of Texas, the agents of which are required to be licensed

2-18     under this Article, shall submit to the department [State Board of

2-19     Insurance] an application for a license in the form required by the

2-20     department [Board].

2-21           (b)  The application must bear a signed endorsement by an

2-22     officer or properly authorized representative of the insurance

2-23     carrier that the individual applicant or each member of the

2-24     partnership or each officer, director, and shareholder of the

2-25     corporation or the responsible officer and employee of the bank is

2-26     qualified to hold that individual [himself] or the partnership,

2-27     [or] the corporation, or the bank out in good faith to the general

2-28     public as an insurance agent, and that the insurance carrier

2-29     desires that the applicant act as an insurance agent to represent

2-30     it in this State.

2-31           (c)  The department [Board] shall issue a license to an

2-32     individual or to a general partnership engaging in the business of

2-33     insurance.  Each partner in the partnership must be licensed

2-34     individually as an agent under this Article.

2-35           (d)  The department [Board] shall issue a license to a

2-36     corporation if the department [Board] finds:

2-37                 (1)  That the corporation is a Texas corporation

2-38     organized or existing under the Texas Business Corporation Act or

2-39     the Texas Professional Corporation Act (Article 1528e, Vernon's

2-40     Texas Civil Statutes) having its principal place of business in the

2-41     State of Texas and having as one of its purposes the authority to

2-42     act as an agent covered by this Article;

2-43                 (2)  That every officer, director, and shareholder of

2-44     the corporation is individually licensed under the provisions of

2-45     this Article, or that every officer and director of the corporation

2-46     is individually licensed under this Article, that the corporation

2-47     is a wholly owned subsidiary of a parent corporation that is

2-48     licensed under this Article, and that every shareholder of the

2-49     parent corporation is individually licensed under this Article; and

2-50                 (3)  That such corporation will have the ability to pay

2-51     any sums up to $25,000 which it might become legally obligated to

2-52     pay on account of any claim made against it by any customer and

2-53     caused by any negligent act, error, or omission of the corporation

2-54     or any person for whose acts the corporation is legally liable in

2-55     the conduct of its business under this Article.  The term

2-56     "customer" means any person, firm, or corporation to whom such

2-57     corporation sells or attempts to sell a policy of insurance, or

2-58     from whom such corporation accepts an application for insurance.

2-59     Such ability shall be proven in one of the following ways:

2-60                       (A)  an errors and omissions policy insuring such

2-61     corporation against errors and omissions in at least the sum of

2-62     $100,000 with no more than a $10,000 deductible feature issued by

2-63     an insurance company licensed to do business in the State of Texas

2-64     or, if a policy cannot be obtained from a company licensed to do

2-65     business in Texas, a policy issued by a company not licensed to do

2-66     business in Texas on filing an affidavit with the department [State

2-67     Board of Insurance] stating the inability to obtain coverage and

2-68     receiving the commissioner's [Board's] approval;

2-69                       (B)  a bond executed by such corporation as

 3-1     principal and a surety company authorized to do business in this

 3-2     State, as surety, in the principal sum of $25,000, payable to the

 3-3     department [State Board of Insurance] for the use and benefit of

 3-4     customers of such corporation, conditioned that such corporation

 3-5     shall pay any final judgment recovered against it by any customer;

 3-6     or

 3-7                       (C)  a deposit of cash or securities of the class

 3-8     authorized by Articles 2.08 and 2.10, Insurance Code, as amended,

 3-9     having a fair market value of $25,000 with the comptroller [State

3-10     Treasurer].  The comptroller [State Treasurer] is directed to

3-11     accept and receive such deposit and hold it exclusively for the

3-12     protection of any customer of such corporation recovering a final

3-13     judgment against such corporation.  Such deposit may be withdrawn

3-14     only upon filing with the department [Board] evidence satisfactory

3-15     to it that the corporation has withdrawn from business and has no

3-16     unsecured liabilities outstanding, or that such corporation has

3-17     provided for the protection of its customers by furnishing an

3-18     errors and omissions policy or a bond as provided.  Securities so

3-19     deposited may be exchanged from time to time for other qualified

3-20     securities.

3-21           A binding commitment to issue such a policy or bond, or the

3-22     tender of such securities, shall be sufficient in connection with

3-23     any application for license.

3-24           Nothing contained herein shall be construed to permit any

3-25     unlicensed employee or agent of any corporation to perform any act

3-26     of an agent under this Article without obtaining a license.

3-27           If at any time, any corporation holding an agent's license

3-28     does not maintain the qualifications necessary to obtain a license,

3-29     the license of such corporation to act as an agent shall be

3-30     cancelled or denied in accordance with the provisions of Sections

3-31     10 and 11 of this Article; provided, however, that should any

3-32     person who is not a licensed agent under this Article acquire

3-33     shares in such a corporation by devise or descent, that person

3-34     shall have a period of 90 days from date of acquisition within

3-35     which to obtain a license or to dispose of the shares to a person

3-36     licensed under this Article.

3-37           Should such an unlicensed person acquire shares in a

3-38     corporation and not dispose of them within a period of 90 days to a

3-39     licensed agent, then they must be purchased by the corporation for

3-40     their book value, that is, the value of said shares of stock as

3-41     reflected by the regular books and records of said corporation, as

3-42     of the date of the acquisition of said shares by said unlicensed

3-43     person.  Should the corporation fail or refuse to so purchase such

3-44     shares, its license shall be cancelled.

3-45           Any such corporation shall have the power to redeem the

3-46     shares of any shareholder, or the shares of a deceased shareholder,

3-47     upon such terms as may be agreed upon by the board of directors and

3-48     such shareholder or such shareholder's personal representative, or

3-49     at a price and upon such terms as may be provided in the articles

3-50     of incorporation, the bylaws, or an existing contract entered into

3-51     between the shareholders of the corporation.

3-52           Each corporation licensed as an agent under this Article

3-53     shall file, under oath, a list of the names and addresses of all of

3-54     its officers, directors, and shareholders with its application for

3-55     renewal license.

3-56           Each corporation shall notify the department [State Board of

3-57     Insurance] upon any change in its officers, directors, or

3-58     shareholders not later than the 30th day after the date on which

3-59     the change becomes effective.

3-60           Except as provided by Subdivision (2) of this subsection, a

3-61     corporation may not own any interest in another corporation

3-62     licensed under this Article, and each owner of an interest in a

3-63     corporation licensed under this Article shall be a natural person

3-64     who holds a valid license issued under this Article.

3-65           (e)  The department shall issue a license to a bank if the

3-66     department finds that:

3-67                 (1)  the bank satisfies the definition of Section 1C of

3-68     this Article;

3-69                 (2)  at least one officer of the bank and each

 4-1     individual who will be performing any acts as an agent for the bank

 4-2     are individually licensed under this Article; and

 4-3                 (3)  the bank will have the ability to pay any sums up

 4-4     to $25,000 that it might become legally obligated to pay on account

 4-5     of any claim made against it by a customer and caused by a

 4-6     negligent act, error, or omission of the bank or any person for

 4-7     whose acts the bank is legally liable in the conduct of its

 4-8     business under this Article.  The term "customer" means any person,

 4-9     firm, or corporation to whom the bank sells or attempts to sell a

4-10     policy of insurance or from whom the bank accepts an application

4-11     for insurance.  That ability shall be proven through:

4-12                       (A)  an errors and omissions policy insuring the

4-13     bank against errors and omissions in at least the sum of $100,000

4-14     with not more than a $10,000 deductible feature, issued by an

4-15     insurance company licensed to do business in this state or, if a

4-16     policy cannot be obtained from a company licensed to do business in

4-17     this state, a policy issued by a company not licensed to do

4-18     business in this state on filing an affidavit with the department

4-19     stating the inability to obtain coverage and receiving the

4-20     department's approval;

4-21                       (B)  a bond executed by the bank as principal and

4-22     a surety company authorized to do business in this state, as

4-23     surety, in the principal sum of $25,000, payable to the department

4-24     for the use and benefit of customers of the bank, conditioned that

4-25     the bank shall pay any final judgment recovered against it by a

4-26     customer; or

4-27                       (C)  a deposit with the comptroller of cash or

4-28     securities of the class authorized by Articles 2.08 and 2.10 of

4-29     this code, with a fair market value of $25,000.  The comptroller

4-30     shall accept and receive the deposit and hold it exclusively for

4-31     the protection of a customer of the bank who recovers a final

4-32     judgment against the bank.  The deposit may be withdrawn only on

4-33     filing with the department satisfactory evidence that the bank has

4-34     withdrawn from the business of insurance and has no unsecured

4-35     liabilities outstanding or that the bank has provided for the

4-36     protection of its customers by furnishing an errors and omissions

4-37     policy or a bond as provided by this subdivision.  Securities so

4-38     deposited may be exchanged from time to time for other qualified

4-39     securities.

4-40           A binding commitment to issue such a policy or bond, or the

4-41     tender of applicable securities, is sufficient in connection with

4-42     an application for license.

4-43           Nothing in this subsection permits an unlicensed employee or

4-44     agent of a bank to perform any act of an agent under this Article

4-45     without obtaining a license.

4-46           A bank licensed as an agent under this Article may have

4-47     additional offices from which the business of insurance is

4-48     conducted only in a place with a population of 5,000 or less and

4-49     must comply with the department's regulations regarding additional

4-50     offices.

4-51           A bank licensed as an agent under this Article must maintain

4-52     the insurance records of the bank, including all files relating to

4-53     customer complaints, separate from records relating to the banking

4-54     transactions of the bank.

4-55           If at any time, a bank that holds an agent's license does not

4-56     maintain the qualifications necessary to obtain a license, the

4-57     license of that bank to act as an agent shall be canceled or denied

4-58     in accordance with Sections 10 and 11 of this Article.

4-59           Each bank licensed as an agent under this Article shall file

4-60     under oath with its application for license renewal a list of the

4-61     name and address of each individual who will be acting as an agent

4-62     on behalf of the bank and of each officer and director of the bank,

4-63     as defined by Article 21.02 of this code, and other biographical

4-64     information as required by the department.

4-65           Each bank shall notify the department of any change in its

4-66     officers and directors, and any change in other persons who will be

4-67     acting as agents, as defined by Article 21.02 of this code, and

4-68     submit biographical information on those officers, directors, and

4-69     persons as required by the department not later than the 30th day

 5-1     after the date on which the change takes effect.

 5-2           Sec. 3.  Issuance of License Under Certain Circumstances.

 5-3     The department [State Board of Insurance] shall issue a license to

 5-4     a person, [or] corporation, or bank in such form as it may prepare

 5-5     authorizing such applicant to write the types of insurance

 5-6     authorized by law to be issued by applicant's appointing insurance

 5-7     carrier, except that:

 5-8           (a)  Such applicant shall not be authorized to write health

 5-9     and accident insurance unless:  (i) applicant, if not a

5-10     partnership, [or] corporation, or bank shall have first passed a

5-11     written examination as provided for in this Article [21.07, as

5-12     amended], or (ii) applicant will act only as a ticket-selling agent

5-13     of a public carrier with respect to accident life insurance

5-14     covering risks of travel or as an agent selling credit life, health

5-15     and accident insurance issued exclusively in connection with credit

5-16     transactions, or (iii) applicant will write policies or riders to

5-17     policies providing only lump sum cash benefits in the event of the

5-18     accidental death, or death by accidental means, or dismemberment,

5-19     or providing only ambulance expense benefits in the event of

5-20     accident or sickness; and

5-21           (b)  Such applicant, if not a partnership, [or] corporation,

5-22     or bank shall not be authorized to write life insurance in excess

5-23     of $7,500 upon any one life unless:  (i) applicant, if not a

5-24     partnership, [or] corporation, or bank shall have first passed a

5-25     written examination as provided for in this Article [21.07, as

5-26     amended], or (ii) applicant will act only as a ticket-selling agent

5-27     of a public carrier with respect to accident life insurance

5-28     covering risks of travel or as an agent selling credit life, health

5-29     and accident insurance issued exclusively in connection with credit

5-30     transactions, or (iii) applicant will write policies or riders to

5-31     policies providing only lump sum cash benefits in the event of the

5-32     accidental death, or death by accidental means, or dismemberment,

5-33     or providing only ambulance expense benefits in the event of

5-34     accident or sickness.

5-35           SECTION 4.   Section 4(a), Article 21.07, Insurance Code, is

5-36     amended to read as follows:

5-37           (a)  Each applicant for a license under the provisions of

5-38     this Article [21.07, Texas Insurance Code, 1951, as amended,] who

5-39     desires to write health and accident insurance, other than as

5-40     excepted in Section 3 of this Article [21.07], within this State

5-41     shall submit to a personal written examination prescribed by the

5-42     department [State Board of Insurance] and administered in the

5-43     English or Spanish language to determine the applicant's [his]

5-44     competency with respect to health and accident insurance,

5-45     specifically including medicare supplement insurance, and the

5-46     applicant's [his] familiarity with the pertinent provisions of the

5-47     laws of the State of Texas relating to health and accident

5-48     insurance, specifically including medicare supplement insurance,

5-49     and shall pass the same to the satisfaction of the department

5-50     [State Board of Insurance]; except that no written examination

5-51     shall be required of:

5-52                 (i)  An applicant for the renewal of a license issued

5-53     by the department [State Board of Insurance] pursuant to this

5-54     Article [21.07, Texas Insurance Code, 1951, as amended], which is

5-55     currently in force at the effective date of this Act;

5-56                 (ii)  An applicant whose license expired less than one

5-57     year prior to the date of application may, in the discretion of the

5-58     department [State Board of Insurance], be issued a license without

5-59     written examination, provided such prior license granted such

5-60     applicant the right to sell health and accident insurance; or

5-61                 (iii)  An applicant that is a partnership, [or]

5-62     corporation, or bank.

5-63           SECTION 5.   Sections 12, 13, and 16, Article 21.07,

5-64     Insurance Code, are amended to read as follows:

5-65           Sec. 12.  Penalty.  Any person or officer, director, or

5-66     shareholder of a corporation or bank required to be licensed by

5-67     this Article who individually, or as an officer or employee of an

5-68     insurance carrier, or other corporation, wilfully violates any of

5-69     the provisions of this Article shall, in addition to any other

 6-1     penalty specifically provided, be guilty of a misdemeanor and, upon

 6-2     conviction, shall be fined not more than $500.00 or imprisoned not

 6-3     more than six (6) months, or both, each such violation being a

 6-4     separate offense hereunder.  In addition, if such offender or the

 6-5     corporation or bank of which he is an officer, director, or

 6-6     shareholder holds a license as an agent, such license shall

 6-7     automatically expire upon such conviction.

 6-8           Sec. 13.  TEXAS DEPARTMENT [STATE BOARD] OF INSURANCE MAY

 6-9     ESTABLISH RULES AND REGULATIONS.  The commissioner [State Board of

6-10     Insurance] is hereby authorized to establish, and from time to time

6-11     to amend, reasonable rules and regulations to comply with federal

6-12     law applicable to the sale of insurance and for the administration

6-13     of this Article [21.07].

6-14           Sec. 16.  WORDING ON [STAMPING OF] LICENSE.  When any license

6-15     shall be issued by the department [State Board of Insurance] to an

6-16     applicant entitled to write health and accident insurance, the

6-17     license shall have [stamped] thereon the words HEALTH AND ACCIDENT

6-18     INSURANCE.

6-19           SECTION 6.   Section 18, Article 21.07, Insurance Code, is

6-20     amended by adding Subsection (c) to read as follows:

6-21           (c)  Notwithstanding any provision of this Article or this

6-22     code to the contrary, a bank located and doing business in a place

6-23     with a population of 5,000 or less that owns a licensed bank

6-24     operating subsidiary as defined by state or federal law, that is

6-25     also located and doing business in a place with a population of

6-26     5,000 or less may receive profits from the licensed bank operating

6-27     subsidiary.  To advertise under the bank name or participate in the

6-28     insurance operation other than by receiving profits from the

6-29     insurance business, the bank must hold an agent license.  Nothing

6-30     in this section permits a bank or any affiliate to pay commissions

6-31     or other valuable consideration to any nonlicensed employees, and a

6-32     bank may not pay, credit, or otherwise reward particular

6-33     nonlicensed units or geographic locations of the bank or any of its

6-34     affiliates with a portion of the commission.

6-35           SECTION 7.   Section 1(b), Chapter 213, Acts of the 54th

6-36     Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas

6-37     Insurance Code), is amended to read as follows:

6-38           (b)  The term "life insurance agent" for the purpose of this

6-39     Act means any person, [or] corporation, or bank that is an

6-40     authorized agent of a legal reserve life insurance company, and any

6-41     person who is a sub-agent of such agent, who acts as such in the

6-42     solicitation of, negotiation for, or procurement of, or collection

6-43     of premiums on, an insurance or annuity contract with a legal

6-44     reserve life insurance company; except that the term "life

6-45     insurance agent" shall not include:

6-46                 (1)  any regular salaried officer or employee of a

6-47     legal reserve life insurance company, or of a licensed life

6-48     insurance agent, who devotes substantially all of his or her time

6-49     to activities other than the solicitation of applications for

6-50     insurance or annuity contracts and receives no commission or other

6-51     compensation directly dependent upon the business obtained, and who

6-52     does not solicit or accept from the public applications for

6-53     insurance or annuity contracts;

6-54                 (2)  employers or their officers or employees, or the

6-55     trustees of any employee benefit plan, to the extent that such

6-56     employers, officers, employees or trustees are engaged in the

6-57     administration or operation of any program of employee benefits

6-58     involving the use of insurance or annuities issued by a legal

6-59     reserve life insurance company, provided that such employers,

6-60     officers, employees or trustees are not in any manner compensated,

6-61     directly or indirectly, by the legal reserve life insurance company

6-62     issuing such insurance or annuity contracts;

6-63                 (3)  except as provided by Section 4(f) of this Act,

6-64     banks, savings and loan associations, or credit unions, or the

6-65     officers and employees of banks, savings and loan associations, or

6-66     credit unions, to the extent that such banks, savings and loan

6-67     associations, credit unions, or officers and employees collect and

6-68     remit premiums by charging same against accounts of depositors on

6-69     the orders of such depositors;

 7-1                 (4)  a ticket-selling agent of a public carrier with

 7-2     respect to accident life insurance tickets covering risks of

 7-3     travel;

 7-4                 (5)  an agent selling credit life, health and accident

 7-5     insurance issued exclusively in connection with credit

 7-6     transactions, or acting as agent or solicitor for health and

 7-7     accident insurance under license issued pursuant to the provisions

 7-8     of Article 21.14 of the Texas Insurance Code.

 7-9           SECTION 8.   Chapter 213, Acts of the 54th Legislature,

7-10     Regular Session, 1955 (Article 21.07-1, Vernon's Texas Insurance

7-11     Code), is amended by adding Section 1C to read as follows:

7-12           Sec. 1C.  DEFINITION.  In this Act, "bank" means a national

7-13     banking association organized and existing under the National Bank

7-14     Acts (12 U.S.C. Section 21 et seq.), a state bank organized and

7-15     existing under the Texas Banking Act (Article 342-1.001 et seq.,

7-16     Vernon's Texas Civil Statutes), a state savings bank organized and

7-17     existing under the Texas Savings Bank Act (Article 489e, Vernon's

7-18     Texas Civil Statutes), a bank branch, or a bank operating

7-19     subsidiary, as defined by state or federal law, that is located and

7-20     doing business in this state in a place with a population of 5,000

7-21     or less.  A bank operating subsidiary located and doing business in

7-22     a place with a population of 5,000 or less may own a licensed

7-23     corporate agent that is also located and doing business in a place

7-24     with a population of 5,000 or less, and is subject to Section 3(b)

7-25     of this Act.

7-26           SECTION 9.   Section 2(a), Chapter 213, Acts of the 54th

7-27     Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas

7-28     Insurance Code), is amended to read as follows:

7-29           (a)  No person, [or] corporation, or bank shall, within this

7-30     State, solicit, procure, receive, or forward applications for life

7-31     insurance or annuities, or issue or deliver policies for, or in any

7-32     manner secure, help, or aid in the placing of any contract of life

7-33     insurance or annuity for any other person, directly or indirectly,

7-34     with any life insurance company not authorized to do business in

7-35     this State.

7-36           SECTION 10.   Sections 3(a) and (b), Chapter 213, Acts of the

7-37     54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's

7-38     Texas Insurance Code), are amended to read as follows:

7-39           (a)  No person, [or] corporation, or bank shall act as a life

7-40     insurance agent within this State until that individual [he] or

7-41     entity [it] shall have procured a license as required by the laws

7-42     of this State.

7-43           (b)  No insurer or licensed life insurance agent doing

7-44     business in this State shall pay directly or indirectly any

7-45     commission, or other valuable consideration, to any person, [or]

7-46     corporation, or bank for services as a life insurance agent within

7-47     this State, unless such person, [or] corporation, or bank shall

7-48     hold a currently valid license to act as a life insurance agent as

7-49     required by the laws of this State; nor shall any person, [or]

7-50     corporation, or bank other than a duly licensed life insurance

7-51     agent, accept any such commission or other valuable consideration;

7-52     provided, however, that the provisions of this Section shall not

7-53     prevent the payment or receipt of renewal or other deferred

7-54     commissions to or by any person solely because such person, [or]

7-55     corporation, or bank has ceased to hold a license to act as a life

7-56     insurance agent.  This subsection does not prevent a bank located

7-57     in a place with a population of 5,000 or less that owns a licensed

7-58     bank operating subsidiary as defined by state or federal law, that

7-59     is also located and doing business in a place with a population of

7-60     5,000 or less from receiving profits from that licensed bank

7-61     operating subsidiary.  To advertise under the bank name or

7-62     participate in the insurance operation other than by receiving

7-63     profits from the insurance business, the bank must hold an agent

7-64     license.  Nothing in this Section permits a bank or any affiliate

7-65     to pay commissions or other valuable consideration to nonlicensed

7-66     employees, and a bank may not pay, credit, or otherwise reward

7-67     particular nonlicensed units or geographic locations of the bank or

7-68     any of its affiliates with a portion of the commission.

7-69           SECTION 11.   Section 4, Chapter 213, Acts of the 54th

 8-1     Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas

 8-2     Insurance Code), is amended by amending Subsections (e) and (f) and

 8-3     by adding Subsection (g) to read as follows:

 8-4           (e)  The department [Commissioner] shall issue a license to a

 8-5     corporation if the department [Commissioner] finds:

 8-6                 (1)  That the corporation is a Texas corporation

 8-7     organized or existing under the Texas Business Corporation Act or

 8-8     the Texas Professional Corporation Act having its principal place

 8-9     of business in the State of Texas and having as one of its purposes

8-10     the authority to act as agent under this Act;

8-11                 (2)  That every officer, director, and shareholder of

8-12     the corporation is individually licensed as an agent under the

8-13     provisions of this Act, or that every officer and director of the

8-14     corporation is individually licensed under this Act, that the

8-15     corporation is a wholly owned subsidiary of a parent corporation

8-16     that is licensed under this Act, and that every shareholder of the

8-17     parent corporation is individually licensed under this Act; and

8-18                 (3)  That such corporation will have the ability to pay

8-19     any sums up to $25,000 which it might become legally obligated to

8-20     pay on account of any claim made against it by any customer and

8-21     caused by any negligent act, error, or omission of the corporation

8-22     or any person for whose acts the corporation is legally liable in

8-23     the conduct of its business as under this Act.  The term "customer"

8-24     as used herein shall mean any person, firm, or corporation to whom

8-25     such corporation sells or attempts to sell a policy of insurance or

8-26     from whom such corporation accepts an application for insurance.

8-27     Such ability shall be proven in one of the following ways:

8-28                       (A)  An errors and omissions policy insuring such

8-29     corporation against errors and omissions in at least the sum of

8-30     $100,000 with no more than a $10,000 deductible feature issued by

8-31     an insurance company licensed to do business in the State of Texas

8-32     or, if a policy cannot be obtained from a company licensed to do

8-33     business in Texas, a policy issued by a company not licensed to do

8-34     business in Texas on filing an affidavit with the department [State

8-35     Board of Insurance] stating the inability to obtain coverage and

8-36     receiving the department's [Board's] approval; [or]

8-37                       (B)  A bond executed by such corporation as

8-38     principal and a surety company authorized to do business in this

8-39     State, as surety, in the principal sum of $25,000, payable to the

8-40     department [State Board of Insurance] for the use and benefit of

8-41     customers of such corporation, conditioned that such corporation

8-42     shall pay any final judgment recovered against it by any customer;

8-43     or

8-44                       (C)  A deposit of cash or securities of the class

8-45     authorized by Articles 2.08 and 2.10 of the Insurance Code, having

8-46     a fair market value of $25,000 with the comptroller [State

8-47     Treasurer].  The comptroller [State Treasurer] is hereby authorized

8-48     and directed to accept and receive such deposit and hold it

8-49     exclusively for the protection of any customer of such corporation

8-50     recovering a final judgment against such corporation.  Such deposit

8-51     may be withdrawn only upon filing with the department

8-52     [Commissioner] satisfactory evidence that the corporation has

8-53     withdrawn from business and has no unsecured liabilities

8-54     outstanding, or that such corporation has provided for the

8-55     protection of its customers by furnishing an errors and omissions

8-56     policy or a bond as provided.  Securities so deposited may be

8-57     exchanged from time to time for other qualified securities.

8-58           A binding commitment to issue such a policy or bond, or the

8-59     tender of such securities, shall be sufficient in connection with

8-60     any application for license.

8-61           Nothing contained herein shall be construed to permit any

8-62     unlicensed employee or agent of any corporation to perform any act

8-63     of an agent under this Act without obtaining a license.

8-64           If at any time, any corporation holding a license under this

8-65     Act does not maintain the qualifications necessary to obtain a

8-66     license, the license of such corporation to act as an agent shall

8-67     be cancelled or denied in accordance with the provisions of

8-68     Sections 12 and 13 of this Act; provided, however, that should any

8-69     person who is not an agent licensed under this Act acquire shares

 9-1     in such a corporation by devise or descent, they shall have a

 9-2     period of 90 days from date of acquisition within which to obtain a

 9-3     license as an agent or to dispose of the shares to an agent

 9-4     licensed under this Act.

 9-5           Should such an unlicensed person acquire shares in such a

 9-6     corporation and not dispose of them within said period of 90 days

 9-7     to a licensed agent, then they must be purchased by the corporation

 9-8     for their book value, that is, the value of said shares of stock as

 9-9     reflected by the regular books and records of said corporation as

9-10     of the date of the acquisition of said shares by said unlicensed

9-11     person.  Should the corporation fail or refuse to so purchase such

9-12     shares, its license shall be cancelled.

9-13           Any such corporation shall have the power to redeem the

9-14     shares of any shareholder, or the shares of a deceased shareholder,

9-15     upon such terms as may be agreed upon by the board of directors and

9-16     such shareholder or such shareholder's personal representative, or

9-17     at such price and upon such terms as may be provided in the

9-18     articles of incorporation, the bylaws, or an existing contract

9-19     entered into between the shareholders of the corporation.

9-20           Each corporation licensed as an agent under this Act shall

9-21     file, under oath, a list of the names and addresses of all of its

9-22     officers, directors, and shareholders with its application for

9-23     renewal license.

9-24           Each corporation licensed as an agent under this Act shall

9-25     notify the department [State Board of Insurance] upon any change in

9-26     its officers, directors, or shareholders not later than the 30th

9-27     day after the date on which the change became effective.

9-28           Except as provided by Subdivision (2) of this subsection, a

9-29     corporation may not own any interest in another corporation

9-30     licensed under this Act, and each owner of an interest in a

9-31     corporation licensed under this Act shall be a natural person who

9-32     holds a valid license issued under this Act.

9-33           No association or any legal entity of any nature, other than

9-34     an individual person, general partnership, [or] corporation, or

9-35     bank may be licensed as a life insurance agent.

9-36           (f)  The department shall issue a license to a bank if the

9-37     department finds that:

9-38                 (1)  the bank satisfies the definition of Section 1C of

9-39     this Article;

9-40                 (2)  at least one officer of the bank and each

9-41     individual who will be performing any acts as an agent for the bank

9-42     are individually licensed under this Act; and

9-43                 (3)  the bank will have the ability to pay any sums up

9-44     to $25,000 that it might become legally obligated to pay on account

9-45     of any claim made against it by a customer and caused by a

9-46     negligent act, error, or omission of the bank or any person for

9-47     whose acts the bank is legally liable in the conduct of its

9-48     business under this Act.  The term "customer" means any person,

9-49     firm, or corporation to whom the bank sells or attempts to sell a

9-50     policy of insurance or from whom the bank accepts an application

9-51     for insurance.  That ability shall be proven through:

9-52                       (A)  an errors and omissions policy insuring the

9-53     bank against errors and omissions in at least the sum of $100,000

9-54     with not more than a $10,000 deductible feature, issued by an

9-55     insurance company licensed to do business in this state or, if a

9-56     policy cannot be obtained from a company licensed to do business in

9-57     this state, a policy issued by a company not licensed to do

9-58     business in this state on filing an affidavit with the department

9-59     stating the inability to obtain coverage and receiving the

9-60     department's approval;

9-61                       (B)  a bond executed by the bank as principal and

9-62     a surety company authorized to do business in this state, as

9-63     surety, in the principal sum of $25,000, payable to the department

9-64     for the use and benefit of customers of the bank, conditioned that

9-65     the bank shall pay any final judgment recovered against it by a

9-66     customer; or

9-67                       (C)  a deposit with the comptroller of cash or

9-68     securities of the class authorized by Articles 2.08 and 2.10 of the

9-69     Insurance Code, with a fair market value of $25,000.  The

 10-1    comptroller shall accept and receive the deposit and hold it

 10-2    exclusively for the protection of a customer of the bank who

 10-3    recovers a final judgment against the bank.  The deposit may be

 10-4    withdrawn only on filing with the department satisfactory evidence

 10-5    that the bank has withdrawn from the business of insurance and has

 10-6    no unsecured liabilities outstanding or that the bank has provided

 10-7    for the protection of its customers by furnishing an errors and

 10-8    omissions policy or a bond as provided by this subsection.

 10-9    Securities so deposited may be exchanged from time to time for

10-10    other qualified securities.

10-11          A binding commitment to issue such a policy or bond, or the

10-12    tender of applicable securities, is sufficient in connection with

10-13    an application for license.

10-14          Nothing in this subsection permits an unlicensed employee or

10-15    agent of a bank to perform any act of an agent under this Act

10-16    without obtaining a license.

10-17          A bank licensed as an agent under this Act may have

10-18    additional offices from which the business of insurance is

10-19    conducted only in a place with a population of 5,000 or less and

10-20    must comply with the department's regulations regarding additional

10-21    offices.

10-22          A bank licensed as an agent under this Act must maintain the

10-23    insurance records of the bank, including all files relating to

10-24    customer complaints, separate from records relating to the banking

10-25    transactions of the bank.

10-26          If a bank that holds a license under this Act does not

10-27    maintain the qualifications necessary to obtain a license, the

10-28    license of that bank to act as an agent shall be canceled or denied

10-29    in accordance with Sections 12 and 13 of this Act.

10-30          Each bank licensed as an agent under this Act shall file

10-31    under oath with its application for license renewal a list of the

10-32    name and address of each individual who will be acting as an agent

10-33    on behalf of the bank and of each officer and director of the bank,

10-34    as defined by Article 21.02 of the Insurance Code, and other

10-35    biographical information as required by the department.

10-36          Each bank shall notify the department of any change in its

10-37    officers and directors, and any change in other persons who will be

10-38    acting as agents, as defined by Article 21.02, Insurance Code, and

10-39    submit biographical information on those officers, directors, and

10-40    persons as required by the department not later than the 30th day

10-41    after the date on which the change takes effect.

10-42          (g)  Each applicant, prior to sitting for the written

10-43    examination as provided for in Section 5 of this Act, shall

10-44    complete, under the supervision of such sponsoring insurer, an

10-45    educational program that shall include:

10-46                (1)  such texts as may be prescribed by the

10-47    Commissioner [of Insurance] on the recommendation of the Advisory

10-48    Board as provided in Subsection (c) of Section 5 of this Act; and

10-49                (2)  materials that will provide the applicant with the

10-50    basic knowledge of:

10-51                      (A)  the broad principles of insurance,

10-52    licensing, and regulatory laws of this State;

10-53                      (B)  principles related to medicare supplement

10-54    insurance; and

10-55                      (C)  the obligations and duties of a life

10-56    insurance agent.

10-57          SECTION 12.   Sections 5(a) and (d), Chapter 213, Acts of the

10-58    54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's

10-59    Texas Insurance Code), are amended to read as follows:

10-60          (a)  Each prospective applicant for a license to act as a

10-61    life insurance agent within this State shall submit to a personal

10-62    written examination administered in the English or Spanish

10-63    language, as prescribed by the department [State Board of

10-64    Insurance], to determine the applicant's competence with respect to

10-65    insurance and annuity contracts, including medicare supplement

10-66    contracts, and the applicant's familiarity with the pertinent

10-67    provisions of the laws of this State and the obligations and duties

10-68    of a life insurance agent, and shall pass the same to the

10-69    satisfaction of the department [State Board of Insurance].  A

 11-1    nonrefundable examination fee, in an amount determined by the

 11-2    Commissioner [Board] but not more than $20, must accompany the

 11-3    application to take the examination.  The department shall charge

 11-4    the fee each time the examination is taken.  The department shall

 11-5    give certifications of a passing score to those applicants that

 11-6    obtain such a score.  No written examination shall be required of:

 11-7                (1)  An applicant for the renewal of a license issued

 11-8    by the department [State Board of Insurance] pursuant to Article

 11-9    21.07, [Texas] Insurance Code, [1951,] which is currently in force

11-10    at the time of the effective date of this Act;

11-11                (2)  An applicant whose license as a life insurance

11-12    agent expired less than one year prior to the date of application

11-13    may, in the discretion of the department [State Board of

11-14    Insurance], be issued a license without written examination;

11-15                (3)  A person who holds the designation Chartered Life

11-16    Underwriter (CLU);

11-17                (4)  An applicant that is a partnership, [or]

11-18    corporation, or bank.

11-19          (d)  An applicant other than a partnership, [or] corporation,

11-20    or bank for a license to act as a combination life insurance agent

11-21    for a combination company, or as an industrial life agent for an

11-22    industrial company, may, in lieu of taking and passing to the

11-23    satisfaction of the Commissioner a personal written examination as

11-24    provided in Sub-section (a) of this Section 5, submit to a personal

11-25    written examination given by the combination or industrial insurer

11-26    for which the applicant is to be licensed, subject to the following

11-27    definitions and conditions:

11-28                (1)  A combination life insurance agent is hereby

11-29    defined as an agent writing weekly premium life insurance or

11-30    monthly ordinary life insurance on a debit basis, provided that a

11-31    combination life insurance agent may also write ordinary contracts

11-32    of life insurance.  An industrial life agent is an agent writing

11-33    only weekly life insurance on a debit basis.  A combination company

11-34    is hereby defined as an insurer actually writing weekly premium

11-35    life insurance or monthly ordinary life insurance on a debit basis,

11-36    provided that a combination company may also write ordinary

11-37    contracts of life insurance.  An industrial company is an insurer

11-38    writing only weekly premium life insurance on a debit basis.

11-39                (2)  Any combination or industrial insurer desiring to

11-40    qualify to administer the examination to its agents shall file with

11-41    the Commissioner a complete outline and explanation of the course

11-42    of study and instruction to be given such applicants and the nature

11-43    and manner of conducting the examinations of applicants and, after

11-44    official approval thereof by the Commissioner, may administer such

11-45    examinations.

11-46                (3)  The combination or industrial insurer shall

11-47    certify as to each applicant that the applicant [he] has completed

11-48    the approved course of study and instruction and has successfully

11-49    passed the examination in writing without aid.

11-50                (4)  It shall be the duty of the Commissioner to

11-51    investigate the manner and method of instruction and examination of

11-52    each combination and industrial insurer as often as deemed

11-53    necessary by the Commissioner and the Commissioner may[, in his

11-54    discretion,] withdraw from any insurer the privilege of examining

11-55    agents in lieu of the examination prescribed in Sub-section (a) of

11-56    this Section 5.

11-57                (5)  The license to act as a life insurance agent

11-58    issued to an applicant pursuant to the provisions of this

11-59    Sub-section (d) shall include [be stamped] COMBINATION OR

11-60    INDUSTRIAL LICENSE on its face and shall automatically expire and

11-61    be of no further force and effect when the holder ceases to act as

11-62    a combination or industrial agent for a combination or industrial

11-63    company.

11-64          SECTION 13.   Section 7(b), Chapter 213, Acts of the 54th

11-65    Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's Texas

11-66    Insurance Code), is amended to read as follows:

11-67          (b)  The [Life Insurance] Commissioner is further authorized

11-68    to enter into reciprocal agreements with the appropriate official

11-69    or any other State waiving the written examination of any applicant

 12-1    resident in such other State, provided:

 12-2                (1)  That a written examination is required of

 12-3    applicants for a life insurance agent's license in such other

 12-4    State;

 12-5                (2)  That the appropriate official of such other State

 12-6    certifies that the applicant holds a currently valid license as a

 12-7    life insurance agent in such other State and either passed such

 12-8    written examination or was the holder of a life insurance agent's

 12-9    license prior to the time such written examination was required;

12-10                (3)  That the applicant has no place of business within

12-11    this State in the transaction of business as a life insurance

12-12    agent;

12-13                (4)  That in such other State, a resident of this State

12-14    is privileged to procure a life insurance agent's license upon the

12-15    foregoing conditions and without discrimination as to fees or

12-16    otherwise in favor of the residents of such other State.

12-17          SECTION 14.   Sections 14 and 15, Chapter 213, Acts of the

12-18    54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's

12-19    Texas Insurance Code), are amended to read as follows:

12-20          Sec. 14.  Penalty.  Any person or officer, director, or

12-21    shareholder of a corporation or bank required to be licensed by

12-22    this Act who individually, or as an officer or employee of a legal

12-23    reserve life insurance company, or other corporation, violates any

12-24    of the provisions of this Act shall, in addition to any other

12-25    penalty specifically provided, be guilty of a misdemeanor and, upon

12-26    conviction, shall be fined not more than $500.00 or imprisoned not

12-27    more than six months, or both, each such violation being a separate

12-28    offense hereunder.  In addition, if such offender or corporation or

12-29    bank of which that person [he] is an officer, director, or

12-30    shareholder holds a license as a life insurance agent, such license

12-31    shall automatically expire upon such conviction.

12-32          Sec. 15.  Commissioner May Establish Rules and Regulations.

12-33    The [Life Insurance] Commissioner is authorized to establish, and

12-34    from time to time to amend, reasonable rules and regulations to

12-35    comply with federal law applicable to the sale of insurance and for

12-36    the administration of this Act.

12-37          SECTION 15.   Sections 16(a)-(d), Chapter 213, Acts of the

12-38    54th Legislature, Regular Session, 1955 (Article 21.07-1, Vernon's

12-39    Texas Insurance Code), are amended to read as follows:

12-40          (a)  In this section, "accident and health insurance agent"

12-41    means any person, [or] corporation, or bank that is an authorized

12-42    agent of a legal reserve life insurance company and who acts as

12-43    such agent only in the solicitation of, negotiation for,

12-44    procurement of, or collection of premiums on an accident and health

12-45    insurance contract with a legal reserve life insurance company, but

12-46    does not include:

12-47                (1)  a regular salaried officer or employee of a legal

12-48    reserve life insurance company, or of a licensed life or accident

12-49    and health insurance agent, who devotes substantially all of his or

12-50    her time to activities other than the solicitation of applications

12-51    for insurance contracts and receives no commission or other

12-52    compensation directly dependent upon the business obtained and who

12-53    does not solicit or accept from the public applications for

12-54    insurance contracts;

12-55                (2)  employers or their officers or employees, or the

12-56    trustees of any employee benefit plan, to the extent that those

12-57    employers, officers, employees, or trustees are engaged in the

12-58    administration or operation of any program of employee benefits

12-59    involving the use of insurance issued by a legal reserve life

12-60    insurance company, provided that those employers, officers,

12-61    employees, or trustees are not in any manner compensated directly

12-62    or indirectly by the legal reserve life insurance company issuing

12-63    the insurance contracts;

12-64                (3)  banks or their officers and employees to the

12-65    extent that the banks, or their officers, and employees collect and

12-66    remit premiums by charging the premiums against the account of a

12-67    depositor on the orders of the depositor;

12-68                (4)  a ticket-selling agent of a public carrier with

12-69    respect to accident and health insurance tickets covering risks of

 13-1    travel; or

 13-2                (5)  an agent selling credit health and accident

 13-3    insurance issued exclusively in connection with credit

 13-4    transactions, or acting as agent or solicitor for health and

 13-5    accident insurance under a license issued under [either] Article

 13-6    21.07[, Article 21.07-1,] or Article 21.14, Insurance Code, or this

 13-7    Act.

 13-8          (b)  The department [State Board of Insurance] may issue a

 13-9    license to a person, [or] a corporation, or a bank to act only as

13-10    an accident and health insurance agent for a legal reserve life

13-11    insurance company as provided by this section.

13-12          (c)  Each applicant for a license under this section who

13-13    desires to act as an accident and health insurance agent within

13-14    this state shall submit to a personal written examination

13-15    prescribed by the department [State Board of Insurance] and

13-16    administered in the English or Spanish language to determine the

13-17    applicant's competency with respect to accident and health

13-18    insurance and familiarity with the pertinent provisions of the

13-19    health and accident insurance laws of this state.  Except as

13-20    provided by Subsection (d) of this section, each applicant must

13-21    pass the examination to the satisfaction of the department [State

13-22    Board of Insurance].

13-23          (d)  A written examination is not required of:

13-24                (1)  an applicant for license under this Section 16 if

13-25    the applicant has previously been licensed and currently holds on

13-26    the effective date of this section a valid license issued by the

13-27    department [State Board of Insurance] under [either] Article

13-28    21.07[, Article 21.07-1,] or Article 21.14 of this code, or this

13-29    Act;

13-30                (2)  an applicant whose license expires less than one

13-31    year before the date of application and who may, in the discretion

13-32    of the department [State Board of Insurance], be issued a license

13-33    without written examination, provided the prior expired license

13-34    granted the applicant the right to act as an agent for accident and

13-35    health insurance; or

13-36                (3)  an applicant that is a partnership, [or]

13-37    corporation, or bank; provided, however, that a partnership, [or]

13-38    corporation, or bank may be licensed hereunder only if it otherwise

13-39    complies with the provisions of Section 4 of this article, but in

13-40    the application of such section to such compensation hereunder, any

13-41    requirement pertaining to or reference therein to "life insurance"

13-42    shall be changed and limited to "health and accident insurance"

13-43    only as is intended by the terms of the Section 16.

13-44          SECTION 16.   Section 3, Article 21.14, Insurance Code, is

13-45    amended by amending Subsections (a) and (d)-(e), and by adding

13-46    Subsections (f) and (g) to read as follows:

13-47          (a)  When any person, partnership, registered limited

13-48    liability partnership, limited liability company, [or] corporation,

13-49    or bank shall desire to engage in business as a local recording

13-50    agent for an insurance company, or insurance carrier, that person

13-51    [he] or entity [it] shall make application for a license to the

13-52    Texas Department of Insurance, in such form as the Department may

13-53    require.  Such application shall bear a signed endorsement by a

13-54    general, state or special agent of a qualified insurance company,

13-55    or insurance carrier that applicant or each member of the

13-56    partnership or each stockholder of the corporation or each member

13-57    of the limited liability company is a resident of this state.

13-58          (d)  The department shall issue a license to a bank if the

13-59    department finds that:

13-60                (1)  the bank is a national banking association

13-61    organized and existing under the National Bank Acts (12 U.S.C.

13-62    Section 21 et seq.), a state bank organized and existing under the

13-63    Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil

13-64    Statutes), a state savings bank organized and existing under the

13-65    Texas Savings Bank Act (Article 489e, Vernon's Texas Civil

13-66    Statutes), or a bank operating subsidiary, as defined by state or

13-67    federal law, that is located and doing business in this state in a

13-68    place with a population of 5,000 or less;

13-69                (2)  at least one officer of the bank and each

 14-1    individual who will be performing any acts of an agent for the bank

 14-2    are individually licensed under this Article; and

 14-3                (3)  the bank will have the ability to pay any sums up

 14-4    to $25,000 that it might become legally obligated to pay on account

 14-5    of any claim made against it by a customer and caused by a

 14-6    negligent act, error, or omission of the bank or any person for

 14-7    whose acts the bank is legally liable in the conduct of its

 14-8    business as a local recording agent.  The term "customer" means any

 14-9    person, firm, or corporation to whom the bank sells or attempts to

14-10    sell a policy of insurance or from whom the bank accepts an

14-11    application for insurance.  That ability shall be proven through:

14-12                      (A)  an errors and omissions policy insuring the

14-13    bank against errors and omissions, in at least the sum of $100,000

14-14    with not more than a $10,000 deductible feature, or the sum of at

14-15    least $300,000 with not more than a $25,000 deductible feature,

14-16    issued by an insurance company licensed to do business in this

14-17    state or, if a policy cannot be obtained from a company licensed to

14-18    do business in this state, a policy issued by a company not

14-19    licensed to do business in this state, on filing an affidavit with

14-20    the department stating the inability to obtain coverage and

14-21    receiving the department's approval;

14-22                      (B)  a bond executed by the bank as principal and

14-23    a surety company authorized to do business in this state, as

14-24    surety, in the principal sum of $25,000, payable to the department

14-25    for the use and benefit of customers of the bank, conditioned that

14-26    the bank shall pay any final judgment recovered against it by a

14-27    customer; or

14-28                      (C)  a deposit with the comptroller of cash or

14-29    securities of the class authorized by Articles 2.08 and 2.10 of

14-30    this code, with a fair market value of $25,000.  The comptroller

14-31    shall accept and receive the deposit and hold it exclusively for

14-32    the protection of a customer of the bank who recovers a final

14-33    judgment against the bank.  The deposit may be withdrawn only on

14-34    filing with the department satisfactory evidence that the bank has

14-35    withdrawn from the business of insurance and has no unsecured

14-36    liabilities outstanding or that the bank has provided for the

14-37    protection of its customers by furnishing an errors and omissions

14-38    policy or a bond as provided by this subsection.  Securities so

14-39    deposited may be exchanged from time to time for other qualified

14-40    securities.

14-41          A binding commitment to issue such a policy or bond, or the

14-42    tender of applicable securities, is sufficient in connection with

14-43    an application for license.

14-44          Nothing in this subsection shall be construed to permit an

14-45    unlicensed employee or agent of a bank to perform any act of a

14-46    local recording agent without obtaining a local recording agent's

14-47    license.  The department may not require a bank to take the

14-48    examination provided by Section 6 of this Article.

14-49          A bank licensed as an agent under this Article may have

14-50    additional offices from which the business of insurance is

14-51    conducted only in a place with a population of 5,000 or less and

14-52    must comply with the department's regulations regarding additional

14-53    offices.

14-54          A bank licensed as an agent under this article must maintain

14-55    its insurance records, including all files relating to and

14-56    reflecting customer complaints, separate from records relating to

14-57    banking transactions of the bank.

14-58          If a bank that holds a local recording agent's license does

14-59    not maintain the qualifications necessary to obtain a license, the

14-60    license of that bank to act as a local recording agent shall be

14-61    canceled or denied in accordance with Sections 16 and 18 of this

14-62    article.

14-63          Each bank licensed as a local recording agent shall file

14-64    under oath with its application for license renewal a list of the

14-65    name and address of each individual who will be acting as an agent

14-66    on behalf of the bank and of each officer and director of the bank,

14-67    as defined by Article 21.02 of this code, and other biographical

14-68    information as required by the department.

14-69          Each bank licensed as a local recording agent shall notify

 15-1    the department of any change in its officers and directors and any

 15-2    change in other persons who will be performing any acts of an

 15-3    agent, as defined by Article 21.02 of this code, and submit

 15-4    biographical information on those officers, directors, and persons

 15-5    as required by the department not later than the 30th day after the

 15-6    date on which the change takes effect.

 15-7          The term "firm," as that term applies to local recording

 15-8    agents in Sections 2, 12, and 16 of this article, includes

 15-9    corporations and banks.

15-10          (e)  The term "partnership" or "agency partnership" as used

15-11    in this Article means a general partnership or a registered limited

15-12    liability partnership domiciled in Texas.

15-13          (f) [(e)]  In this Article, the term "corporation" or

15-14    "corporations" shall mean a corporation organized under the Texas

15-15    Business Corporation Act, The Texas Professional Corporation Act

15-16    (Article 1528e, Vernon's Texas Civil Statutes), or a Texas

15-17    domiciled limited liability company organized or existing under the

15-18    Texas Limited Liability Company Act (Article 1528n, Vernon's Texas

15-19    Civil Statutes) having its principal place of business in this

15-20    state and having as one of its purposes the authority to act as an

15-21    insurance agent.  Each officer, manager, and member of a limited

15-22    liability company must be licensed under this Article.  The

15-23    licensing and regulation of a limited liability company shall be

15-24    subject to the same provisions and requirements of this Article

15-25    that are applicable to corporations licensed under this Article.

15-26          (g)  In this article, the term "bank" means a national

15-27    banking association organized and existing under the National Bank

15-28    Acts (12 U.S.C. Section 21 et seq.), a state bank organized and

15-29    existing under the Texas Banking Act (Article 342-1.001 et seq.,

15-30    Vernon's Texas Civil Statutes), a state savings bank organized and

15-31    existing under the Texas Savings Bank Act (Article 489e, Vernon's

15-32    Texas Civil Statutes), a bank branch, or a bank operating

15-33    subsidiary, as defined by state or federal law, that is located and

15-34    doing business in this state in a place with a population of 5,000

15-35    or less.  A bank operating subsidiary, as defined by state or

15-36    federal law, located and doing business in a place in this state

15-37    with a population of 5,000 or less may own a licensed corporate

15-38    agent that is also located and doing business in a place with a

15-39    population of 5,000 or less, and is subject to Section 3a(5) of

15-40    this Article.

15-41          SECTION 17.   Section 3a, Article 21.14, Insurance Code, is

15-42    amended by adding Subsection (5) to read as follows:

15-43                (5)  Notwithstanding any provision of this article or

15-44    this code to the contrary, a bank located and doing business in a

15-45    place with a population of 5,000 or less that owns a licensed bank

15-46    operating subsidiary, as defined by state or federal law, that is

15-47    also located and doing business in a place with a population of

15-48    5,000 or less may receive profits from the licensed bank operating

15-49    subsidiary.  To advertise under the bank name or participate in the

15-50    insurance operation other than by receiving profits from the

15-51    insurance business, the bank must hold an agent license.  Nothing

15-52    in this section permits a bank or any affiliate to pay commissions

15-53    or other valuable consideration to any nonlicensed employees, and a

15-54    bank may not pay, credit, or otherwise reward particular

15-55    nonlicensed units or geographic locations of the bank or any of its

15-56    affiliates with a portion of the commission.

15-57          SECTION 18.   Sections 4(a)-(c), Article 21.14, Insurance

15-58    Code, are amended to read as follows:

15-59          (a)  It shall be unlawful for any person, firm, partnership,

15-60    [or] corporation or bank, or any partner, officer, director,

15-61    employee, or shareholder of a corporation, or any officer,

15-62    director, or employee of a bank to act as a local recording agent

15-63    or solicitor in procuring business for any insurance company,

15-64    corporation, interinsurance exchange, mutual, reciprocal,

15-65    association, Lloyds or other insurance carrier, until that person

15-66    [he] or entity [it] shall have in force the license provided for

15-67    herein.

15-68          (b)  No insurer doing business in this state shall pay

15-69    directly or indirectly any commission, or other valuable

 16-1    consideration, to any person, firm, partnership, [or] corporation,

 16-2    or bank for services as a local recording agent within this state,

 16-3    unless such person, firm, partnership, [or] corporation, or bank

 16-4    shall hold a currently valid license and appointment to act as a

 16-5    local recording agent as required by the laws of this state; nor

 16-6    shall any person, firm, partnership, [or] corporation, or bank

 16-7    other than a duly licensed and appointed local recording agent

 16-8    accept any such commission or other valuable consideration;

 16-9    provided, however, that nothing contained in this subsection shall

16-10    prohibit an assigned risk pool or assigned risk plan, duly

16-11    authorized to operate by the laws of this state, from paying

16-12    commissions, or other valuable consideration, to a duly licensed

16-13    person, firm, partnership, [or] corporation, or bank for services

16-14    as a local recording agent.

16-15          (c)  No licensed local recording agent, managing general

16-16    agent, or surplus lines agent doing business in this state shall

16-17    pay directly or indirectly any commission, or other valuable

16-18    consideration, to any person, firm, partnership, [or] corporation,

16-19    or bank for services as a local recording agent within this state,

16-20    unless such person, firm, partnership, [or] corporation, or bank

16-21    shall hold a currently valid license to act as a local recording

16-22    agent as required by the laws of this state; nor shall any person,

16-23    firm, partnership, [or] corporation, or bank other than a duly

16-24    licensed local recording agent accept any such commission or other

16-25    valuable consideration.

16-26          SECTION 19.   Section 5, Article 21.14, Insurance Code, is

16-27    amended to read as follows:

16-28          Sec. 5.  Active agents or solicitors only to be licensed.  No

16-29    license shall be granted to any person, firm, partnership, [or]

16-30    corporation, or bank as a local recording agent or to a person as a

16-31    solicitor, for the purpose of writing any form of insurance, unless

16-32    it is found by the department [State Board of Insurance] that such

16-33    person, firm, partnership, [or] corporation, or bank is or intends

16-34    to be, actively engaged in the soliciting or writing of insurance

16-35    for the public generally; that each person or individual of a firm

16-36    is a resident of Texas and is to be actively engaged in good faith

16-37    in the business of insurance, and that the application is not being

16-38    made in order to evade the laws against rebating and discrimination

16-39    either for the applicant or for some other person, firm,

16-40    partnership, [or] corporation, or bank.  Nothing herein contained

16-41    shall prohibit an applicant insuring property which the applicant

16-42    owns or in which the applicant has an interest; but it is the

16-43    intent of this Section to prohibit coercion of insurance and to

16-44    preserve to each citizen the right to choose that individual's

16-45    [his] own agent or insurance carrier, and to prohibit the licensing

16-46    of an individual, firm, partnership, [or] corporation, or bank to

16-47    engage in the insurance business principally to handle business

16-48    which the applicant controls only through ownership, mortgage or

16-49    sale, family relationship or employment, which shall be taken to

16-50    mean that an applicant who is making an original application for

16-51    license shall show the department [State Board of Insurance] that

16-52    the applicant has a bona fide intention to engage in business in

16-53    which, in any calendar year, at least twenty-five per cent (25%) of

16-54    the total volume of premiums shall be derived from persons or

16-55    organizations other than applicant and from property other than

16-56    that on which the applicant shall control the placing of insurance

16-57    through ownership, mortgage, sale, family relationship or

16-58    employment.  Nothing herein contained shall be construed to

16-59    authorize a partnership, [or] corporation, or bank to receive a

16-60    license as a solicitor.

16-61          SECTION 20.   Section 24, Article 21.14, Insurance Code, is

16-62    amended to read as follows:

16-63          Sec. 24.  VIOLATION OF ACT.  Any person or any member of any

16-64    firm, or any corporation or bank, or any officer, director,

16-65    shareholder or employee of any corporation or bank who violates any

16-66    of the provisions of Sections 4, 15 and 22 of this Article shall be

16-67    guilty of a misdemeanor, and on conviction in a court of competent

16-68    jurisdiction, shall be punished by a fine of not less than One

16-69    Dollar ($1.00) nor more than One Hundred Dollars ($100.00).

 17-1          SECTION 21.   Article 21.14, Insurance Code, is amended by

 17-2    adding Section 27 to read as follows:

 17-3          Sec. 27.  RULES.  In addition to other rules required or

 17-4    authorized by this article, the commissioner may adopt rules in

 17-5    accordance with federal law applicable to the regulation of the

 17-6    sale of insurance that are necessary and proper to carry out the

 17-7    provisions of this article.

 17-8          SECTION 22.   Subchapter B, Chapter 21, Insurance Code, is

 17-9    amended by adding Article 21.21-9 to read as follows:

17-10          Art. 21.21-9.  UNFAIR METHODS OF COMPETITION AND UNFAIR

17-11    PRACTICES BY FINANCIAL INSTITUTIONS

17-12          Sec. 1.  DEFINITIONS.  In this article:

17-13                (1)  "Affiliate" means a person who, directly or

17-14    indirectly or through one or more intermediaries, controls or is

17-15    controlled by another person or is under common control with

17-16    another person.

17-17                (2)  "Bank" means:

17-18                      (A)  a national banking association organized and

17-19    existing under the National Bank Acts (12 U.S.C. Section 21 et

17-20    seq.);

17-21                      (B)  a state bank organized and existing under

17-22    the Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas

17-23    Civil Statutes);

17-24                      (C)  a state savings bank organized and existing

17-25    under the Texas Savings Bank Act (Article 489e, Vernon's Texas

17-26    Civil Statutes);

17-27                      (D)  a bank branch; or

17-28                      (E)  a bank operating subsidiary, as defined by

17-29    state or federal law, that is located and doing business in this

17-30    state in a place with a population of 5,000 or less.

17-31          Sec. 2.  UNFAIR METHODS OF COMPETITION AND UNFAIR PRACTICES

17-32    DEFINED.  (a)  The following are unfair methods of competition and

17-33    unfair practices in the sale of insurance by banks:

17-34                (1)  Tying.  (A)  When the agent is a bank, requiring

17-35    the purchase of insurance from the bank, its subsidiary or

17-36    affiliate, or from or through any particular agent, solicitor,

17-37    insurer, or any other person or entity, as a condition of extending

17-38    or renewing credit, leasing or selling property, or furnishing

17-39    services;

17-40                      (B)  Conditioning the terms of credit or the sale

17-41    or lease of property on acquisition of insurance from or through

17-42    the bank, its subsidiary or affiliate, or any other particular

17-43    person or entity;

17-44                      (C)  Rejecting any required policy solely because

17-45    that policy has been issued or underwritten by a person or entity

17-46    who is not associated with the bank; or

17-47                      (D)  Imposing any requirement on an agent or

17-48    broker not associated with the bank that is not imposed on an agent

17-49    or broker who is associated with the bank or the bank's subsidiary

17-50    or affiliate; and

17-51                (2)  Bank affiliated agent disclosures.  When a bank is

17-52    soliciting the purchase of or is selling insurance, or any person

17-53    is soliciting the purchase of or is selling insurance recommended

17-54    or sponsored by the bank, on the premises of the bank, or in

17-55    connection with a product offering of the bank, failing to disclose

17-56    clearly in all promotional materials relating to insurance products

17-57    that are distributed to customers and potential customers that:

17-58                      (A)  insurance products sold through or in the

17-59    bank or its subsidiary or affiliate are not insured by the Federal

17-60    Deposit Insurance Corporation;

17-61                      (B)  the products are not issued, guaranteed, or

17-62    underwritten by the bank or the Federal Deposit Insurance

17-63    Corporation; and

17-64                      (C)  the products involve investment risk, if

17-65    appropriate, including potential loss of principal.

17-66          (b)  Subsection (a)(1) of this section does not prevent a

17-67    person who lends money or extends credit from placing insurance on

17-68    real or personal property if the mortgagor, borrower, or purchaser

17-69    has failed to provide required insurance in accordance with the

 18-1    terms of the loan or credit document.

 18-2          Sec. 3.  DISCLOSURE REQUIRED BY BANKS.  (a)  The following

 18-3    disclosure requirements apply to each agent that is a bank, or that

 18-4    solicits the purchase of or sells insurance recommended or

 18-5    sponsored by a bank, on the premises of a bank, or in connection

 18-6    with a product offering of a bank.  Promotional materials relating

 18-7    to insurance products distributed to customers and potential

 18-8    customers must clearly disclose that insurance products sold

 18-9    through the bank affiliated agent:

18-10                (1)  are not insured by the Federal Deposit Insurance

18-11    Corporation;

18-12                (2)  are not issued, guaranteed, or underwritten by the

18-13    bank or the Federal Deposit Insurance Corporation; and

18-14                (3)  involve investment risk, if appropriate, including

18-15    potential loss of principal.

18-16          (b)  At the time a loan application is made, a bank shall

18-17    provide to the customer a written disclosure in substantially the

18-18    form provided by this subsection.  The disclosure form must be

18-19    separate and apart from any loan application or loan document.  The

18-20    bank employee who presents the disclosure and the customer shall

18-21    sign and date the disclosure form.  One copy of the disclosure form

18-22    shall be maintained by the bank in the loan file and one copy shall

18-23    be provided to the customer for his or her records.  The disclosure

18-24    must be in substantially the following form:

18-25                           "CUSTOMER DISCLOSURE

18-26          "You have applied for a loan with the bank.  As permitted by

18-27    the Texas Credit Code, the bank is requiring that collateral used

18-28    to secure the loan be insured to cover the amount of the loan to

18-29    the extent insurance is available on the property to be insured,

18-30    against the usual and customary casualty losses.

18-31          "You have the right to provide this insurance either through

18-32    existing policies already owned or controlled by you or by

18-33    procuring the insurance through any insurance agent or company

18-34    authorized to transact business in Texas.

18-35          "The bank, through its own insurance agency, can also make

18-36    this insurance available to you.  However, federal and state laws

18-37    provide that the bank cannot require you to obtain insurance

18-38    through the bank, its subsidiary, an affiliate, or any particular

18-39    unaffiliated third party, either as a condition to obtaining this

18-40    credit or to obtain special terms or consideration.

18-41          "Insurance products sold through or in the bank or its

18-42    affiliate or subsidiary are not insured by the Federal Deposit

18-43    Insurance Corporation and are not issued, guaranteed, or

18-44    underwritten by the bank or the Federal Deposit Insurance

18-45    Corporation.

18-46          "You are not required or obligated to purchase insurance from

18-47    the bank or any subsidiary, affiliate, or particular unaffiliated

18-48    third party as a condition to obtaining your loan, and your

18-49    decision as to insurance agents will not affect your credit terms

18-50    in any way.

18-51    ____________________             ____________________

18-52    Customer                         Date

18-53    ____________________

18-54    Employee of Bank"

18-55          (c)  An individual who is an employee or agent of a bank, or

18-56    a subsidiary or affiliate of a bank, may not, directly or

18-57    indirectly, make an insurance-related referral related to, or

18-58    solicit the purchase of any insurance from, a customer knowing that

18-59    the customer has applied for a loan or extension of credit from a

18-60    financial institution, before the customer has received a written

18-61    commitment with respect to that loan or extension of credit, or, if

18-62    a written commitment has not been or will not be issued in

18-63    connection with the loan or extension of credit, before the

18-64    customer receives notification of approval of the loan or extension

18-65    of credit by the person and that person creates a written record of

18-66    the loan or extension of credit approval.  This subsection does not

18-67    prohibit a bank from:

18-68                (1)  informing a customer that insurance is required in

18-69    connection with a loan;

 19-1                (2)  contacting persons in the course of a direct or

 19-2    mass mailing to a group of persons in a manner that is not related

 19-3    to the person's loan application or credit decision; or

 19-4                (3)  selling credit life, credit disability, credit

 19-5    property, or involuntary unemployment insurance specifically

 19-6    authorized by this code and approved for sale in this state, that

 19-7    is sold in conjunction with a credit transaction.

 19-8          (d)  The commissioner may amend the disclosure form as

 19-9    necessary to comply with federal or state law.

19-10          (e)  This section does not apply to a credit life, credit

19-11    accident and health, credit property, or credit involuntary

19-12    unemployment insurance policy that is otherwise specifically

19-13    authorized by this code, approved for sale in this state, and sold

19-14    in connection with a credit transaction.

19-15          Sec. 4.  INDEPENDENCE OF BANK AGENTS FROM LOAN TRANSACTIONS.

19-16    (a)  If insurance is offered or sold to a bank customer in

19-17    connection with a loan transaction by a bank, the insurance sales

19-18    person involved in that insurance transaction may not be involved

19-19    in that loan transaction and may not also be the person making that

19-20    loan.

19-21          (b)  This section does not apply to a bank that has $40

19-22    million or less in total assets, as reported on the most recent

19-23    Federal Financial Institutions Examination Council (FFIEC)

19-24    Consolidated Report of Condition and Income or any successor report

19-25    required by federal or state law.  In addition, this section does

19-26    not apply to a credit life, credit disability, credit property, or

19-27    involuntary unemployment insurance product that is specifically

19-28    authorized by this code, approved for sale in this state, and sold

19-29    in conjunction with a credit transaction.

19-30          Sec. 5.  CUSTOMER PRIVACY.   (a)  In this section:

19-31                (1)  "Customer" means a person with an investment,

19-32    security, deposit, trust, or credit relationship with a financial

19-33    institution.

19-34                (2)  "Nonpublic customer information" means information

19-35    regarding an individual that is derived from a bank record.  The

19-36    term does not include customer names, addresses, and telephone

19-37    numbers but does include information concerning insurance premiums,

19-38    the terms and conditions of insurance coverage, insurance

19-39    expirations, insurance claims, and insurance history of the

19-40    individual.

19-41          (b)  A person may not use nonpublic customer information for

19-42    the purpose of selling or soliciting the purchase of insurance, or

19-43    provide nonpublic customer information to a third party for the

19-44    purpose of another's sale or solicitation of the purchase of

19-45    insurance, unless it is clearly and conspicuously disclosed that

19-46    the information may be so used and the customer has been provided

19-47    an opportunity to object before the use of that information for

19-48    this purpose.

19-49          Sec. 6.  PHYSICAL LOCATION OF INSURANCE ACTIVITIES.  The

19-50    place of solicitation or sale of insurance by a bank or on the

19-51    premises of a bank must be clearly and conspicuously indicated by

19-52    signs in order to be readily distinguishable by the public as

19-53    separate and distinct from the lending and deposit-taking

19-54    activities of the bank.  If a person who would otherwise be subject

19-55    to the requirements of this section does not have the physical

19-56    space to comply, the commissioner may grant a waiver from the

19-57    requirements of this section on written request by that person

19-58    demonstrating that, due to the size of the physical premises of the

19-59    person, compliance is not possible if the person also identifies

19-60    other steps that will be taken to minimize customer confusion.

19-61          Sec. 7.  RULES.  The commissioner may adopt reasonable rules

19-62    to comply with federal law applicable to the sale of insurance and

19-63    for the implementation and administration of this article.

19-64          SECTION 23.  Article 21.11, Insurance Code, is amended to

19-65    read as follows:

19-66          Art. 21.11.  NONRESIDENT [COMMISSIONS TO NON-RESIDENTS;

19-67    CANCELLATION OF NON-RESIDENT AGENT'S LICENSE; NON-RESIDENT AGENT

19-68    NOT TO ACT AS SURPLUS LINES] AGENT

19-69          Sec. 1.  NONRESIDENT AGENT LICENSE.  (a)  Notwithstanding

 20-1    Sections 3(a) and (b), Article 21.14, of this code, the department

 20-2    shall license a person who is not a resident of this state to act

 20-3    as a nonresident agent in accordance with Article 21.14 of this

 20-4    code,  subject to the limitations of this article.

 20-5          (b)  An applicant for issuance of a license under this

 20-6    section must meet the requirements for issuance of a license under

 20-7    Article 21.14 of this code, except that the department shall waive

 20-8    any of those license requirements for an applicant with a valid

 20-9    license from another state or jurisdiction that has license

20-10    requirements substantially equivalent to those of this state.

20-11          Sec. 2.  RIGHTS OF LICENSE HOLDER.  (a)  Except as provided

20-12    by this section, a license issued under this article to an

20-13    individual who is not a resident of this state grants the same

20-14    rights and privileges afforded under a license issued under Article

20-15    21.14 of this code.

20-16          (b)  A person who holds a license issued under this article

20-17    may not:

20-18                (1)  maintain an office in this state;

20-19                (2)  solicit insurance business in this state by any

20-20    method, including an oral, written, or electronic communication; or

20-21                (3)  employ solicitors or others to directly or

20-22    indirectly solicit insurance in this state.

20-23          (c)  The commissioner shall impose on a resident of another

20-24    state or jurisdiction of the United States who is an applicant for

20-25    a license or a holder of a license issued under this article  any

20-26    requirement or restriction that:

20-27                (1)  the other state or jurisdiction of the United

20-28    States imposes on a resident of this state who is a nonresident

20-29    applicant or license holder in that state or jurisdiction; and

20-30                (2)  is in addition to or stricter than the

20-31    requirements or restrictions imposed under the insurance law of

20-32    this state on an applicant or license holder who is not a resident

20-33    of this state.

20-34          (d)  For purposes of Subsection (c) of this section,

20-35    "requirement or restriction" includes a requirement or restriction

20-36    imposed by a law or regulation that:

20-37                (1)  limits the rights or privileges of a person;

20-38                (2)  affects a commission or other compensation paid to

20-39    a person; or

20-40                (3)  imposes a condition precedent on a person.

20-41          Sec. 3.  LIMITATIONS.  (a)  This article does not permit:

20-42                (1)  [Any person, agent, firm, or corporation licensed

20-43    by the Board to act as a fire and marine, marine, tornado, rent,

20-44    accident, casualty, liability, health, elevator, disability, plate

20-45    glass, burglary, bonding, title, surety or fidelity insurance agent

20-46    in the State of Texas, is hereby prohibited from paying, directly

20-47    or indirectly, any commission, brokerage or other valuable

20-48    consideration on account of any policy or policies covering

20-49    property, person or persons in this State, to any person, persons,

20-50    agent, firm or corporation that is a non-resident of this State, or

20-51    to any person or persons, agent, firm or corporation not duly

20-52    licensed by the Board as a fire, fire and marine, marine, tornado,

20-53    rent, accident, casualty, liability, health, elevator, disability,

20-54    plate glass, burglary, bonding, title, surety or fidelity insurance

20-55    agent;  excepting however, that on any policy of insurance

20-56    originated by a Licensed Non-Resident Insurance Agent, as

20-57    hereinafter defined, and covering property or persons in this

20-58    State, a Texas local Recording Agent may divide the commission with

20-59    the originating Licensed Non-Resident Insurance Agent, but in any

20-60    such case the insurance company or carrier shall pay to the Texas

20-61    Local Recording Agent through which such policy is issued, signed

20-62    or countersigned, his minimum share, which shall be a sum not less

20-63    than the amount of commission or brokerage required to be paid by

20-64    the laws or regulations of the State of such originating

20-65    Non-Resident Agent when a similar policy of insurance is originated

20-66    by a Texas Local Recording Agent covering persons or property in

20-67    such other State.]

20-68          [Nothing herein shall prevent a Texas Local Recording Agent

20-69    from dividing with, or paying commissions to, another Texas Local

 21-1    Recording Agent.  Nothing herein shall relieve any insurance

 21-2    company or carrier covered thereby from writing Texas risks through

 21-3    Texas agents as provided in  Article 21.09, Insurance Code.]

 21-4          [A Licensed Non-Resident Insurance Agent is any person, firm

 21-5    or corporation residing or domiciled in another State and having a

 21-6    Non-Resident Insurance Agent's license as is hereinafter

 21-7    authorized.]

 21-8          [Upon application, in such form as the Board of Insurance

 21-9    Commissioners may require, a non-resident of this State who is duly

21-10    licensed to transact insurance other than life under the laws of

21-11    the State wherein such applicant resides, if such State does not

21-12    prohibit residents of this State from acting as insurance agent

21-13    therein, the Board of Insurance Commissioners may issue to such

21-14    applicant a Non-Resident Agent's license.]

21-15          [The issuance of a Non-Resident Agent's license shall be for

21-16    the purpose of permitting a Local Recording Agent of Texas to

21-17    divide commission with an agent of another State on insurance

21-18    covering property or persons in this State placed with or through a

21-19    Local Recording Agent, and to permit an agent of another State, who

21-20    qualifies and is licensed as a Non-Resident Agent, to inspect and

21-21    service such risks in Texas, which license shall be subject to the

21-22    same fees, qualifications, requirements and restrictions as apply

21-23    to Local Recording Agents of this State, except that an office

21-24    shall not be maintained in this State by a Non-Resident Agent and

21-25    all such insurance transacted shall be through licensed Local

21-26    Recording Agents as provided in Article 21.09 of the Texas

21-27    Insurance Code;  and provided further that a Non-Resident Agent

21-28    shall transact all matters with the Board of Insurance

21-29    Commissioners relating to rates and rate engineering and

21-30    terminology of standard policy forms through Local Recording

21-31    Agents, and nothing contained herein shall be construed as granting

21-32    authority to a Non-Resident Agent to transact such matters directly

21-33    with the Board of Insurance Commissioners;  and, except that the

21-34    Board of Insurance Commissioners, at its discretion, on payment by

21-35    applicant of the examination fee, may enter into a reciprocal

21-36    arrangement with the officer having jurisdiction of insurance

21-37    business in any other State to accept in lieu of the written

21-38    examination of such an applicant residing therein, a certificate of

21-39    such officer to the effect that the applicant is licensed as an

21-40    insurance agent in such State and has complied with its

21-41    qualification standards in respect to the following:]

21-42                [(a)  Experience or training;]

21-43                [(b)  Reasonable familiarity with the broad principles

21-44    of insurance, licensing and regulatory laws, and with provisions,

21-45    terms, and conditions of the insurance which applicant proposes to

21-46    transact; and]

21-47                [(c)  A fair and general understanding of the

21-48    obligations and duties of an insurance agent.]

21-49          [Nothing contained herein shall be construed to permit] any

21-50    person or firm [who is] licensed solely as a broker in the person's

21-51    or firm's state [State] of [his] residence to be granted a

21-52    [Non-Resident]  license under this article [as referred to herein];

21-53                (2)  [provided further that nothing contained herein

21-54    shall be construed to permit] a holder of a [Non-Resident Agent's]

21-55    license issued under  this article to act as a surplus lines agent

21-56    [Surplus Lines Agent] under [the provisions of] Article 1.14-2 of

21-57    this code [the  Insurance Code] or to perform any of the acts

21-58    permitted under Article 1.14-2 of this code, except as provided

21-59    under Section 10, Article 21.54, of this code; [thereunder] or

21-60                (3)  [to permit] any person or firm who holds a

21-61    [Non-Resident Agent's] license issued under this article [as

21-62    authorized herein] to engage in any form of direct solicitation of

21-63    insurance within this state [State].

21-64          (b)  The commissioner shall revoke a nonresident agent's [A

21-65    Non-Resident Agent's] license issued under this article if the

21-66    commissioner finds [shall be  cancelled and not be subject to

21-67    reissuance when it is found by the Board of Insurance

21-68    Commissioners] that the [such] license was obtained or is being

21-69    used for the purpose of transacting insurance through a local

 22-1    recording agent [Local Recording Agent] in [such] a manner that

 22-2    permits the individual licensed under this article [as  to permit a

 22-3    Non-Resident Agent], by subterfuge, to transact insurance as a

 22-4    local recording agent.

 22-5          (c)  In the circumstances described by Subsection (b) of this

 22-6    section, the commissioner shall also revoke [Local Recording Agent,

 22-7    and in  which event] the license of the affected local recording

 22-8    agent.

 22-9          (d)  A license revoked under Subsection (b) or (c) of this

22-10    section is [Local Recording Agent likewise shall be cancelled and]

22-11    not [be] subject to reissuance before the fifth anniversary of the

22-12    date the revocation is effective.

22-13          (e)  The commissioner shall order that any [and all]

22-14    insurance transacted under an [such] arrangement described by

22-15    Subsection (b) of this section [shall] be cancelled[, provided

22-16    further that the provisions of Sections 16 and 17, Article 21.14 of

22-17    the Insurance Code shall apply to such cancellation].

22-18          (f)  Article 21.01-2 of this code applies to licensing of a

22-19    nonresident agent under this article.

22-20          Sec. 4.  HOME OFFICE EMPLOYEE.  This article does not affect

22-21    the authority established under Section 20, Article 21.14, of this

22-22    code of an actual full-time home office salaried employee of an

22-23    insurance carrier licensed to do business in this state.

22-24          Sec. 5.  RULES.  The commissioner may adopt rules to

22-25    implement this article.

22-26          SECTION 24.  Article 21.09, Insurance Code, is repealed.

22-27          SECTION 25.  (a)  Except as provided by Subsection (b) of

22-28    this section, this Act takes effect September 1, 1997.

22-29          (b)  Sections 23 and 24 of this Act take effect July 1, 1997.

22-30          SECTION 26.  The importance of this legislation and the

22-31    crowded condition of the calendars in both houses create an

22-32    emergency and an imperative public necessity that the

22-33    constitutional rule requiring bills to be read on three several

22-34    days in each house be suspended, and this rule is hereby suspended,

22-35    and that this Act take effect and be in force according to its

22-36    terms, and it is so enacted.

22-37                                 * * * * *