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 * * * * *