By: Sibley S.B. No. 1900
97S0854/1
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the licensing of banks as insurance agents; providing a
1-2 penalty.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subsections (a) and (b), Section 1, Article
1-5 21.07, Insurance Code, are amended to read as follows:
1-6 (a) No person, [or] corporation, or bank shall act as an
1-7 agent of any (i) local mutual aid association, (ii) local mutual
1-8 burial association, (iii) statewide mutual assessment corporation,
1-9 (iv) stipulated premium company, (v) county mutual insurance
1-10 company, (vi) casualty company writing accident and health
1-11 insurance, or (vii) any other type of insurance carrier licensed to
1-12 do business in the State of Texas and which insurance carrier's
1-13 agents are required to be licensed under the provisions of this
1-14 Article [21.07, Texas Insurance Code, 1951, as amended], on the
1-15 date that this Act shall become effective, unless he or it shall
1-16 have first procured a license from the department [State Board of
1-17 Insurance] as in this Article [21.07, as amended hereby], is
1-18 provided, and no such insurance carrier shall appoint any person,
1-19 [or] corporation, or bank to act as its agent unless such person,
1-20 [or] corporation, or bank shall have obtained a license under the
1-21 provisions of this Article, and no such person, [or] corporation,
1-22 or bank who obtains a license shall engage in business as an agent
1-23 until he or it shall have been appointed to act as an agent by some
2-1 duly authorized insurance carrier designated by the provisions of
2-2 this Article [21.07] and authorized to do business in the State of
2-3 Texas. Any person, [or] corporation, or bank desiring to act as an
2-4 agent of any insurance carrier licensed to do business in the State
2-5 of Texas and writing health and accident insurance may obtain a
2-6 separate license as an agent to write health and accident insurance
2-7 provided such person, [or] corporation, or bank complies with the
2-8 provisions of this Article and has been appointed to act as an
2-9 agent by some duly authorized insurance carrier authorized to do
2-10 health and accident insurance business in the State of Texas.
2-11 (b) No insurer or licensed insurance agent doing business in
2-12 this State shall pay directly or indirectly any commission, or
2-13 other valuable consideration, to any person, [or] corporation, or
2-14 bank for services as an insurance agent within this State, unless
2-15 such person, [or] corporation, or bank shall hold a currently valid
2-16 license to act as an insurance agent as required by the laws of
2-17 this State; nor shall any person, [or] corporation, or bank other
2-18 than a duly licensed insurance agent, accept any such commission or
2-19 other valuable consideration; provided, however, that the
2-20 provisions of this Section shall not prevent the payment or receipt
2-21 of renewal or other deferred commissions to or by any person solely
2-22 because such person, [or] corporation, or bank has ceased to hold a
2-23 license to act as an insurance agent.
2-24 SECTION 2. Article 21.07, Insurance Code, is amended by
2-25 adding Section 1C to read as follows:
3-1 Sec. 1C. LICENSING OF BANKS. In this Article, "bank" means
3-2 a national banking association organized and existing under the
3-3 National Bank Act (12 U.S.C. Section 21 et seq.), a state bank
3-4 organized and existing under the Texas Banking Act (Articles
3-5 342-1.001 et seq., Vernon's Texas Civil Statutes), a state savings
3-6 bank organized and existing under the Texas Savings Bank Act
3-7 (Article 489e, Vernon's Texas Civil Statutes), a bank branch, or a
3-8 bank operating subsidiary, located in this state in a municipality
3-9 or county with a population of 5,000 or less. A bank located in a
3-10 municipality or county with a population of 5,000 or less may own
3-11 at least 51 percent of a licensed corporate agent which is also
3-12 located in and doing business in a municipality or county with a
3-13 population of 5,000 or less, and is subject to the provisions of
3-14 Section 18(c) of this Article.
3-15 SECTION 3. Sections 2 and 3, Article 21.07, Insurance Code,
3-16 are amended to read as follows:
3-17 Sec. 2. Application for license; to whom license may be
3-18 issued. (a) Any person, [or] corporation, or bank that desires to
3-19 become an agent for a local mutual aid association, a local mutual
3-20 burial association, a statewide mutual assessment corporation, a
3-21 stipulated premium company, a county mutual insurance company, a
3-22 casualty company writing accident and health insurance, or any
3-23 other type of insurance carrier licensed to do business in the
3-24 State of Texas, the agents of which are required to be licensed
3-25 under this Article, shall submit to the department [State Board of
4-1 Insurance] an application for a license in the form required by the
4-2 department [Board].
4-3 (b) The application must bear a signed endorsement by an
4-4 officer or properly authorized representative of the insurance
4-5 carrier that the individual applicant or each member of the
4-6 partnership or each officer, director, and shareholder of the
4-7 corporation or the responsible officer and employee of the bank is
4-8 qualified to hold himself or the partnership, [or] the corporation,
4-9 or the bank out in good faith to the general public as an insurance
4-10 agent, and that the insurance carrier desires that the applicant
4-11 act as an insurance agent to represent it in this State.
4-12 (c) The department [Board] shall issue a license to an
4-13 individual or to a general partnership engaging in the business of
4-14 insurance. Each partner in the partnership must be licensed
4-15 individually as an agent under this Article.
4-16 (d) The department [Board] shall issue a license to a
4-17 corporation if the department [Board] finds:
4-18 (1) That the corporation is a Texas corporation
4-19 organized or existing under the Texas Business Corporation Act or
4-20 the Texas Professional Corporation Act (Article 1528e, Vernon's
4-21 Texas Civil Statutes) having its principal place of business in the
4-22 State of Texas and having as one of its purposes the authority to
4-23 act as an agent covered by this Article;
4-24 (2) That every officer, director, and shareholder of
4-25 the corporation is individually licensed under the provisions of
5-1 this Article, or that every officer and director of the corporation
5-2 is individually licensed under this Article, that the corporation
5-3 is a wholly owned subsidiary of a parent corporation that is
5-4 licensed under this Article, and that every shareholder of the
5-5 parent corporation is individually licensed under this Article; and
5-6 (3) That such corporation will have the ability to pay
5-7 any sums up to $25,000 which it might become legally obligated to
5-8 pay on account of any claim made against it by any customer and
5-9 caused by any negligent act, error, or omission of the corporation
5-10 or any person for whose acts the corporation is legally liable in
5-11 the conduct of its business under this Article. The term
5-12 "customer" means any person, firm, or corporation to whom such
5-13 corporation sells or attempts to sell a policy of insurance, or
5-14 from whom such corporation accepts an application for insurance.
5-15 Such ability shall be proven in one of the following ways:
5-16 (A) an errors and omissions policy insuring such
5-17 corporation against errors and omissions in at least the sum of
5-18 $100,000 with no more than a $10,000 deductible feature issued by
5-19 an insurance company licensed to do business in the State of Texas
5-20 or, if a policy cannot be obtained from a company licensed to do
5-21 business in Texas, a policy issued by a company not licensed to do
5-22 business in Texas on filing an affidavit with the State Board of
5-23 Insurance stating the inability to obtain coverage and receiving
5-24 the Board's approval;
5-25 (B) a bond executed by such corporation as
6-1 principal and a surety company authorized to do business in this
6-2 State, as surety, in the principal sum of $25,000, payable to the
6-3 State Board of Insurance for the use and benefit of customers of
6-4 such corporation, conditioned that such corporation shall pay any
6-5 final judgment recovered against it by any customer; or
6-6 (C) a deposit of cash or securities of the class
6-7 authorized by Articles 2.08 and 2.10, Insurance Code, as amended,
6-8 having a fair market value of $25,000 with the State Treasurer.
6-9 The State Treasurer is directed to accept and receive such deposit
6-10 and hold it exclusively for the protection of any customer of such
6-11 corporation recovering a final judgment against such corporation.
6-12 Such deposit may be withdrawn only upon filing with the Board
6-13 evidence satisfactory to it that the corporation has withdrawn from
6-14 business and has no unsecured liabilities outstanding, or that such
6-15 corporation has provided for the protection of its customers by
6-16 furnishing an errors and omissions policy or a bond as provided.
6-17 Securities so deposited may be exchanged from time to time for
6-18 other qualified securities.
6-19 A binding commitment to issue such a policy or bond, or the
6-20 tender of such securities, shall be sufficient in connection with
6-21 any application for license.
6-22 Nothing contained herein shall be construed to permit any
6-23 unlicensed employee or agent of any corporation to perform any act
6-24 of an agent under this Article without obtaining a license.
6-25 If at any time, any corporation holding an agent's license
7-1 does not maintain the qualifications necessary to obtain a license,
7-2 the license of such corporation to act as an agent shall be
7-3 cancelled or denied in accordance with the provisions of Sections
7-4 10 and 11 of this Article; provided, however, that should any
7-5 person who is not a licensed agent under this Article acquire
7-6 shares in such a corporation by devise or descent, that person
7-7 shall have a period of 90 days from date of acquisition within
7-8 which to obtain a license or to dispose of the shares to a person
7-9 licensed under this Article.
7-10 Should such an unlicensed person acquire shares in a
7-11 corporation and not dispose of them within a period of 90 days to a
7-12 licensed agent, then they must be purchased by the corporation for
7-13 their book value, that is, the value of said shares of stock as
7-14 reflected by the regular books and records of said corporation, as
7-15 of the date of the acquisition of said shares by said unlicensed
7-16 person. Should the corporation fail or refuse to so purchase such
7-17 shares, its license shall be cancelled.
7-18 Any such corporation shall have the power to redeem the
7-19 shares of any shareholder, or the shares of a deceased shareholder,
7-20 upon such terms as may be agreed upon by the board of directors and
7-21 such shareholder or such shareholder's personal representative, or
7-22 at a price and upon such terms as may be provided in the articles
7-23 of incorporation, the bylaws, or an existing contract entered into
7-24 between the shareholders of the corporation.
7-25 Each corporation licensed as an agent under this Article
8-1 shall file, under oath, a list of the names and addresses of all of
8-2 its officers, directors, and shareholders with its application for
8-3 renewal license.
8-4 Each corporation shall notify the State Board of Insurance
8-5 upon any change in its officers, directors, or shareholders not
8-6 later than the 30th day after the date on which the change becomes
8-7 effective.
8-8 Except as provided by Subdivision (2) of this subsection, a
8-9 corporation may not own any interest in another corporation
8-10 licensed under this Article, and each owner of an interest in a
8-11 corporation licensed under this Article shall be a natural person
8-12 who holds a valid license issued under this Article.
8-13 (e) The department shall issue a license to a bank if the
8-14 department finds:
8-15 (1) That the bank is a national banking association
8-16 organized and existing under the National Bank Act (12 U.S.C.
8-17 Section 21 et seq.), a state bank organized and existing under the
8-18 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
8-19 Statutes), a state savings bank organized and existing under the
8-20 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
8-21 Statutes), or a bank operating subsidiary, located in this State in
8-22 a municipality or county with a population of 5,000 or less;
8-23 (2) That at least one officer of the bank and each
8-24 individual who will be performing any acts as an agent for the bank
8-25 is individually licensed under the provisions of this Article; and
9-1 (3) That such bank will have the ability to pay any
9-2 sums up to $25,000 which it might become legally obligated to pay
9-3 on account of any claim made against it by any customer and caused
9-4 by any negligent act, error, or omission of the bank or any person
9-5 for whose acts the bank is legally liable in the conduct of its
9-6 business under this Article. The term "customer" means any person,
9-7 firm, or corporation to whom such bank sells or attempts to sell a
9-8 policy of insurance or from whom such bank accepts an application
9-9 for insurance. Such ability shall be proven in one of the
9-10 following ways:
9-11 (A) an errors and omissions policy ensuring such
9-12 bank against errors and omissions in at least the sum of $100,000
9-13 with no more than a $10,000 deductible feature issued by an
9-14 insurance company licensed to do business in the State of Texas or,
9-15 if a policy cannot be obtained from a company licensed to do
9-16 business in Texas, a policy issued by a company not licensed to do
9-17 business in Texas on filing an affidavit with the department
9-18 stating the inability to obtain coverage and receiving the
9-19 department's approval;
9-20 (B) a bond executed by such bank as principal
9-21 and a surety company authorized to do business in this State, as
9-22 surety, in the principal sum of $25,000, payable to the department
9-23 for the use and benefit of customers of such bank, conditioned that
9-24 such bank shall pay any final judgment recovered against it by any
9-25 customer; or
10-1 (C) a deposit of cash or securities of the class
10-2 authorized by Articles 2.08 and 2.10 of this code, having a fair
10-3 market value of $25,000 with the comptroller. The comptroller is
10-4 directed to accept and receive such deposit and hold it exclusively
10-5 for the protection of any customer of such bank recovering a final
10-6 judgment against such bank. Such deposit may be withdrawn only on
10-7 filing with the department evidence satisfactory to it that the
10-8 bank has withdrawn from the business of insurance and has no
10-9 unsecured liabilities outstanding or that such bank has provided
10-10 for the protection of its customers by furnishing an errors and
10-11 omissions policy or a bond as provided. Securities so deposited
10-12 may be exchanged from time to time for other qualified securities.
10-13 A binding commitment to issue such a policy or bond, or the
10-14 tender of such securities, shall be sufficient in connection with
10-15 any application for license.
10-16 Nothing contained herein shall be construed to permit any
10-17 unlicensed employee or agent of any bank to perform any act of an
10-18 agent under this Article without obtaining a license.
10-19 A bank licensed as an agent under this Article may have
10-20 additional offices from which the business of insurance is
10-21 conducted only in a municipality or county with a population of
10-22 5,000 or less and must comply with the department's regulations
10-23 regarding additional offices.
10-24 A bank licensed as an agent under this Article must maintain
10-25 the insurance records of the bank, including all files relating to
11-1 customer complaints, separate and apart from records relating to
11-2 banking transactions of the bank.
11-3 If at any time, any bank holding an agent's license does not
11-4 maintain the qualifications necessary to obtain a license, the
11-5 license of such bank to act as an agent shall be canceled or denied
11-6 in accordance with the provisions of Sections 10 and 11 of this
11-7 Article.
11-8 Each bank licensed as an agent under this Article shall file
11-9 under oath with its application for renewal a list of the names and
11-10 addresses of all individuals who will be acting as agents on behalf
11-11 of the bank and all officers and directors of the bank, as defined
11-12 in Article 21.02 of this code, and other biographical information
11-13 as required by the department.
11-14 Each bank shall notify the department on any change in its
11-15 officers and directors, and any change in other persons who will be
11-16 acting as agents, as defined in Article 21.02 of this code, and
11-17 submit biographical information on such officers, directors, and
11-18 persons as required by the department not later than the 30th day
11-19 after the date on which the change becomes effective.
11-20 Sec. 3. Issuance of License Under Certain Circumstances.
11-21 The department [State Board of Insurance] shall issue a license to
11-22 a person, [or] corporation, or bank in such form as it may prepare
11-23 authorizing such applicant to write the types of insurance
11-24 authorized by law to be issued by applicant's appointing insurance
11-25 carrier, except that:
12-1 (a) Such applicant shall not be authorized to write health
12-2 and accident insurance unless: (i) applicant, if not a
12-3 partnership, [or] corporation, or bank shall have first passed a
12-4 written examination as provided for in this Article [21.07, as
12-5 amended], or (ii) applicant will act only as a ticket-selling agent
12-6 of a public carrier with respect to accident life insurance
12-7 covering risks of travel or as an agent selling credit life, health
12-8 and accident insurance issued exclusively in connection with credit
12-9 transactions, or (iii) applicant will write policies or riders to
12-10 policies providing only lump sum cash benefits in the event of the
12-11 accidental death, or death by accidental means, or dismemberment,
12-12 or providing only ambulance expense benefits in the event of
12-13 accident or sickness; and
12-14 (b) Such applicant, if not a partnership, [or] corporation,
12-15 or bank shall not be authorized to write life insurance in excess
12-16 of $7,500 upon any one life unless: (i) applicant, if not a
12-17 partnership, [or] corporation, or bank shall have first passed a
12-18 written examination as provided for in this Article [21.07, as
12-19 amended], or (ii) applicant will act only as a ticket-selling agent
12-20 of a public carrier with respect to accident life insurance
12-21 covering risks of travel or as an agent selling credit life, health
12-22 and accident insurance issued exclusively in connection with credit
12-23 transactions, or (iii) applicant will write policies or riders to
12-24 policies providing only lump sum cash benefits in the event of the
12-25 accidental death, or death by accidental means, or dismemberment,
13-1 or providing only ambulance expense benefits in the event of
13-2 accident or sickness.
13-3 SECTION 4. Subsection (a), Section 4, Article 21.07,
13-4 Insurance Code, is amended to read as follows:
13-5 (a) Each applicant for a license under the provisions of
13-6 this Article [21.07, Texas Insurance Code, 1951, as amended,] who
13-7 desires to write health and accident insurance, other than as
13-8 excepted in Section 3 of this Article [21.07], within this State
13-9 shall submit to a personal written examination prescribed by the
13-10 department [State Board of Insurance] and administered in the
13-11 English or Spanish language to determine his competency with
13-12 respect to health and accident insurance, specifically including
13-13 medicare supplement insurance, and his familiarity with the
13-14 pertinent provisions of the laws of the State of Texas relating to
13-15 health and accident insurance, specifically including medicare
13-16 supplement insurance, and shall pass the same to the satisfaction
13-17 of the department [State Board of Insurance]; except that no
13-18 written examination shall be required of:
13-19 (i) An applicant for the renewal of a license issued
13-20 by the department [State Board of Insurance] pursuant to this
13-21 Article [21.07, Texas Insurance Code, 1951, as amended], which is
13-22 currently in force at the effective date of this Act;
13-23 (ii) An applicant whose license expired less than one
13-24 year prior to the date of application may, in the discretion of the
13-25 department [State Board of Insurance], be issued a license without
14-1 written examination, provided such prior license granted such
14-2 applicant the right to sell health and accident insurance; or
14-3 (iii) An applicant that is a partnership, [or]
14-4 corporation, or bank.
14-5 SECTION 5. Sections 12, 13, and 16, Article 21.07, Insurance
14-6 Code, are amended to read as follows:
14-7 Sec. 12. Penalty. Any person or officer, director, or
14-8 shareholder of a corporation or bank required to be licensed by
14-9 this Article who individually, or as an officer or employee of an
14-10 insurance carrier, or other corporation, wilfully violates any of
14-11 the provisions of this Article shall, in addition to any other
14-12 penalty specifically provided, be guilty of a misdemeanor and, upon
14-13 conviction, shall be fined not more than $500.00 or imprisoned not
14-14 more than six (6) months, or both, each such violation being a
14-15 separate offense hereunder. In addition, if such offender or the
14-16 corporation or bank of which he is an officer, director, or
14-17 shareholder holds a license as an agent, such license shall
14-18 automatically expire upon such conviction.
14-19 Sec. 13. TEXAS DEPARTMENT [STATE BOARD] OF INSURANCE MAY
14-20 ESTABLISH RULES AND REGULATIONS. The commissioner [State Board of
14-21 Insurance] is hereby authorized to establish, and from time to time
14-22 to amend, reasonable rules and regulations to comply with federal
14-23 law applicable to the sale of insurance and for the administration
14-24 of this Article [21.07].
14-25 Sec. 16. Stamping of License. When any license shall be
15-1 issued by the department [State Board of Insurance] to an applicant
15-2 entitled to write health and accident insurance, the license shall
15-3 have [stamped] thereon the words HEALTH AND ACCIDENT INSURANCE.
15-4 SECTION 6. Section 18, Article 21.07, Insurance Code, is
15-5 amend by adding Subsection (c) to read as follows:
15-6 (c) Notwithstanding any provision of this Article or this
15-7 code to the contrary, a bank located in a municipality or county
15-8 with a population of 5,000 or less which owns at least 51 percent
15-9 of a licensed bank operating subsidiary which is also located and
15-10 doing business in a municipality or county with a population of
15-11 5,000 or less may receive profits from the licensed bank operating
15-12 subsidiary. To advertise under the bank name or participate in the
15-13 insurance operation other than by receiving profits from the
15-14 insurance business, the bank must hold an agent license. Nothing
15-15 in this section permits a bank or any affiliate to pay commissions
15-16 or other valuable consideration to any nonlicensed employees, nor
15-17 may a bank pay, credit, or otherwise reward particular nonlicensed
15-18 units or geographic locations of the bank or any of its affiliates
15-19 with a portion of the commission.
15-20 SECTION 7. Subsection (b), Section 1, Chapter 213, Acts of
15-21 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
15-22 Insurance Code), is amended to read as follows:
15-23 (b) The term "life insurance agent" for the purpose of this
15-24 Act means any person, [or] corporation, or bank that is an
15-25 authorized agent of a legal reserve life insurance company, and any
16-1 person who is a sub-agent of such agent, who acts as such in the
16-2 solicitation of, negotiation for, or procurement of, or collection
16-3 of premiums on, an insurance or annuity contract with a legal
16-4 reserve life insurance company; except that the term "life
16-5 insurance agent" shall not include:
16-6 (1) any regular salaried officer or employee of a
16-7 legal reserve life insurance company, or of a licensed life
16-8 insurance agent, who devotes substantially all of his or her time
16-9 to activities other than the solicitation of applications for
16-10 insurance or annuity contracts and receives no commission or other
16-11 compensation directly dependent upon the business obtained, and who
16-12 does not solicit or accept from the public applications for
16-13 insurance or annuity contracts;
16-14 (2) employers or their officers or employees, or the
16-15 trustees of any employee benefit plan, to the extent that such
16-16 employers, officers, employees or trustees are engaged in the
16-17 administration or operation of any program of employee benefits
16-18 involving the use of insurance or annuities issued by a legal
16-19 reserve life insurance company, provided that such employers,
16-20 officers, employees or trustees are not in any manner compensated,
16-21 directly or indirectly, by the legal reserve life insurance company
16-22 issuing such insurance or annuity contracts;
16-23 (3) except as provided in Section 4(f) of this Act,
16-24 banks, savings and loan associations, or credit unions, or the
16-25 officers and employees of banks, savings and loan associations, or
17-1 credit unions, to the extent that such banks, savings and loan
17-2 associations, credit unions, or officers and employees collect and
17-3 remit premiums by charging same against accounts of depositors on
17-4 the orders of such depositors;
17-5 (4) a ticket-selling agent of a public carrier with
17-6 respect to accident life insurance tickets covering risks of
17-7 travel;
17-8 (5) an agent selling credit life, health and accident
17-9 insurance issued exclusively in connection with credit
17-10 transactions, or acting as agent or solicitor for health and
17-11 accident insurance under license issued pursuant to the provisions
17-12 of Article 21.14 of the Texas Insurance Code.
17-13 SECTION 8. Chapter 213, Acts of the 54th Legislature, 1955
17-14 (Article 21.07-1, Vernon's Texas Insurance Code), is amended by
17-15 adding Section 1C to read as follows:
17-16 Sec. 1C. DEFINITION. In this Act, "bank" means a national
17-17 banking association organized and existing under the National Bank
17-18 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
17-19 existing under the Texas Banking Act (Article 342-1.001 et seq.,
17-20 Vernon's Texas Civil Statutes), a state savings bank organized and
17-21 existing under the Texas Savings Bank Act (Article 489e, Vernon's
17-22 Texas Civil Statutes), a bank branch, or a bank operating
17-23 subsidiary, located in this state in a municipality or county with
17-24 a population of 5,000 or less. A bank located in a municipality or
17-25 county with a population of 5,000 or less may own at least 51
18-1 percent of a licensed corporate agent which is also located in and
18-2 doing business in a municipality or county with a population of
18-3 5,000 or less and is subject to the provisions of Section 3(b) of
18-4 this Act.
18-5 SECTION 9. Subsection (a), Section 2, Chapter 213, Acts of
18-6 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
18-7 Insurance Code), is amended to read as follows:
18-8 (a) No person, [or] corporation, or bank shall, within this
18-9 State, solicit, procure, receive, or forward applications for life
18-10 insurance or annuities, or issue or deliver policies for, or in any
18-11 manner secure, help, or aid in the placing of any contract of life
18-12 insurance or annuity for any other person, directly or indirectly,
18-13 with any life insurance company not authorized to do business in
18-14 this State.
18-15 SECTION 10. Subsections (a) and (b), Section 3, Chapter 213,
18-16 Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
18-17 Insurance Code), are amended to read as follows:
18-18 (a) No person, [or] corporation, or bank shall act as a life
18-19 insurance agent within this State until he or it shall have
18-20 procured a license as required by the laws of this State.
18-21 (b) No insurer or licensed life insurance agent doing
18-22 business in this State shall pay directly or indirectly any
18-23 commission, or other valuable consideration, to any person, [or]
18-24 corporation, or bank for services as a life insurance agent within
18-25 this State, unless such person, [or] corporation, or bank shall
19-1 hold a currently valid license to act as a life insurance agent as
19-2 required by the laws of this State; nor shall any person, [or]
19-3 corporation, or bank other than a duly licensed life insurance
19-4 agent, accept any such commission or other valuable consideration;
19-5 provided, however, that the provisions of this Section shall not
19-6 prevent the payment or receipt of renewal or other deferred
19-7 commissions to or by any person solely because such person, [or]
19-8 corporation, or bank has ceased to hold a license to act as a life
19-9 insurance agent. Nothing herein shall be construed to prevent a
19-10 bank located in a municipality or county with a population of 5,000
19-11 or less which owns at least 51 percent of a licensed bank operating
19-12 subsidiary which is also located in and doing business in a
19-13 municipality or county with a population of 5,000 or less from
19-14 receiving profits from the licensed bank operating subsidiary. To
19-15 advertise under the bank name or participate in the insurance
19-16 operation other than by receiving profits from the insurance
19-17 business, the bank must hold an agent license. Nothing in this
19-18 Section permits a bank or any affiliate to pay commissions or other
19-19 valuable consideration to any nonlicensed employees, nor may a bank
19-20 pay, credit, or otherwise reward particular nonlicensed units or
19-21 geographic locations of the bank or any of its affiliates with a
19-22 portion of the commission.
19-23 SECTION 11. Section 4, Chapter 213, Acts of the 54th
19-24 Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance Code),
19-25 is amended to amending Subsection (e) and adding a new Subsection
20-1 (f) and relettering existing Subsection (f) to read as follows:
20-2 (e) The department [Commissioner] shall issue a license to a
20-3 corporation if the department [Commissioner] finds:
20-4 (1) That the corporation is a Texas corporation
20-5 organized or existing under the Texas Business Corporation Act or
20-6 the Texas Professional Corporation Act having its principal place
20-7 of business in the State of Texas and having as one of its purposes
20-8 the authority to act as agent under this Act;
20-9 (2) That every officer, director, and shareholder of
20-10 the corporation is individually licensed as an agent under the
20-11 provisions of this Act, or that every officer and director of the
20-12 corporation is individually licensed under this Act, that the
20-13 corporation is a wholly owned subsidiary of a parent corporation
20-14 that is licensed under this Act, and that every shareholder of the
20-15 parent corporation is individually licensed under this Act; and
20-16 (3) That such corporation will have the ability to pay
20-17 any sums up to $25,000 which it might become legally obligated to
20-18 pay on account of any claim made against it by any customer and
20-19 caused by any negligent act, error, or omission of the corporation
20-20 or any person for whose acts the corporation is legally liable in
20-21 the conduct of its business as under this Act. The term "customer"
20-22 as used herein shall mean any person, firm, or corporation to whom
20-23 such corporation sells or attempts to sell a policy of insurance or
20-24 from whom such corporation accepts an application for insurance.
20-25 Such ability shall be proven in one of the following ways:
21-1 (A) An errors and omissions policy insuring such
21-2 corporation against errors and omissions in at least the sum of
21-3 $100,000 with no more than a $10,000 deductible feature issued by
21-4 an insurance company licensed to do business in the State of Texas
21-5 or, if a policy cannot be obtained from a company licensed to do
21-6 business in Texas, a policy issued by a company not licensed to do
21-7 business in Texas on filing an affidavit with the department [State
21-8 Board of Insurance] stating the inability to obtain coverage and
21-9 receiving the department's [Board's] approval; or
21-10 (B) A bond executed by such corporation as
21-11 principal and a surety company authorized to do business in this
21-12 State, as surety, in the principal sum of $25,000, payable to the
21-13 department [State Board of Insurance] for the use and benefit of
21-14 customers of such corporation, conditioned that such corporation
21-15 shall pay any final judgment recovered against it by any customer;
21-16 or
21-17 (C) A deposit of cash or securities of the class
21-18 authorized by Articles 2.08 and 2.10 of the Insurance Code, having
21-19 a fair market value of $25,000 with the comptroller [State
21-20 Treasurer]. The comptroller [State Treasurer] is hereby authorized
21-21 and directed to accept and receive such deposit and hold it
21-22 exclusively for the protection of any customer of such corporation
21-23 recovering a final judgment against such corporation. Such deposit
21-24 may be withdrawn only upon filing with the department
21-25 [Commissioner] satisfactory evidence that the corporation has
22-1 withdrawn from business and has no unsecured liabilities
22-2 outstanding, or that such corporation has provided for the
22-3 protection of its customers by furnishing an errors and omissions
22-4 policy or a bond as provided. Securities so deposited may be
22-5 exchanged from time to time for other qualified securities.
22-6 A binding commitment to issue such a policy or bond, or the
22-7 tender of such securities, shall be sufficient in connection with
22-8 any application for license.
22-9 Nothing contained herein shall be construed to permit any
22-10 unlicensed employee or agent of any corporation to perform any act
22-11 of an agent under this Act without obtaining a license.
22-12 If at any time, any corporation holding a license under this
22-13 Act does not maintain the qualifications necessary to obtain a
22-14 license, the license of such corporation to act as an agent shall
22-15 be cancelled or denied in accordance with the provisions of
22-16 Sections 12 and 13 of this Act; provided, however, that should any
22-17 person who is not an agent licensed under this Act acquire shares
22-18 in such a corporation by devise or descent, they shall have a
22-19 period of 90 days from date of acquisition within which to obtain a
22-20 license as an agent or to dispose of the shares to an agent
22-21 licensed under this Act.
22-22 Should such an unlicensed person acquire shares in such a
22-23 corporation and not dispose of them within said period of 90 days
22-24 to a licensed agent, then they must be purchased by the corporation
22-25 for their book value, that is, the value of said shares of stock as
23-1 reflected by the regular books and records of said corporation as
23-2 of the date of the acquisition of said shares by said unlicensed
23-3 person. Should the corporation fail or refuse to so purchase such
23-4 shares, its license shall be cancelled.
23-5 Any such corporation shall have the power to redeem the
23-6 shares of any shareholder, or the shares of a deceased shareholder,
23-7 upon such terms as may be agreed upon by the board of directors and
23-8 such shareholder or such shareholder's personal representative, or
23-9 at such price and upon such terms as may be provided in the
23-10 articles of incorporation, the bylaws, or an existing contract
23-11 entered into between the shareholders of the corporation.
23-12 Each corporation licensed as an agent under this Act shall
23-13 file, under oath, a list of the names and addresses of all of its
23-14 officers, directors, and shareholders with its application for
23-15 renewal license.
23-16 Each corporation licensed as an agent under this Act shall
23-17 notify the department [State Board of Insurance] upon any change in
23-18 its officers, directors, or shareholders not later than the 30th
23-19 day after the date on which the change became effective.
23-20 Except as provided by Subdivision (2) of this subsection, a
23-21 corporation may not own any interest in another corporation
23-22 licensed under this Act, and each owner of an interest in a
23-23 corporation licensed under this Act shall be a natural person who
23-24 holds a valid license issued under this Act.
23-25 No association or any legal entity of any nature, other than
24-1 an individual person, general partnership, [or] corporation, or
24-2 bank may be licensed as a life insurance agent.
24-3 (f) The department shall issue a license to a bank if the
24-4 department finds:
24-5 (1) That the bank is a national banking association
24-6 organized and existing under the National Bank Act (12 U.S.C.
24-7 Section 21 et seq.), a state bank organized and existing under the
24-8 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
24-9 Statutes), a state savings bank organized and existing under the
24-10 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
24-11 Statutes), or a bank operating subsidiary, located in this state in
24-12 a municipality or county with a population of 5,000 or less;
24-13 (2) That at least one officer of the bank and each
24-14 individual who will be performing any acts as an agent for the bank
24-15 are individually licensed under the provisions of this Act; and
24-16 (3) That such bank will have the ability to pay any
24-17 sums up to $25,000 which it might become legally obligated to pay
24-18 on account of any claim made against it by any customer and caused
24-19 by any negligent act, error, or omission of the bank or any person
24-20 for whose acts the bank is legally liable in the conduct of its
24-21 business under this Act. The term "customer" means any person,
24-22 firm, or corporation to whom such bank sells or attempts to sell a
24-23 policy of insurance or from whom such bank accepts an application
24-24 for insurance. Such ability shall be proven in one of the
24-25 following ways:
25-1 (A) An errors and omissions policy insuring such
25-2 bank against errors and omissions in at least the sum of $100,000
25-3 with no more than a $10,000 deductible feature issued by an
25-4 insurance company licensed to do business in the State of Texas or,
25-5 if a policy cannot be obtained from a company licensed to do
25-6 business in Texas, a policy issued by a company not licensed to do
25-7 business in Texas on filing an affidavit with the department
25-8 stating the inability to obtain coverage and receiving the
25-9 department's approval; or
25-10 (B) A bond executed by such bank as principal
25-11 and a surety company authorized to do business in this State, as
25-12 surety, in the principal sum of $25,000, payable to the department
25-13 for the use and benefit of customers of such bank, conditioned that
25-14 such bank shall pay any final judgment recovered against it by any
25-15 customer; or
25-16 (C) A deposit of cash or securities of the class
25-17 authorized by Articles 2.08 and 2.10 of the Insurance Code, having
25-18 a fair market value of $25,000 with the comptroller. The
25-19 comptroller is hereby authorized and directed to accept and receive
25-20 such deposit and hold it exclusively for the protection of any
25-21 customer of such bank recovering a final judgment against such
25-22 bank. Such deposit may be withdrawn only on filing with the
25-23 department satisfactory evidence that the bank has withdrawn from
25-24 the business of insurance and has no unsecured liabilities
25-25 outstanding or that such bank has provided for the protection of
26-1 its customers by furnishing an errors and omissions policy or a
26-2 bond as provided. Securities so deposited may be exchanged from
26-3 time to time for other qualified securities.
26-4 A binding commitment to issue such a policy or bond, or the
26-5 tender of such securities, shall be sufficient in connection with
26-6 any application for license.
26-7 Nothing contained herein shall be construed to permit any
26-8 unlicensed employee or agent of any bank to perform any act of an
26-9 agent under this Act without obtaining a license.
26-10 A bank licensed as an agent under this Act may have
26-11 additional offices from which the business of insurance is
26-12 conducted only in a municipality or county with a population of
26-13 5,000 or less and must comply with the department's regulations
26-14 regarding additional offices.
26-15 A bank licensed as an agent under this Act must maintain the
26-16 insurance records of the bank, including all files relating to
26-17 customer complaints, separate and apart from records relating to
26-18 banking transactions of the bank.
26-19 If at any time, any bank holding a license under this Act
26-20 does not maintain the qualifications necessary to obtain a license,
26-21 the license of such bank to act as an agent shall be canceled or
26-22 denied in accordance with the provisions of Sections 12 and 13 of
26-23 this Act.
26-24 Each bank licensed as an agent under this Act shall file
26-25 under oath with its application for renewal license a list of the
27-1 names and addresses of all individuals who will be acting as agents
27-2 on behalf of the bank and all officers and directors of the bank,
27-3 as defined in Article 21.02 of the Insurance Code, and other
27-4 biographical information as required by the department.
27-5 Each bank shall notify the department upon any change in its
27-6 officers and directors, and any change in other persons who will be
27-7 acting as agents, as defined in Article 21.02 of the Insurance
27-8 Code, and submit biographical information on such officers,
27-9 directors, and persons as required by the department not later than
27-10 the 30th day after the date on which the change becomes effective.
27-11 (g) Each applicant, prior to sitting for the written
27-12 examination as provided for in Section 5 of this Act, shall
27-13 complete, under the supervision of such sponsoring insurer, an
27-14 educational program that shall include:
27-15 (1) such texts as may be prescribed by the
27-16 Commissioner of Insurance on the recommendation of the Advisory
27-17 Board as provided in Subsection (c) of Section 5 of this Act; and
27-18 (2) materials that will provide the applicant with the
27-19 basic knowledge of:
27-20 (A) the broad principles of insurance,
27-21 licensing, and regulatory laws of this State;
27-22 (B) principles related to medicare supplement
27-23 insurance; and
27-24 (C) the obligations and duties of a life
27-25 insurance agent.
28-1 SECTION 12. Subsections (a) and (d), Section 5, Chapter
28-2 213, Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's
28-3 Texas Insurance Code), are amended to read as follows:
28-4 (a) Each prospective applicant for a license to act as a
28-5 life insurance agent within this State shall submit to a personal
28-6 written examination administered in the English or Spanish
28-7 language, as prescribed by the department [State Board of
28-8 Insurance], to determine the applicant's competence with respect to
28-9 insurance and annuity contracts, including medicare supplement
28-10 contracts, and the applicant's familiarity with the pertinent
28-11 provisions of the laws of this State and the obligations and duties
28-12 of a life insurance agent, and shall pass the same to the
28-13 satisfaction of the department [State Board of Insurance]. A
28-14 nonrefundable examination fee, in an amount determined by the
28-15 Commissioner [Board] but not more than $20, must accompany the
28-16 application to take the examination. The department shall charge
28-17 the fee each time the examination is taken. The department shall
28-18 give certifications of a passing score to those applicants that
28-19 obtain such a score. No written examination shall be required of:
28-20 (1) An applicant for the renewal of a license issued
28-21 by the department [State Board of Insurance] pursuant to Article
28-22 21.07, [Texas] Insurance Code, [1951,] which is currently in force
28-23 at the time of the effective date of this Act;
28-24 (2) An applicant whose license as a life insurance
28-25 agent expired less than one year prior to the date of application
29-1 may, in the discretion of the department [State Board of
29-2 Insurance], be issued a license without written examination;
29-3 (3) A person who holds the designation Chartered Life
29-4 Underwriter (CLU);
29-5 (4) An applicant that is a partnership, [or]
29-6 corporation, or bank.
29-7 (d) An applicant other than a partnership, [or] corporation,
29-8 or bank for a license to act as a combination life insurance agent
29-9 for a combination company, or as an industrial life agent for an
29-10 industrial company, may, in lieu of taking and passing to the
29-11 satisfaction of the Commissioner a personal written examination as
29-12 provided in Sub-section (a) of this Section 5, submit to a personal
29-13 written examination given by the combination or industrial insurer
29-14 for which the applicant is to be licensed, subject to the following
29-15 definitions and conditions:
29-16 (1) A combination life insurance agent is hereby
29-17 defined as an agent writing weekly premium life insurance or
29-18 monthly ordinary life insurance on a debit basis, provided that a
29-19 combination life insurance agent may also write ordinary contracts
29-20 of life insurance. An industrial life agent is an agent writing
29-21 only weekly life insurance on a debit basis. A combination company
29-22 is hereby defined as an insurer actually writing weekly premium
29-23 life insurance or monthly ordinary life insurance on a debit basis,
29-24 provided that a combination company may also write ordinary
29-25 contracts of life insurance. An industrial company is an insurer
30-1 writing only weekly premium life insurance on a debit basis.
30-2 (2) Any combination or industrial insurer desiring to
30-3 qualify to administer the examination to its agents shall file with
30-4 the Commissioner a complete outline and explanation of the course
30-5 of study and instruction to be given such applicants and the nature
30-6 and manner of conducting the examinations of applicants and, after
30-7 official approval thereof by the Commissioner, may administer such
30-8 examinations.
30-9 (3) The combination or industrial insurer shall
30-10 certify as to each applicant that he has completed the approved
30-11 course of study and instruction and has successfully passed the
30-12 examination in writing without aid.
30-13 (4) It shall be the duty of the Commissioner to
30-14 investigate the manner and method of instruction and examination of
30-15 each combination and industrial insurer as often as deemed
30-16 necessary by the Commissioner and the Commissioner may, in his
30-17 discretion, withdraw from any insurer the privilege of examining
30-18 agents in lieu of the examination prescribed in Subsection (a) of
30-19 this Section 5.
30-20 (5) The license to act as a life insurance agent
30-21 issued to an applicant pursuant to the provisions of this
30-22 Sub-section (d) shall include [be stamped] COMBINATION OR
30-23 INDUSTRIAL LICENSE on its face and shall automatically expire and
30-24 be of no further force and effect when the holder ceases to act as
30-25 a combination or industrial agent for a combination or industrial
31-1 company.
31-2 SECTION 13. Subsection (b), Section 7, Chapter 213, Acts of
31-3 the 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas
31-4 Insurance Code), is amended to read as follows:
31-5 (b) The [Life Insurance] Commissioner is further authorized
31-6 to enter into reciprocal agreements with the appropriate official
31-7 or any other State waiving the written examination of any applicant
31-8 resident in such other State, provided:
31-9 (1) That a written examination is required of
31-10 applicants for a life insurance agent's license in such other
31-11 State;
31-12 (2) That the appropriate official of such other State
31-13 certifies that the applicant holds a currently valid license as a
31-14 life insurance agent in such other State and either passed such
31-15 written examination or was the holder of a life insurance agent's
31-16 license prior to the time such written examination was required;
31-17 (3) That the applicant has no place of business within
31-18 this State in the transaction of business as a life insurance
31-19 agent;
31-20 (4) That in such other State, a resident of this State
31-21 is privileged to procure a life insurance agent's license upon the
31-22 foregoing conditions and without discrimination as to fees or
31-23 otherwise in favor of the residents of such other State.
31-24 SECTION 14. Sections 14 and 15, Chapter 213, Acts of the
31-25 54th Legislature, 1955 (Article 21.07-1, Vernon's Texas Insurance
32-1 Code), are amended to read as follows:
32-2 Sec. 14. Penalty. Any person or officer, director, or
32-3 shareholder of a corporation or bank required to be licensed by
32-4 this Act who individually, or as an officer or employee of a legal
32-5 reserve life insurance company, or other corporation, violates any
32-6 of the provisions of this Act shall, in addition to any other
32-7 penalty specifically provided, be guilty of a misdemeanor and, upon
32-8 conviction, shall be fined not more than $500.00 or imprisoned not
32-9 more than six months, or both, each such violation being a separate
32-10 offense hereunder. In addition, if such offender or corporation or
32-11 bank of which he is an officer, director, or shareholder holds a
32-12 license as a life insurance agent, such license shall automatically
32-13 expire upon such conviction.
32-14 Sec. 15. Commissioner May Establish Rules and Regulations.
32-15 The [Life Insurance] Commissioner is authorized to establish, and
32-16 from time to time to amend, reasonable rules and regulations to
32-17 comply with federal law applicable to the sale of insurance and for
32-18 the administration of this Act.
32-19 SECTION 15. Subsections (a) through (d), Section 16, Chapter
32-20 213, Acts of the 54th Legislature, 1955 (Article 21.07-1, Vernon's
32-21 Texas Insurance Code), are amended to read as follows:
32-22 (a) In this section, "accident and health insurance agent"
32-23 means any person, [or] corporation, or bank that is an authorized
32-24 agent of a legal reserve life insurance company and who acts as
32-25 such agent only in the solicitation of, negotiation for,
33-1 procurement of, or collection of premiums on an accident and health
33-2 insurance contract with a legal reserve life insurance company, but
33-3 does not include:
33-4 (1) a regular salaried officer or employee of a legal
33-5 reserve life insurance company, or of a licensed life or accident
33-6 and health insurance agent, who devotes substantially all of his or
33-7 her time to activities other than the solicitation of applications
33-8 for insurance contracts and receives no commission or other
33-9 compensation directly dependent upon the business obtained and who
33-10 does not solicit or accept from the public applications for
33-11 insurance contracts;
33-12 (2) employers or their officers or employees, or the
33-13 trustees of any employee benefit plan, to the extent that those
33-14 employers, officers, employees, or trustees are engaged in the
33-15 administration or operation of any program of employee benefits
33-16 involving the use of insurance issued by a legal reserve life
33-17 insurance company, provided that those employers, officers,
33-18 employees, or trustees are not in any manner compensated directly
33-19 or indirectly by the legal reserve life insurance company issuing
33-20 the insurance contracts;
33-21 (3) banks or their officers and employees to the
33-22 extent that the banks, or their officers, and employees collect and
33-23 remit premiums by charging the premiums against the account of a
33-24 depositor on the orders of the depositor;
33-25 (4) a ticket-selling agent of a public carrier with
34-1 respect to accident and health insurance tickets covering risks of
34-2 travel; or
34-3 (5) an agent selling credit health and accident
34-4 insurance issued exclusively in connection with credit
34-5 transactions, or acting as agent or solicitor for health and
34-6 accident insurance under a license issued under either Article
34-7 21.07, Article 21.07-1, or Article 21.14, Insurance Code.
34-8 (b) The department [State Board of Insurance] may issue a
34-9 license to a person, [or] a corporation, or a bank to act only as
34-10 an accident and health insurance agent for a legal reserve life
34-11 insurance company as provided by this section.
34-12 (c) Each applicant for a license under this section who
34-13 desires to act as an accident and health insurance agent within
34-14 this state shall submit to a personal written examination
34-15 prescribed by the department [State Board of Insurance] and
34-16 administered in the English or Spanish language to determine the
34-17 applicant's competency with respect to accident and health
34-18 insurance and familiarity with the pertinent provisions of the
34-19 health and accident insurance laws of this state. Except as
34-20 provided by Subsection (d) of this section, each applicant must
34-21 pass the examination to the satisfaction of the department [State
34-22 Board of Insurance].
34-23 (d) A written examination is not required of:
34-24 (1) an applicant for license under this Section 16 if
34-25 the applicant has previously been licensed and currently holds on
35-1 the effective date of this section a valid license issued by the
35-2 department [State Board of Insurance] under either Article 21.07,
35-3 Article 21.07-1, or Article 21.14 of this code;
35-4 (2) an applicant whose license expires less than one
35-5 year before the date of application and who may, in the discretion
35-6 of the department [State Board of Insurance], be issued a license
35-7 without written examination, provided the prior expired license
35-8 granted the applicant the right to act as an agent for accident and
35-9 health insurance; or
35-10 (3) an applicant that is a partnership, [or]
35-11 corporation, or bank; provided, however, that a partnership, [or]
35-12 corporation, or bank may be licensed hereunder only if it otherwise
35-13 complies with the provisions of Section 4 of this article, but in
35-14 the application of such section to such compensation hereunder, any
35-15 requirement pertaining to or reference therein to "life insurance"
35-16 shall be changed and limited to "health and accident insurance"
35-17 only as is intended by the terms of the Section 16.
35-18 SECTION 16. Section 3, Article 21.14, Insurance Code, is
35-19 amended by amending Subsection (a), adding Subsection (g), and
35-20 relettering existing Subsections (d) and (e) to read as follows:
35-21 (a) When any person, partnership, registered limited
35-22 liability partnership, limited liability company, [or] corporation,
35-23 or bank shall desire to engage in business as a local recording
35-24 agent for an insurance company, or insurance carrier, he or it
35-25 shall make application for a license to the Texas Department of
36-1 Insurance, in such form as the Department may require. Such
36-2 application shall bear a signed endorsement by a general, state or
36-3 special agent of a qualified insurance company, or insurance
36-4 carrier that applicant or each member of the partnership or each
36-5 stockholder of the corporation or each member of the limited
36-6 liability company is a resident of this state.
36-7 (d) The Department shall issue a license to a bank if the
36-8 Department finds:
36-9 (1) That the bank is a national banking association
36-10 organized and existing under the National Bank Act (12 U.S.C.
36-11 Section 21 et seq.), a state bank organized and existing under the
36-12 Texas Banking Act (Article 342-1.001 et seq., Vernon's Texas Civil
36-13 Statutes), a state savings bank organized and existing under the
36-14 Texas Savings Bank Act (Article 489e, Vernon's Texas Civil
36-15 Statutes), or a bank operating subsidiary, located in this state in
36-16 a municipality or county with a population of 5,000 or less;
36-17 (2) That at least one officer of the bank and each
36-18 individual who will be performing any acts of an agent for the bank
36-19 are individually licensed under the provisions of this Article; and
36-20 (3) That such bank will have the ability to pay any
36-21 sums up to $25,000 which it might become legally obligated to pay
36-22 on account of any claim made against it by any customer and caused
36-23 by any negligent act, error, or omission of the bank or any person
36-24 for whose acts the bank is legally liable in the conduct of its
36-25 business as a local recording agent. The term "customer" means any
37-1 person, firm, or corporation to whom such bank sells or attempts to
37-2 sell a policy of insurance or from whom such bank accepts an
37-3 application for insurance. Such ability shall be proven in one of
37-4 the following ways:
37-5 (A) An errors and omissions policy insuring such
37-6 bank against errors and omissions, in at least the sum of $100,000
37-7 with no more than a $10,000 deductible feature or the sum of at
37-8 least $300,000 with no more than a $25,000 deductible feature,
37-9 issued by an insurance company licensed to do business in the State
37-10 of Texas or, if a policy cannot be obtained from a company licensed
37-11 to do business in Texas, a policy issued by a company not licensed
37-12 to do business in Texas, on filing an affidavit with the Department
37-13 stating the inability to obtain coverage and receiving the
37-14 Department's approval; or
37-15 (B) A bond executed by such bank as principal
37-16 and a surety company authorized to do business in this state, as
37-17 surety, in the principal sum of $25,000, payable to the Department
37-18 for the use and benefit of customers of such bank, conditioned that
37-19 such bank shall pay any final judgment recovered against it by any
37-20 customer; or
37-21 (C) A deposit of cash or securities of the class
37-22 authorized by Articles 2.08 and 2.10 of this Code, having a fair
37-23 market value of $25,000 with the comptroller. The comptroller is
37-24 hereby authorized and directed to accept and receive such deposit
37-25 and hold it exclusively for the protection of any customer of such
38-1 bank recovering a final judgment against such bank. Such deposit
38-2 may be withdrawn only on filing with the Department evidence
38-3 satisfactory to it that the bank has withdrawn from the business of
38-4 insurance and has no unsecured liabilities outstanding or that such
38-5 bank has provided for the protection of its customers by furnishing
38-6 an errors and omissions policy or a bond as provided under this
38-7 subsection. Securities so deposited may be exchanged from time to
38-8 time for other qualified securities.
38-9 A binding commitment to issue such a policy or bond, or the
38-10 tender of such securities, shall be sufficient in connection with
38-11 any application for license.
38-12 Nothing contained herein shall be construed to permit any
38-13 unlicensed employee or agent of any bank to perform any act of a
38-14 local recording agent without obtaining a local recording agent's
38-15 license. The Department shall not require a bank to take the
38-16 examination provided in Section 6 of this Article.
38-17 A bank licensed as an agent under this Article may have
38-18 additional offices from which the business of insurance is
38-19 conducted only in a municipality or county with a population of
38-20 5,000 or less and must comply with the Department's regulations
38-21 regarding additional offices.
38-22 A bank licensed as an agent under this Article must maintain
38-23 its insurance records, including all files relating to and
38-24 reflecting customer complaints, separate and apart from records
38-25 relating to banking transactions of the bank.
39-1 If at any time, any bank holding a local recording agent's
39-2 license does not maintain the qualifications necessary to obtain a
39-3 license, the license of such bank to act as a local recording agent
39-4 shall be canceled or denied in accordance with the provisions of
39-5 Sections 16 and 18 of this Article.
39-6 Each bank licensed as a local recording agent shall file
39-7 under oath with its application for renewal license a list of the
39-8 names and addresses of all individuals who will be acting as agents
39-9 on behalf of the bank and all officers and directors of the bank,
39-10 as defined in Article 21.02 of this code, and other biographical
39-11 information as required by the Department.
39-12 Each bank licensed as a local recording agent shall notify
39-13 the Department on any change in its officers and directors and any
39-14 change in other persons who will be performing any acts of an
39-15 agent, as defined in Article 21.02 of this code, and submit
39-16 biographical information on such officers, directors, and persons
39-17 as required by the Department not later than the 30th day after the
39-18 date on which the change became effective.
39-19 The term "firm" as it applies to local recording agents in
39-20 Sections 2, 12, and 16 of this Article shall be construed to
39-21 include corporations and banks.
39-22 (e) The term "partnership" or "agency partnership" as used
39-23 in this Article means a general partnership or a registered limited
39-24 liability partnership domiciled in Texas.
39-25 (f) [(e)] In this Article, the term "corporation" or
40-1 "corporations" shall mean a corporation organized under the Texas
40-2 Business Corporation Act, The Texas Professional Corporation Act
40-3 (Article 1528e, Vernon's Texas Civil Statutes), or a Texas
40-4 domiciled limited liability company organized or existing under the
40-5 Texas Limited Liability Company Act (Article 1528n, Vernon's Texas
40-6 Civil Statutes) having its principal place of business in this
40-7 state and having as one of its purposes the authority to act as an
40-8 insurance agent. Each officer, manager, and member of a limited
40-9 liability company must be licensed under this Article. The
40-10 licensing and regulation of a limited liability company shall be
40-11 subject to the same provisions and requirements of this Article
40-12 that are applicable to corporations licensed under this Article.
40-13 (g) In this Article, the term "bank" means a national
40-14 banking association organized and existing under the National Bank
40-15 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
40-16 existing under the Texas Banking Act (Article 342-1.001 et seq.,
40-17 Vernon's Texas Civil Statutes), a state savings bank organized and
40-18 existing under the Texas Savings Bank Act (Article 489e, Vernon's
40-19 Texas Civil Statutes), a bank branch, or a bank operating
40-20 subsidiary, located in this state in a municipality or county with
40-21 a population of 5,000 or less. A bank located in a municipality or
40-22 county with a population of 5,000 or less may own at least 51
40-23 percent of a licensed corporate agent which is also located and
40-24 doing business in a municipality or county with a population of
40-25 5,000 or less, and is subject to the provisions of Section 3a(5) of
41-1 this Article.
41-2 SECTION 17. Section 3a, Article 21.14, Insurance Code, is
41-3 amended by adding Subsection (5) to read as follows:
41-4 (5) Notwithstanding any provisions of either this Article or
41-5 of this Code to the contrary, a bank located in a municipality or
41-6 county with a population of 5,000 or less which owns at least 51
41-7 percent of a licensed bank operating subsidiary which is also
41-8 located and doing business in a municipality or county with a
41-9 population of 5,000 or less, may receive profits from the licensed
41-10 bank operating subsidiary. To advertise under the bank name or
41-11 participate in the insurance operation other than by receiving
41-12 profits from the insurance business, the bank must hold an agent
41-13 license. Nothing in this section permits a bank or any affiliate
41-14 to pay commissions or other valuable consideration to any
41-15 nonlicensed employees, nor may a bank pay, credit, or otherwise
41-16 reward particular nonlicensed units or geographic locations of the
41-17 bank or any of its affiliates with a portion of the commission.
41-18 SECTION 18. Subsections (a), (b), and (c), Section 4,
41-19 Article 21.14, Insurance Code, are amended to read as follows:
41-20 (a) It shall be unlawful for any person, firm, partnership,
41-21 [or] corporation or bank, or any partner, officer, director,
41-22 employee, or shareholder of a corporation or any officer, director,
41-23 or employee of a bank to act as a local recording agent or
41-24 solicitor in procuring business for any insurance company,
41-25 corporation, interinsurance exchange, mutual, reciprocal,
42-1 association, Lloyds or other insurance carrier, until he or it
42-2 shall have in force the license provided for herein.
42-3 (b) No insurer doing business in this state shall pay
42-4 directly or indirectly any commission, or other valuable
42-5 consideration, to any person, firm, partnership, [or] corporation,
42-6 or bank for services as a local recording agent within this state,
42-7 unless such person, firm, partnership, [or] corporation, or bank
42-8 shall hold a currently valid license and appointment to act as a
42-9 local recording agent as required by the laws of this state; nor
42-10 shall any person, firm, partnership, [or] corporation, or bank
42-11 other than a duly licensed and appointed local recording agent
42-12 accept any such commission or other valuable consideration;
42-13 provided, however, that nothing contained in this subsection shall
42-14 prohibit an assigned risk pool or assigned risk plan, duly
42-15 authorized to operate by the laws of this state, from paying
42-16 commissions, or other valuable consideration, to a duly licensed
42-17 person, firm, partnership, [or] corporation, or bank for services
42-18 as a local recording agent.
42-19 (c) No licensed local recording agent, managing general
42-20 agent, or surplus lines agent doing business in this state shall
42-21 pay directly or indirectly any commission, or other valuable
42-22 consideration, to any person, firm, partnership, [or] corporation,
42-23 or bank for services as a local recording agent within this state,
42-24 unless such person, firm, partnership, [or] corporation, or bank
42-25 shall hold a currently valid license to act as a local recording
43-1 agent as required by the laws of this state; nor shall any person,
43-2 firm, partnership, [or] corporation, or bank other than a duly
43-3 licensed local recording agent accept any such commission or other
43-4 valuable consideration.
43-5 SECTION 19. Section 5, Article 21.14, Insurance Code, is
43-6 amended to read as follows:
43-7 Sec. 5. Active agents or solicitors only to be licensed. No
43-8 license shall be granted to any person, firm, partnership, [or]
43-9 corporation, or bank as a local recording agent or to a person as a
43-10 solicitor, for the purpose of writing any form of insurance, unless
43-11 it is found by the Department [State Board of Insurance] that such
43-12 person, firm, partnership, [or] corporation, or bank is or intends
43-13 to be, actively engaged in the soliciting or writing of insurance
43-14 for the public generally; that each person or individual of a firm
43-15 is a resident of Texas and is to be actively engaged in good faith
43-16 in the business of insurance, and that the application is not being
43-17 made in order to evade the laws against rebating and discrimination
43-18 either for the applicant or for some other person, firm,
43-19 partnership, [or] corporation, or bank. Nothing herein contained
43-20 shall prohibit an applicant insuring property which the applicant
43-21 owns or in which the applicant has an interest; but it is the
43-22 intent of this Section to prohibit coercion of insurance and to
43-23 preserve to each citizen the right to choose his own agent or
43-24 insurance carrier, and to prohibit the licensing of an individual,
43-25 firm, partnership, [or] corporation, or bank to engage in the
44-1 insurance business principally to handle business which the
44-2 applicant controls only through ownership, mortgage or sale, family
44-3 relationship or employment, which shall be taken to mean that an
44-4 applicant who is making an original application for license shall
44-5 show the Department [State Board of Insurance] that the applicant
44-6 has a bona fide intention to engage in business in which, in any
44-7 calendar year, at least twenty-five per cent (25%) of the total
44-8 volume of premiums shall be derived from persons or organizations
44-9 other than applicant and from property other than that on which the
44-10 applicant shall control the placing of insurance through ownership,
44-11 mortgage, sale, family relationship or employment. Nothing herein
44-12 contained shall be construed to authorize a partnership, [or]
44-13 corporation, or bank to receive a license as a solicitor.
44-14 SECTION 20. Section 24, Article 21.14, Insurance Code, is
44-15 amended to read as follows:
44-16 Sec. 24. VIOLATION OF ARTICLE. Any person or any member of
44-17 any firm, or any corporation or bank, or any officer, director,
44-18 shareholder or employee of any corporation or bank who violates any
44-19 of the provisions of Sections 4, 15 and 22 of this Article shall be
44-20 guilty of a misdemeanor, and on conviction in a court of competent
44-21 jurisdiction, shall be punished by a fine of not less than One
44-22 Dollar ($1.00) nor more than One Hundred Dollars ($100.00).
44-23 SECTION 21. Article 21.14, Insurance Code, is amended by
44-24 adding Section 27 to read as follows:
44-25 Sec. 27. RULES. In addition to other rules required or
45-1 authorized by this article, the Commissioner may adopt rules in
45-2 accordance with federal law applicable to the regulation of sales
45-3 of insurance that are necessary and proper to carry out the
45-4 provisions of this Code.
45-5 SECTION 22. Subchapter B, Chapter 21, Insurance Code, is
45-6 amended by adding Article 21.21-9 to read as follows:
45-7 Art. 21.21-9. UNFAIR METHODS OF COMPETITION AND UNFAIR
45-8 PRACTICES BY FINANCIAL INSTITUTIONS
45-9 Sec. 1. DEFINITION. In this article "bank" means a national
45-10 banking association organized and existing under the National Bank
45-11 Act (12 U.S.C. Section 21 et seq.), a state bank organized and
45-12 existing under the Texas Banking Act (Article 342-1.001 et seq.,
45-13 Vernon's Texas Civil Statutes), a state savings bank organized and
45-14 existing under the Texas Savings Bank Act (Article 489e, Vernon's
45-15 Texas Civil Statutes), a bank branch, or a bank operating
45-16 subsidiary, located in this state in a municipality or county with
45-17 a population of 5,000 or less.
45-18 Sec. 2. UNFAIR METHODS OF COMPETITION AND UNFAIR PRACTICES
45-19 DEFINED. (a) The following are unfair methods of competition and
45-20 unfair practices in the sale of insurance by banks:
45-21 (1) Tying. (A) When the agent is a bank, requiring
45-22 the purchase of insurance from the bank, its subsidiary or
45-23 affiliate, or from or through any particular agent, solicitor,
45-24 insurer, or any other person or entity, as a condition of extending
45-25 or renewing credit, leasing or selling property, or furnishing
46-1 services;
46-2 (B) Conditioning the terms of credit or the sale
46-3 or lease of property upon acquisition of insurance from or through
46-4 the bank, its affiliate or subsidiary, or any other particular
46-5 person or entity;
46-6 (C) Rejecting any required policy solely because
46-7 such policy has been issued or underwritten by a person or entity
46-8 who is not associated with such bank; or
46-9 (D) Imposing any requirement on any agent or
46-10 broker not associated with the bank that is not imposed on any
46-11 agent or broker who is associated with such bank, subsidiary, or
46-12 affiliate.
46-13 (2) Bank Affiliated Agent Disclosures. When the agent
46-14 is a bank, affiliated with a bank for the purpose of the sale of
46-15 insurance products through common ownership, management, or
46-16 control, or offers or sells insurance from a bank's premises,
46-17 failing to disclose clearly in all promotional materials relating
46-18 to insurance products distributed to customers and potential
46-19 customers that insurance products sold through or in the bank or
46-20 its affiliate or subsidiary are not insured by the Federal Deposit
46-21 Insurance Corporation and that the products are not issued,
46-22 guaranteed, or underwritten by the bank or the Federal Deposit
46-23 Insurance Corporation.
46-24 (b) Subsection (a)(1) of this section shall not prevent a
46-25 person who lends money or extends credit from placing insurance on
47-1 real or personal property in the event the mortgagor, borrower, or
47-2 purchaser has failed to provide required insurance in accordance
47-3 with the terms of the loan or credit document.
47-4 Sec. 3. DISCLOSURE REQUIRED BY BANKS. (a) The following
47-5 disclosure requirements apply to all agents which are banks, or
47-6 which offer or sell insurance from a bank's premises. Promotional
47-7 materials relating to insurance products distributed to customers
47-8 and potential customers shall clearly disclose that insurance
47-9 products sold through the bank affiliated agent are not insured by
47-10 the Federal Deposit Insurance Corporation and that the product is
47-11 not issued, guaranteed, or underwritten by the bank or the Federal
47-12 Deposit Insurance Corporation.
47-13 (b) At the time a loan application is made, a bank must
47-14 provide to the customer a written disclosure in substantially the
47-15 form provided by this subsection. The disclosure form must be
47-16 separate and apart from any loan application or loan document. The
47-17 bank employee who presents the disclosure and the customer shall
47-18 sign and date the disclosure form. One copy of the disclosure form
47-19 shall be maintained by the bank in the loan file and one copy shall
47-20 be provided to the customer for his or her records.
47-21 The disclosure shall be in substantially the following form:
47-22 "CUSTOMER DISCLOSURE
47-23 "You have applied for a loan with the bank. As permitted by
47-24 the Texas Credit Code, the bank is requiring that collateral used
47-25 to secure the loan be insured to cover the amount of the loan to
48-1 the extent insurance is available on the property to be insured,
48-2 against the usual and customary casualty losses.
48-3 "You have the right to provide this insurance either through
48-4 existing policies already owned or controlled by you or by
48-5 procuring the insurance through any insurance agent or company
48-6 authorized to transact business in Texas.
48-7 "The bank, through its own insurance agency, can also make
48-8 this insurance available to you. However, federal and state laws
48-9 provide that the bank cannot require you to obtain insurance
48-10 through the bank, its subsidiary, an affiliate, or any particular
48-11 unaffiliated third party either as a condition to obtaining this
48-12 credit or to obtain special terms or consideration.
48-13 "Insurance products sold through or in the bank or its
48-14 affiliate or subsidiary are not insured by the Federal Deposit
48-15 Insurance Corporation nor are the products issued, guaranteed, or
48-16 underwritten by the bank or the Federal Deposit Insurance
48-17 Corporation.
48-18 "You are not required or obligated to purchase insurance from
48-19 the bank or any subsidiary, affiliate, or particular unaffiliated
48-20 third party as a condition to obtaining your loan, nor will your
48-21 decision as to insurance agents affect your credit terms in any
48-22 way.
49-1 ____________________ ____________________
49-2 "Customer Date
49-3 ____________________
49-4 Employee of Bank"
49-5 (c) An agent that is affiliated with a bank for the purpose
49-6 of the sale of insurance products through common ownership,
49-7 management, or control may not complete a sale of insurance
49-8 covering the collateral securing or proposed to secure a loan with
49-9 the same bank prior to the bank making a commitment on such loan
49-10 transaction.
49-11 (d) The commissioner may amend the disclosure form as
49-12 necessary to comply with federal or state law.
49-13 Sec. 4. INDEPENDENCE OF BANK AGENTS FROM LOAN TRANSACTIONS.
49-14 (a) If insurance is offered or sold to a bank customer in
49-15 connection with a loan transaction by a bank, the insurance sales
49-16 person involved in that insurance transaction must be independent
49-17 of that lending transaction and may not also be the person or
49-18 persons making that loan.
49-19 (b) This provision shall not apply to banks which have $40
49-20 million or less in total assets as reported on the most recent
49-21 Federal Financial Institutions Examination Council (FFIEC)
49-22 Consolidated Report of Condition and Income or any successor report
49-23 required by federal or state law. In addition, this provision
49-24 shall not apply to transactions in which the insurance sold is a
49-25 credit life, credit disability, credit property, or involuntary
50-1 unemployment product sold in conjunction with a credit transaction.
50-2 Sec. 5. COMMISSIONER OF INSURANCE MAY ESTABLISH RULES AND
50-3 REGULATIONS. The commissioner is authorized to establish, and from
50-4 time to time to amend, reasonable rules and regulations to comply
50-5 with federal law applicable to the sale of insurance and for the
50-6 implementation and administration of this article.
50-7 SECTION 23. This Act takes effect September 1, 1997.
50-8 SECTION 24. The importance of this legislation and the
50-9 crowded condition of the calendars in both houses create an
50-10 emergency and an imperative public necessity that the
50-11 constitutional rule requiring bills to be read on three several
50-12 days in each house be suspended, and this rule is hereby suspended.