SRC-DBM C.S.S.B. 956 76(R) BILL ANALYSIS
Senate Research CenterC.S.S.B. 956
76R12122 PB-FBy: Madla
Economic Development
4/15/1999
Committee Report (Substituted)
DIGEST
Currently, Article 21.15-7, Insurance Code, requires the commissioner of
insurance to review and evaluate the current agents' licensing statutes and
make recommendations to the legislature to reduce the number and type of
agency licences, determine which statutory provisions should apply
uniformly to all insurance licenses, address new marketing methods, and to
address any other problems which may exist. C.S.S.B. 956 consolidates
agent licenses and promotes uniformity in the regulation of agents.
PURPOSE
As proposed, C.S.S.B. 956 sets forth provisions regulating certain
insurance agents; consolidating insurance agents licenses; and providing
penalties.
RULEMAKING AUTHORITY
Rulemaking authority is granted to the commissioner of insurance in
SECTIONS 1.01, 1.02, 1.06, and 1.11(Section 4, Article 21.01, Insurance
Code; Sections 3(c),(d), (e), and (f), Article 21.01-1, Insurance Code;
Section 5A(a), Article 21.01-2, Insurance Code, and Section 2 (n) (4) and
Article 21.07, Insurance Code) of this bill.
SECTION BY SECTION ANALYSIS
ARTICLE 1. GENERAL PROVISIONS APPLICABLE TO ALL INSURANCE AGENTS
SECTION 1.01. Amends Article 21.01, Insurance Code, as follows:
Art. 21.01. New heading: PURPOSE; CONSOLIDATION OF LICENSES; APPLICATION;
CERTIFICATE OF AUTHORITY OR LICENSE REQUIRED; RULEMAKING AUTHORITY
Sec. 1. PURPOSE. Provides that it is the intent of the legislature to
simplify and reform the regulation of insurance agents in this state by
consolidating the types of licenses issued to insurance agents under this
subchapter. Provides that this chapter is also intended to promote
uniformity in the licensing, examination, continuing education, and
disciplinary requirements for agents.
Sec. 2. CERTIFICATE OF AUTHORITY OR LICENSE REQUIRED. Prohibits any
person from acting as an agent or otherwise, in soliciting or receiving
applications for insurance of any kind whatever in this state, or in any
manner to aid in the transaction of the business of any insurance company
incorporated in this state, or out of it, without first procuring a license
for certificate of authority from the Texas Department of Insurance
(department), rather than the State Board of Insurance (board).
Sec. 3. APPLICATION. Provides that, except as otherwise provided by this
code, this subchapter applies to each person licensed in accordance with
certain chapters, articles, sections, and subsections. Provides that
except as otherwise provided by law, each reference in this code and other
laws of this state to a particular type of license authorizing an agent to
engage in the business of insurance in this state means a license
designation as made by amendment, enactment, or reenactment of or to
Chapter 21A, of this code by the 76th Legislature, Regular Session, 1999,
or subsequent amendments to that subchapter. Provides that a reference in
this chapter to a satisfactory provision applies to all reenactments,
revisions, or amendments of that provision.
Sec. 4. RULES. Authorizes the commissioner of insurance (commissioner) to
adopt rules as necessary to implement this subchapter and to meet the
minimum requirements of federal law and regulations.
SECTION 1.02. Amends Article 21.01-1, Insurance Code, as follows:
Art. 21.01-1. New heading: AGENTS' QUALIFYING EXAMINATION; CONTINUING
EDUCATION REQUIREMENTS FOR AGENTS
Sec. 1. EXAMINATION ADMINISTRATION. Authorizes the commissioner, rather
than the State Board of Insurance, to accept examinations administered by a
testing service as satisfying the examination requirements of persons
seeking license as agents, counselors, or adjusters under this code.
Requires the commissioner to hold a public hearing in accordance with
Chapter 2001, Government Code and to adopt rules and standards as may be
deemed appropriate by the commissioner, rather than board, to implement the
authority granted in this article. Requires the department, rather than
the State Board of Insurance, to administer any required qualifying
examination in accordance with this article. Authorizes the commissioner
to adopt rules relating to the scope, type, and conduct of the written
examinations and the times and places in this state at which the
examinations will be conducted. Authorizes the commissioner's rules to
designate textbooks, manuals, and other materials to be studied by
applicants in preparation for examinations conducted under this subsection.
Authorizes those textbooks, manuals, or other materials to consist of
material available to an applicant by purchase for the publisher or of
material prepared at the direction of the commissioner and distribute to an
applicant on request and on payment of the reasonable cost of the material.
Requires all examination questions to be prepared from the contents of the
textbooks, manuals, and other materials designated or prepared by the
commissioner under this subsection. Deletes text regarding the provisions
of Section 5 of the Administrative Procedure of the Texas Register Act
(Article 6252-13a, V.T.C.S., and the provisions of the respective statutes
governing the issuance of the license sought by the applicant. Makes
conforming and nonsubstantive changes.
Sec. 2. EXAMINATION OF LICENSE APPLICANT. Requires each applicant, except
as provided by Subsection (c), for a license to act as an insurance agent
in this state to submit to a personal written examination that is
prescribed by the department and administered in the English or Spanish
language, and must pass the examination to the satisfaction of the
department. Requires the examination to determine certain applicant
competencies. Requires the department to charge each applicant an
examination fee in an amount determined by the department as necessary for
administration of the examination. Requires the fee to accompany each
application to take the examination. Provides that the fee is
nonrefundable other than for failure of an applicant to appear and take the
examination after an applicant has given at least 24 hours notice of an
emergency situation to the department and received the department's
approval of refund of the fee. Requires the commissioner to prescribe a
limited written licensing examination for applicants for a limited license
under Article 21.07-1 or Article 21.14 of this code. Requires a limited
examination to be administered according to the provisions of this article.
Requires determination of certain applicant competencies and
understandings. Prohibits the department from requiring a person to take
an examination under this article under certain conditions, including if
the person is an applicant for a general life, accident, and health license
who was authorized to solicit insurance on behalf of a fraternal benefit
society on September 1, 1999, if the applicant had, does not, or limits
certain solicitations of insurance; holds a certain license in a certain
capacity; and requires each examination administered under this article to
be offered in English and Spanish.
Sec. 3. CONTINUING EDUCATION REQUIREMENTS. Provides that the department
has exclusive jurisdiction for all matters relating to the continuing
education of insurance agents who are licensed under this code. Requires
each individual, except as provided by Subsection (d) of this section, who
holds a license issued by the department to complete continuing education.
Requires all continuing education hours to be completed before the
expiration date of an individual's license. Requires a person who holds a
life, accident, or a property and casualty license to complete 15 hours of
continuing education annually. Prohibits an agent from being required to
complete more than 15 continuing education hours annually as a result of
holding more than one license for which continuing education is required.
Requires an individual who holds a limited life, accident, and health
license, or a limited property and casualty license to complete five hours
of continuing education annually. Requires each individual who holds a
license issued by the department to complete 4 hours of continuing
education in ethics during each license renewal period. Requires at least
50 percent of all required continuing education hours to be completed in a
classroom setting or a classroom equivalent setting approved by the
department. Authorizes the department to grant reciprocity to license
holders who complete continuing education requirements in other professions
or in associations with professional designations in an insurance-related
field. Authorizes the department, on a timely written request of an agent,
to extend the time for an agent to comply with the continuing education
requirements of this section or may exempt an agent from some or all of the
requirements for a licensing period if the department finds that the agent
is unable to comply with the requirements because of illness, medical
disability, or another extenuating circumstance beyond the control of the
agent. Requires the commissioner, by rule, to prescribe the criteria for
an exemption or extension under this subsection. Provides that an
individual who has continuously held a license issued under this code to
operate as an insurance agent for the 20 years preceding September 1, 1999,
is exempt from the continuing education requirements of this section.
Authorizes the commissioner, by rule, to provide for other reasonable
exemptions. Requires the department to certify continuing education
programs for agents. Authorizes only a program that satisfies the criteria
established by rule by the commissioner to receive designation. Requires
the certification criteria to be designed to ensure that continuing
education programs enhance the knowledge, understanding, and professional
competence of the license holder. Requires a nonrefundable certification
fee, in an amount set by the commissioner as necessary for administering
the program, to accompany each application for certification of a
continuing education program. Requires the fee to be established by rule
and based on a graduated scale according to the number of hours required to
complete the program. Requires each continuing education program provider
to register with the department as a course provider. Requires the
department to assess a registration fee for each application for
registration as a provider, set by the commissioner in an amount necessary
for the proper administration of this section. Authorizes the commissioner
to adopt rules establishing the requirements for continuing education
program providers. Authorizes the department to negotiate agreements with
independent contractors under which the independent contractor certifies
and registers continuing education courses and providers. Authorizes the
department to require those independent contractors to correspond directly
with providers with regard to the administration of continuing education
programs, and the contractors may collect fees from the providers for
administration of the programs. Provides that the department retains the
authority to establish the scope and type of continuing education
requirements for each type of license. Authorizes the commissioner to
appoint an advisory council to furnish the commissioner with information
and assistance in the conduct of the continuing education program for
agents licensed under this subchapter. Requires an advisory council, if
appointed, to be composed of nine members, four of whom must be public
members. Provides that the public members are entitled to reimbursement
for their reasonable travel expenses in attending meetings of the advisory
council, subject to any applicable limit in the General Appropriations Act.
Sets forth public member prohibitions.
SECTION 1.03. Redesignates Section 2, Article 21.01-2, Insurance Code, as
Section 1A, Article 21.01-2, Insurance Code, and amends Section 1A, Article
21.01-2, as follows:
Sec. 1A. New heading: EXPIRATION AND RENEWAL OF LICENSES. Provides that
except as provided by this section, each agent license issued by the
department expires on the fifth anniversary of the date of issuance unless
suspended or revoked by the commissioner. Authorizes a person to renew a
license, rather than an unexpired license, that has not expired or has not
been suspended or revoked by filing a properly completed renewal
application with the department. Provides that on filing of a completed
renewal application not later than the expiration date of the license
accompanied by the renewal fee set by the commissioner, the original
license continues in force until the department issues the renewal license;
or the commissioner issues an order revoking the license. Authorizes a
person to renew a license by filing a renewal application with the
department and paying the department the required renewal fee and an
additional fee that is equal to one-half of the renewal fee, rather than
license fee, for the license, if a person's license has been expired for 90
days or less. Prohibits a person from renewing a license, if a person's
license has been expired for more than 90 days but less than one year, but
is entitled to a new license without taking the applicable examination, if
the person submits a new application, the license fee, and an additional
fee equal to one-half of the license fee to the department. Prohibits a
person from renewing a license, if a person's license has been expired for
one year or more, rather than 90 days. Authorizes the department to renew
without reexamination an expired license of a person who was licensed in
this state, moved to another state, and is currently licensed and has been
in continual practice in the other state for the period preceding
application. Requires the department, at least 30 days before the
expiration of a person's license, to send written notice of the impending
license expiration to the person at the person's last known mailing address
according to the records of the department. Requires license fees, for the
licensing period in which the license expiration is changed, to be prorated
so that each license holder shall pay only that portion of the license fee
that is allocable to the period, rather than the number of months, during
which the license is valid. Provides that this section is not applicable to
a license issued under Article 21.07-6 or 21.077 of this code. Makes
conforming changes.
SECTION 1.04. Amends Article 21.02-2, Insurance Code, by adding Section
2A, as follows:
Sec. 2A. PROHIBITED ACTIVITIES. Prohibits a person licensed under this
code who receives a commission or other consideration for services as an
insurance agent from receiving an additional fee for those services
provided to the same client except for a fee described by Article 21.35A or
21.35B of this code. Prohibits an insurer or licensed insurance agent
engaged in the business of insurance in this state from paying, directly or
indirectly, and from accepting, any commission or other valuable
consideration to or from any person for services performed by that person
as an insurance agent as required by the laws of this state. Provides that
this subsection does not prevent the payment or receipt of renewal or other
deferred commissions to or by any person solely because the person ceased
to hold a license to act as an insurance agent. Prohibits an insurance
agent licensed under this code from paying, allowing, or giving, or
offering to pay, allowing, or giving, directly or indirectly, to any person
who is not a licensed insurance agent, any rebate of premiums payable,
commission, paid employment, or contract for service, or any other valuable
consideration or inducement, that is not specified in the policy or
contract of insurance for or on account of the solicitation or negotiation
of insurance contracts. Provides that, in addition to any other penalty
imposed under this code, a person who is determined by the department to
have committed conduct described by this subsection is barred from
receiving a license as an insurance agent before the fifth anniversary of
the date of the determination. Sets forth who this subsection applies to
including a person who solicits any contract of insurance or acts as an
agent for a person, including an insurance company, association, or
organization, not authorized to engage in the business of insurance in this
state without holding a license issued under Article 1.14-2 of this code.
Prohibits a person who has had an insurance license revoked in this state
or any other state from soliciting or otherwise transacting business under
Chapter 10 of this code, unless it is determined by the department to be in
the public interest to allow the person to act in that capacity. Prohibits
a person who has had an insurance license revoked in this state or any
other state from acting as an officer, director, member, manager, or
partner, or as a shareholder with a controlling interest, of an entity
licensed under this subchapter unless it is determined by the department to
be in the public interest, to allow the person to act in that capacity.
Prohibits a property and casualty agent from knowingly granting, writing,
or permitting a greater amount of insurance against loss by fire than the
reasonable value of the subject of insurance.
SECTION 1.05. Redesignates Section 5, Article 21.01-2, Insurance Code, as
Section 3A, Article 21.01-2, Insurance Code, and amends Section 3A, Article
21.02-2, Insurance Code, as follows:
Sec. 3A. New heading: DENIAL OR REFUSAL OF LICENSE APPLICATION;
SUSPENSION OR REVOCATION OF LICENSES; DISCIPLINE OF LICENSE HOLDERS.
Authorizes, rather than requires, in addition to any other remedy available
under Section 7, Article 1.10, of this code, the department to refuse issue
an original license, revoke, suspend, or refuse to renew a license, place
on probation, a person whose license has been suspended, assess an
administrative penalty, or reprimand a license holder for a violation of
this code, another insurance law of this state, or a rule of the
commissioner. Sets forth certain actions of an applicant or license
holder, individually or through any officer, director, or shareholder which
would authorize the department to discipline a license holder or deny a
license application under this article. Prohibits an individual whose
license application is denied or whose license has been revoked under this
article from applying for any license as an insurance agent before the
fifth anniversary of the effective date of the denial or revocation; or if
the applicant or license holder seeks judicial review of the department's
action, the date of the final court order or decree affirming that action.
Authorizes the commissioner to deny a timely application filed under
Subsection (d) of this section, if the applicant does not show good cause
why the denial or revocation of the previous license application should not
be considered a bar to the issuance of a new license. Provides that this
subsection does not apply to an applicant whose license application was
denied for failure to pass a required written examination; or submit a
properly completed license application. Authorizes the department, instead
of or in addition to taking disciplinary action under this section, to
order that a license holder who is currently afflicted with a disability to
be placed on disability probation under the terms and conditions specified
under Article 21.15-6 of this code and department rules. Provides that
Subsections (c) - (f) of this section do not apply to a person who is
licensed under, or holds a certificate of authority issued under, Chapter 9
of this code. Deletes text requiring the commissioner to prescribe
procedures by which all decisions to deny, suspend, or revoke a license, or
to refuse to renew a license, are made by or are appealable to the
commissioner.
SECTION 1.06. Amends Article 21.01-2, Insurance Code, by adding Sections
4A, 5A, and 6A, as follows:
Sec. 4A. JUDICIAL REVIEW. Sets forth the conditions under which a license
holder may appeal as provided by Article 1.04 of this code.
Sec. 5A. AUTOMATIC FINES. Authorizes the commissioner to establish, by
rule, monetary fines for certain violations to expedite the department's
processing of certain violations of this code. Sets forth certain
violations for which fines are authorized to be assessed. Prohibits this
section from being construed to limit the department's authority to take
any other disciplinary action against a license holder as provided under
another provision of this code. Provides that if a person disputes an
assessment of a fine under this section, the matter is a contested case
subject to Chapter 2001, Government Code.
Sec. 6A. ENFORCEMENT OF SUBCHAPTER. Authorizes the attorney general, a
district or county attorney, or the department acting through the
commissioner to institute an injunction proceeding or any other proceeding
to enforce this subchapter and to enjoin any person, firm, corporation, or
bank from engaging or attempting to engage in the business of insurance in
violation of this code or any other insurance law of this state. Provides
that the provisions of this section are cumulative of the other penalties
or remedies provided by this article.
SECTION 1.07. Amends Article 21.04, Insurance Code, as follows:
Art. 21.04. New heading: LICENSE HOLDER DEEMED COMPANY'S AGENT.
SECTION 1.08. Amends Article 21.06, Insurance Code, as follows:
Art. 21.06. New heading: AUTHORITY TO APPOINT AGENTS. Requires each
foreign or domestic insurance company, by resolution of its board of
directors, to designate an officer or agent, rather than some officer or
agent, who is empowered to appoint or employ its agent in this state, and
such officer or agent shall promptly notify the department, rather than
board, in writing of the name, title, and address of each person so
appointed or employed. Provides that the authority of that designee to act
on behalf of the insurance company continues in force, unless revoked by
the commissioner, rather than board, for cause or canceled at the request
of the insurance company, until the first day of March after its issuance,
and must be renewed annually. Deletes text regarding the board being
required to issue a certificate to a person, including a copy of a
certificate of authority.
SECTION 1.09. Amends Section 1, Article 21.07, Insurance Code, as follows:
Sec. 1. New heading: APPLICABILITY OF ARTICLE. Requires no person to act
as an agent of any insurance company, health maintenance organization, or
other type of insurance carrier licensed to do business in the State of
Texas and which insurance carrier's agents are required to be licensed
under the provision of this subchapter, rather than Article, on the date
that this Act shall become effective, unless that person, rather than
individual or entity, shall have first procured a license from the
department as provided by this subchapter, and no such insurance carrier
shall appoint any person to act as its agent unless such person shall have
obtained a license under the provisions of this subchapter, rather than
article, and no such person who obtains a license shall engage in business
as an agent until that person shall have been appointed to act as an agent
by some duly authorized insurance carrier designated by the provisions of
this code, rather than Article and authorized to do business in the State
of Texas. Sets forth what the provisions of this subchapter do not apply
to. Deletes text authorizing any person, corporation, or bank desiring to
act as an agent of any insurance carrier licensed to do business in the
State of Texas and writing a health and accident insurance to obtain a
separate license as an agent to write health and accident insurance.
Deletes existing Subsections (b) and (c).
SECTION 1.10. Amends Section 1A, Article 21.07, Insurance Code, unless the
context clearly indicates otherwise in this subchapter, to define "agent,"
"bank," "control," "corporation," "individual," "insurance company,"
"partnership," "person," and "sub-agent." Deletes the existing definition
of "person."
SECTION 1.11. Amends Section 2, Article 21.07, Insurance Code, to require
any person who desires to become an agent for an insurance company or
health maintenance organization, rather than a casualty company writing
accident and health insurance, or any other type of insurance carrier
licensed to do business in the State of Texas, the agents of which are
required to be licensed under this subchapter, to submit an application
for a license in the form required by the department to the department.
Requires each applicant for a license to act as an insurance agent in this
state to file a completed application on forms developed by the department
to the commissioner. Requires the commissioner to establish, by rule, the
requirements for a properly completed application. Prohibits the
commissioner from granting a license as an insurance agent to write any
form of insurance unless the department finds certain conditions exist.
Provides that this section does not prohibit an applicant insuring property
that the applicant owns or in which the applicant has an interest, but it
is the intent of this section to prohibit coercion of insurance and to
preserve to each individual, the right to choose the individual's own agent
or insurance company, and to prohibit the licensing of a person to engage
in the insurance business principally to handle business that the applicant
controls only through ownership, mortgage or sale, family relationship, or
employment. Requires an applicant for an original license to have a bona
fide intention to engage in business in which, in any calendar year, at
least 25 percent of the total volume of premiums is derived from persons
other than the applicant and from property other than that on which the
applicant controls the placing of insurance through ownership, mortgage,
sale, family relationship, or employment. Prohibits the department from
denying a license application solely on the ground that the applicant will
act only part-time as an agent. Requires the department to issue a license
to an individual to engage, rather than or to a general partnership
engaging, in the business of insurance, if the department finds that the
individual meets certain requirements. Authorizes an individual engaging
in the insurance business as a sole proprietorship under the authority of a
license issued under this subchapter to incorporate, but the corporation
does not have greater license authority than that granted to the license
holder in the hoder's individual capacity. Requires each individual
license holder to notify the department on a monthly basis of certain
events. Requires the department to issue a license to a corporation or
partnership if the department finds that a corporation or partnership is
organized under the laws of this state or any other state or territory of
the United States; admitted to conduct business in this state by the
secretary of state, if so required; and authorized by its articles of
incorporation or its partnership agreement to act as an insurance agent;
the corporation or partnership meets the definition of that entity adopted
under Section 1A of this article; at least one officer of the corporation
or one active partner of the partnership and all other persons performing
any acts of an agent on behalf of the corporation or partnership in this
state are individually licensed by the department separately from the
corporation or partnership; the corporation or partnership will have the
ability to pay any sums up to $25,000 which it might become legally
obligated to pay on account of any claim made against it by any customer
and caused by any negligent act, error, or omission of the corporation or
partnership or any person for whose acts the corporation or partnership is
legally liable in the conduct of its business under this code, rather than
article. Requires such ability to be maintained in certain ways including
an errors and omissions policy insuring such corporation or partnership
against errors and omissions in at least the sum of $250,000, rather than
the sum of $100,000. Requires such ability to be maintained, rather than
proven, in certain ways. Requires a binding commitment to issue such a
policy or bond to be sufficient in connection with any application for
license; the corporation or partnership intends to be actively engaged in
the business of insurance as required under Subsection (c) of this section;
each branch location from which the corporation or partnership will conduct
its business in this state under authority of an insurance license is
separately registered with the department; the corporation or partnership
has submitted the application, appropriate fees, and any other information
required by the department; and an officer, director, member, manager,
partner, or any other person who has the right or ability to control the
license holder has not had a license suspended or revoked or been the
subject of any other disciplinary action by the insurance regulator of this
or any other state or committed an act for which a license may be denied
under Article 21.01-2 of this code. Requires each corporation or
partnership licensed as an agent under this subchapte to file, under oath,
on a from developed by the department, biographical information for each,
rather than a list of the name for all, of its executive officers and
directors or unlicensed partners who administer the entity's operations in
this state, and shareholders who are in control of the corporation, or any
other partners who have the right or ability to control the partnership.
Requires a biographical form for each individual who is in control of the
parent entity, if any corporation or partnership is owned, in whole or in
part, by another entity. Requires each corporation or partnership to
notify the department on a monthly basis of certain events. Requires the
department to issue a license to a bank in the manner provided for the
licensing of a corporation under this section. Prohibits a person from
acquiring in any manner, any ownership interest in an entity licensed as an
agent under this subchapter if the person is, or after the acquisition
would be, directly or indirectly, in control of the license holder, or
otherwise acquire control of or exercise any control over the license
holder, unless the person has filed certain information with the department
under oath. Sets forth the information filed under oath with the
department. Authorizes the commissioner to require that the information
required by Subdivisions (1) through (4) of that subsection for an
individual be provided regarding each partner of the partnership or limited
partnership, each member of the syndicate or group, and each person who
controls the partner or member, if a person required to file a statement
under Subsection (p) of this section is a partnership, limited partnership,
syndicate, or other group. Authorizes the commissioner to require that the
information required by Subdivisions (1) through (4) of that subsection be
provided regarding the corporation; each individual who is an executive
officer or director of the corporation; and each person who is directly or
indirectly the beneficial owner of more than 10 percent of the outstanding
voting securities of the corporation, if a partner, member, or person is a
corporation or the person required to file the statement under Subsection
(p) of this section is a corporation. Authorizes the department to
disapprove an acquisition of control, if, after notice and opportunity for
hearing, the commissioner makes certain determinations. Provides that,
notwithstanding Subsection (o) of this section, a change in control is
considered approved if the department has not proposed to deny the
requested change before the 91st day after the date of receipt by the
department of all information required by this section. Requires the
commissioner to be the corporation's or partnership's attorney for service
of process on whom all lawful process, notice, or demand may be served in
any legal proceeding against the corporation or partnership under certain
conditions. Requires the department to deny, revoke, or suspend the
license of a corporation or partnership to act as an agent as provided by
Article 21.01-2 of this code, if a corporation or partnership that holds an
agent's license does not maintain the qualifications necessary for issuance
of the license. Deletes text requiring an application to bear a signed
endorsement by an office or property authorized representative of the
insurance carrier. Deletes text requiring a partner in the partnership to
be licensed individually as an agent under this article. Deletes text
regarding a Texas corporation organized or existing under the Texas
Business Corporation Act or the Texas Professional Corporation Act having
its principal place of business in the State of Texas and having as its
purposes the authority to act as an agent covered by this article. Deletes
text providing that every officer, director, and shareholder of the
corporation is individually licensed under the provisions of this article,
or that every officer and director of the corporation is individually
licensed under this article, that the corporation is a wholly owned
subsidiary of a parent corporation that is licensed under this article, and
that every shareholder of the parent corporation is individually licensed
under this article. Deletes text regarding a deposit of cash or securities
of the class authorized by Articles 2.08 and 2.10, Insurance Code, as
amended having a fair market value of $25,000 with the comptroller and its
use. Deletes text regarding the tender of such securities. Deletes text
requiring an agent's license to be canceled; an unlicensed person acquiring
shares in a corporation and not disposing of them within a period of 90
days to a licensed agent; and any such corporation being required to have
the power to redeem the shares of any shareholder under certain conditions.
Deletes text regarding shareholders with its application for renewal
license. Deletes text requiring each corporation to notify the department
upon any change in its officers, directors, or shareholders. Deletes text
prohibiting a corporation from owning any interest in another corporation
licensed under this Article and requiring each owner of an interest in a
corporation licensed under this Article to be a natural person who holds a
valid license under this article. Deletes existing subsection (e).
Deletes text regarding a binding commitment to issue such a policy or bond,
or the tender of applicable securities, being sufficient in connection with
an application for license. Deletes text regarding nothing in this
subsection permitting an unlicensed employee or agent of a bank to perform
any act of an agent under this Article without obtaining a license.
Deletes text authorizing a bank licensed as an agent under this Article
from having additional offices from which the business of insurance is
conducted only in a place with a population of 5,000 or less and being
required to comply with the department's regulations regarding additional
offices. Deletes text requiring a bank licensed as an agent under this
article from maintaining the insurance records of the bank. Deletes text
requiring the license of a bank to act as an agent to be canceled or
denied, if at any time, a bank that holds an agent's license does not
maintain the qualifications necessary to obtain a license. Deletes text
requiring each bank licensed as an agent under this article to file under
oath with its application for license renewal a list of the name and
address of the bank and of each officer and director of the bank, as
defined by Article 21.02 of this code, and other biographical information
as required by the department. Deletes text requiring each bank to notify
the department of any chang in its officers and directors, and any change
in other persons who will be acting as agents. Makes conforming and
nonsubstantive changes.
SECTION 1.12. Amends Article 21.07, Insurance Code, by adding Section 3A,
as follows:
Sec. 3A. TEMPORARY LICENSE. Authorizes the department to issue a
temporary agent's license to an applicant for a license under Section 2 of
this article who is being considered for appointment as an agent by an
insurer or health maintenance organization. Provides that an applicant for
a temporary license is not required to pass a written examination and the
temporary license is valid for the 90 days after the date of issuance.
Requires the department to issue a temporary license immediately on receipt
by the department of a property completed application executed by the
person in the form required by Section 2 of this article, accompanied by
the nonrefundable filing fee set by the department and a certificate signed
by an officer or properly authorized representative of the insurer or heath
maintenance organization including certain statements. Authorizes the
insurer or health maintenance organization to assume that the temporary
license will be issued in due course and the applicant may proceed to act
as an agent, if the temporary license is not received from the department
before the eight day after the date on which the application, certificate,
and nonrefundable fee are delivered or mailed to the department and the
insurer or health maintenance organization has not been notified that the
application is denied. Prohibits a temporary license from being renewed or
issued more than once in a consecutive six-month period to the same
applicant, from being granted to a person who does not intend to apply
for a license to sell insurance or membership to the public generally, and
from being used to obtain commissions from sales made to persons who have
family, employment, or business relationships with the temporary license
holder. Prohibits an insurer or health maintenance organization from
knowingly paying, directly or indirectly, to the holder of a temporary
license under this section, and a temporary license holder from receiving
or accepting, a commission on the sale of certain contracts of insurance or
memberships. Prohibits a person who has been issued a temporary license
under this section and is acting under the authority of the temporary
license from engaging in any insurance solicitation, sale, or other agency
transaction that results in or is intended to result in the replacement of
any existing individual life insurance policy form or annuity contract that
is in force, or receiving, directly or indirectly, any commission or other
compensation that may or does result from such a solicitation, sale, or
other agency transaction. Prohibits a person who holds a permanent license
from circumventing or attempting to circumvent the intent of this
subsection by acting for or with a person holding a temporary license.
Defines "replacement." Authorizes the department to cancel, suspend, or
revoke the temporary appointment powers of an insurer or health maintenance
organization if, after notice and opportunity for hearing, the commissioner
finds that that insurer or health maintenance organization has abused the
temporary appointment powers. Provides that an appeal from the
department's decision is subject to Article 1.04 of this code. Sets forth,
in considering whether abuse has occurred, what the department may
consider. Requires the insurer or health maintenance organization to
administer at least 40 hours of training to each applicant for a temporary
license not later than the 14th day after the date on which the
application, certificate, and nonrefundable fee are delivered or mailed to
the department. Requires at least 10 hours to be taught in a classroom
setting, including an accredited college, university, junior college, or
community college, a business school, or a private institute or classes
sponsored by the insurer or health organization and especially established
for this purpose. Sets forth the knowledge the training program required
to be provided to an applicant. Authorizes the commissioner to require an
affected insurer or health maintenance organization to file with the
department a description of the insurer's or health maintenance
organization's training program and may require the insurer or health
maintenance organization to obtain the approval of the department before
continuing to use the training program, if the commissioner finds under
Subsection (g) of this section that an abuse of temporary appointment
powers has occurred. Requires each insurer or maintenance organization to
ensure that, during any two consecutive calendar quarters, at least 70
percent of the insurer's or health maintenance organization's applicants
for temporary licenses sit for the required licensing examination.
Requires at least 50 percent of the applicants taking the examination to
pass during that period. Prohibits an insurer or health maintenance
organization form making more than 250 appointments of temporary license
holders during a calendar year.
SECTION 1.13. Amends Section 6, Article 21.07, Insurance Code, as follows:
Sec. 6. New heading: FILING OF ADDITIONAL APPOINTMENTS. Authorizes an
agent, except as specifically prohibited by another provision of this code,
to represent and act as an agent for more than one insurance carrier at any
time while the agent's license is in force, if the agent so desires.
Requires any such agent and the insurance carrier involved to file with the
department, rather than must give notice to the State Board of Insurance
of, any additional appointment, rather than appointments, authorizing an
agent to act a agent for an additional insurance carrier or carriers not
later than the 30th day after the effective date of the appointment.
Requires the filing, rather than such notice, to include certain items.
Provides that an appointment made under this article to authorize an agent
to act as an agent for an insurance carrier continues in effect without the
necessity of renewal until it is terminated or withdrawn by the insurance
carrier or agent. Requires the insurance carrier to follow the procedures
established under Section 6B of, rather than as provided by this section or
is otherwise terminated in accordance with, this article, if an agent is
terminated for cause. Provides that each renewal license issued to an agent
authorizes the agent to represent and act for the insurance carriers for
which the agent holds an appointment until the appointment is terminated or
withdrawn, and that agent is considered to be the agent of the appointing
insurance carriers for the purposes of this code. Authorizes an agent
appointed under this section to act on behalf of the appointing carrier
before the department receives a filing made under this section. Provides
that a person acting as a sub-agent is not required to be separately
appointed by each insurance carrier that has appointed the licensed person
who has designated the sub-agent in writing to the department. Requires
termination of the subagent by the licensed person to be reported promptly
to the department and terminates the sub-agent's authority to act for the
licensed person and that person's insurance carriers.
SECTION 1.14. Amends Article 21.07, Insurance Code, by adding Sections 6B,
6C, 6D, and 6E, as follows:
Sec. 6B. INSURANCE CARRIER TO NOTIFY DEPARTMENT OF TERMINATION OF
CONTRACT; COMMUNICATION PRIVILEGED. Requires each insurance carrier, on
termination of an agent for cause, to immediately file a statement of the
facts relating to the termination of the appointment and the date and cause
of the termination with the department. Requires the department, on
receipt of the statement, to record the termination of the appointment of
that agent to represent the insurance carrier in this state. Provides that
a document, record, statement, or other information required to be made or
disclosed to the department under this section is privileged and
confidential communication and is not admissible in evidence in any court
action or proceeding except under a subpoena issued by a court of record.
Provides that an insurance carrier, an employee or agent of the carrier, or
any other person, acting without malice, is not liable for providing the
information required to be disclosed under this section.
Sec. 6C. FEES; USE OF FUNDS. Requires the department to collect from each
agent of an insurance carrier writing insurance in this state under this
code, a non-refundable license fee and a non-refundable appointment fee for
each appointment by an insurance carrier. Requires these fees, together
with examination fee, license fees, and license renewal fees, to be
deposited to the credit of the Texas Department of Insurance operating
fund. Authorizes the department to use any portion of the fees collected
to enforce this subchapter; to employ persons as it considers necessary to
investigate and make reports regarding alleged violations of this code and
misconduct on the part of agents; and to pay the salaries and expenses of
those persons and office employees and other expenses necessary to enforce
this subchapter from the fees collected. Authorizes a person employed by
the department under this section to administer an oath and examine under
oath any person considered necessary in gathering information and evidence
and to have that information and evidence reduced to writing if considered
necessary, and all such expenses shall be paid from the fees. Requires the
department to set the fees in amounts reasonable and necessary to implement
this subchapter.
Sec. 6D. DUPLICATE LICENSE FEE. Requires the department to collect in
advance from an agent requesting a duplicate license, a fee in an amount
set by the department. Requires the fee collected under this section to be
deposited to the credit of the Texas Department of Insurance operating
fund.
Sec. 6E. REQUIREMENT TO APPOINT SUB-AGENT. Requires a general agent to
submit to the department in writing, in the form prescribed by the
department, notice of the subagent's appointment, if a general life,
accident, and health agent or general property and casualty agent who has
been appointed by an insurance carrier that has a permit to do business in
this state desires to appoint a sub-agent in the operation of an insurance
business. Requires the notice to be accompanied by a nonrefundable fee in
an amount determined by the commissioner.
ARTICLE 2. LIFE, ACCIDENT, AND HEALTH LICENSES
SECTION 2.01. Amends Chapter 21A, Insurance Code, by adding Article
21.07-1, as follows:
Art. 21.07-1. TEXAS LIFE, ACCIDENT, AND HEALTH AGENTS LICENSE ACT
Sec. 1. SHORT TITLE; APPLICATION. Authorizes this article to be cited as
the Texas Life, Accident, and Health Agents License Act. Provides that
each agent of an insurance company authorized to provide life, accident,
and health insurance coverage in this state is subject to this article.
Sets forth the persons this article applies to.
Sec. 2. GENERAL LIFE, ACCIDENT, AND HEALTH LICENSE; LICENSE REQUIRED. Sets
forth certain persons, acting in certain ways, whom are required to have a
general life, accident, and health insurance license including an agent
writing fixed or variable annuity contracts or variable life contracts.
Defines "combination company." Requires each person who acts as a
combination life insurance agent for a combination company to have a
general life, accident, and health license. Authorizes a combination
company and a combination life insurance agent to also write ordinary life
insurance contracts. Provides that except as otherwise provided by this
subsection, a general life, accident, and health license is required for an
agent writing life, accident, and health insurance for a fraternal benefit
society under Chapter 10 of this code. Provides that a license is not
required for an agent, regularly salaried officer, employee,
representative, or member of a fraternal benefit society who devotes less
than 50 percent of the person's time to the solicitation or procurement of
insurance contracts for the society. Provides that a person who, in the
preceding calendar year, has solicited or procured certain amounts on
certain insurance contracts on behalf of a fraternal benefit society is
presumed to have devoted 50 percent or more of the person's time to the
solicitation or procurement of insurance contracts. Sets forth certain
amounts and certain contracts solicited and procured including life
insurance contracts that generate, in the aggregate, more than $20,000 of
direct premium for all lives insured for the preceding calendar year, if no
interest-sensitive life insurance certificate is solicited or procured with
a face amount of insurance that exceeds $35,000 unless the person has
obtained the designation of "Fraternal Insurance Counselor."
Sec. 3. AUTHORITY TO WRITE ADDITIONAL PRODUCT LINES. Authorizes a person
who holds a general life, accident, and health license issued under the
requirements of this subchapter to write additional types of insurance
contracts as provided under Section 5 of this article or under a specialty
license program established by the department without obtaining an
additional license.
Sec. 4. LIMITED LIFE, ACCIDENT, AND HEALTH LICENSE. Defines "funeral
prearrangement life insurance agent," and "job protection insurance." Sets
forth certain agents this section applies to. Requires a person to whom
this article applies to hold a limited life, health, and accident license
under this article. Authorizes the commissioner to adopt rules as necessary
to implement this article. Sets forth, notwithstanding this section or any
other law, prohibited actions of a funeral prearrangement life insurance
agent. Authorizes a person who holds a limited life, accident, and health
license issued under this section to write only the types of insurance
products described by this section. Provides that an applicant for a
limited life, accident, and health license is not eligible for a temporary
license under Section 4 of this article.
ARTICLE 3. PROPERTY AND CASUALTY LICENSES
SECTION 3.01. Amends Article 21.14, Insurance Code, as follows:
Art. 21.14. New heading: TEXAS PROPERTY AND CASUALTY AGENTS LICENSE ACT
Sec. 1. SHORT TITLE; APPLICATION. Authorizes this article to be cited as
the Texas Property and Casualty Agents License Act. Provides that each
agent of an insurance company authorized to provide property casualty
insurance coverage in this state is subject to this article. Provides that
this article applies to each person who performs that acts of an agent, as
defined by Article 21.02 of this code, whether through certain modes of
communication, by the solicitation of, negotiation for, procurement of, or
collection of premiums on an insurance contract offered by any type of
insurance carrier authorized to sell certain property and casualty
insurance products in this state.
Sec. 2. GENERAL PROPERTY AND CASUALTY LICENSE; LICENSE REQUIRED. Sets
forth certain persons acting in certain manners who are required to have a
general property and casualty license.
Sec. 3. AUTHORITY TO WRITE ADDITIONAL PRODUCT LINES. Authorizes a person
who holds a general property and casualty license issued under this chapter
to write additional types of insurance contracts as provided under Section
6 of this article or under a specialty license program established by the
department.
Sec. 4. AUTHORITY TO WRITE ACCIDENT AND HEALTH INSURANCE. Authorizes a
person who holds a general property and casualty license issued under this
subchapter to write health and accident insurance for a property and
casualty insurer authorized to sell those insurance products in this state
without holding a license issued under Article 21.07-1 of this code.
Sec. 5. EMERGENCY LICENSE WITHOUT EXAMINATION. Authorizes the department,
in the event of the death or disability of a property and casualty agent or
if a property and casualty agent is found to be insolvent and unable to pay
for premiums as they become due to an insurer, to issue to an applicant for
a property and casualty license an emergency property and casualty license
without examination, if it is established to the satisfaction of the
department that the emergency license is necessary for the preservation of
the agency assess of a deceased, disabled, or insolvent property and
casualty agent. Provides that an emergency license is valid for 90 days in
any 12 consecutive months and may be renewed by the department for an
additional 90 days during the 12-month period if the other requirements of
this subchapter are met.
Sec. 6. LIMITED PROPERTY AND CASUALTY LICENSE. Sets forth, notwithstanding
any other law, the limited property and casualty license requirement for
each person who desires to act as an agent writing certain types of
insurance and prepaid legal services contracts including any form of
insurance authorized under Chapter 16 of this code for a farm insurance
company, except that a license is not required under this subsection for a
person who wrote policies that generated, in the aggregate, less than
$20,000 in direct premium for the preceding calendar year; and only
industrial fire insurance policies covering dwellings, household goods, and
wearing apparel on a weekly, monthly, or quarterly basis on a continuous
premium payment plan written for an insurance company whose business is
devoted exclusively to that business as described by Article 17.02 of this
code, except that a license is not required under this subsection for a
person who wrote industrial fire insurance policies that generated, in the
aggregate, less than $20,000 in direct premium for the preceding calendar
year. Provides that Subsection (a) (1) of this section applies to a
production credit association or bank for a cooperative, as provided under
the farm credit system under 12 U.S.C. 2001 et seq., as amended.
Authorizes a person who holds a limited property and casualty license
issued under this subchapter to write only the types of insurance products
designated on the license by the department.
Sec. 7. FULL-TIME HOME OFFICE EMPLOYEES: MANDATORY REGISTRATION,
CONTINUING EDUCATION REQUIREMENTS, AND NOTIFICATION TO CONSUMERS;
DISCIPLINARY ACTIONS. Requires each actual full-time home office salaried
employee of an insurance carrier licensed to do business in this state who
solicits or receives an application for the sale of insurance through
certain communication modes to register with the commissioner. Requires an
insurance carrier licensed to do business in this state whose general plan
of operation includes the use of employees described by Subsection (a) of
this section to certify to the commissioner that each of those employees
receives at least 15 hours of continuing education annually. Requires each
continuing education course provided by the insurance carrier to be
submitted to the department for approval as provided by Section 3, Article
21.01-1, of this code. Requires a person registered under this section to
comply with the continuing education requirements adopted under Section 3,
Article 21.01-1, of this code, as if the person were a licensed agent.
Sets forth the required design of an employees continuing education which
will impart certain competencies and knowledge. Requires the registration
of an actual full-time home office salaried employee to be suspended and
the employer insurance carrier may be disciplined for any act for which an
agent may be disciplined under Article 21.01-2 of this code. Requires each
registrant under this section to disclose the fact of the registration when
making certain modes of communication to solicit or receive an application
for the sale of insurance. Requires each person who registers under this
section to submit a nonrefundable registration fee in an amount determined
by the department.
Sec. 8. INSURANCE SERVICE REPRESENTATIVE LICENSE. Provides that an
insurance service representative license is required for each person who is
employed on a salaried basis to perform assigned duties only within the
office of a property and casualty agent. Authorizes to those duties to
include the issuance of insurance binders only with the express approval of
the property and casualty agent who supervises the insurance service
representative. Provides that the provisions of Subchapter A of this
chapter that apply to a general license apply to a license issued under
this section, except that proof of financial responsibility is not required
of a person licensed only as an insurance service representative. Deletes
heading to existing Article 21.14; deletes existing Sections 1 - 16, 18 -
27; and Sections 3a, 5a, 5b, and 5c, 6a, and 20a.
ARTICLE 4. NONRESIDENT AGENT LICENSE
SECTION 4.01. Amends Section 1, Article 21.11, Insurance Code, to require
the department to license a person who is not a resident of this state to
act as a nonresident agent if the department finds certain conditions exist
including an applicant for the nonresident license, if an individual holds
a license, rather than subject to Subsection (b) of this section, holds a
license, as an agent in the state of residence and either obtained the
license by passing a written examination or held the license before the
time a written examination was required to obtain the license; or subject
to Subsection (b) of this section, has passed the examination for an
agent's license required under Article 21.01-1 of this code and satisfies
the requirements adopted under Section 2, Article 21.07, of this code for
licensing of an individual. Authorizes the commissioner to enter into a
reciprocal agreement with the appropriate official of another state waving
the written examination requirement for an applicant who is a resident if
certain conditions are met. Authorizes a person who resides in a town
through which the state line runs and whose residence is located in the
town in the adjoining state to be licensed as a resident agent if the
person maintains the person's business office in this state. Authorizes the
department, rather than requires the department, to waive any license
requirement for an applicant with a valid license from another state or
jurisdiction that has license requirements substantially equivalent to
those of this state. Requires the commissioner to be the attorney for
service of process on whom all lawful process, notice, or demand may be
served in any legal proceeding against a nonresident agent licensed to
transact business in this state if certain conditions exist. Makes
conforming and nonsubstantive changes.
SECTION 4.02. Amends Sections 2(a) and (b), Article 21.11, Insurance Code,
as follows:
(a) Provides that except as otherwise specifically provided by this code,
rather than this section, a license under this article to an individual who
is not a resident of this state grants the same rights and privileges
afforded to a resident license holder.
(b) Provides that a person who holds a license issued under this article
and who is in compliance with the continuing education requirements of the
person's state of residence is exempt from the continuing education
requirements imposed under Article 21.01-1 of this code. Deletes text
regarding under a license issued under Article 21.14 of this code; and may
not take certain actions.
SECTION 4.03. Amends Section 3, Article 21.11, Insurance Code, to provide
that this subchapter applies to licensing of a nonresident agent under this
article. Deletes existing Subdivision(3), and Subsections (b), (c), (d),
and (e). Deletes text regarding Article 21.01-2 of this code. Makes a
conforming change.
SECTION 4.04. Amends Sections 4 and 5, Article 21.11, Insurance Code, as
follows:
Sec. 4. HOME OFFICE EMPLOYEE. Provides that this article does not affect
the authority established under Section 7, rather than Section 20, Article
21.14 of this code of an actual full-time home office salaried employee of
an insurance carrier licensed to do business in this state.
Sec. 5. RULES. Authorizes the commissioner to adopt rules as necessary to
implement this article and to meet the minimum requirements of federal law
and regulations.
ARTICLE 5. CONFORMING AMENDMENTS
SECTION 5.01. Amends Section 1, Article 3.71, Insurance Code, to authorize
any person who is licensed as a general life, accident, and health agent,
rather than insurance agent, or as a general property and casualty agent,
rather than local recording agent, under Article 21.07-1, rather than the
provisions of Articles 21.07, 21.07-1, or 21.14 of this code, rather than
of the Insurance Code of the State of Texas, to act as such agent. Makes
conforming changes.
SECTION 5.02. Amends Section 7, Article 3.75, Insurance Code, as follows:
Sec. 7. VARIABLE CONTRACT AGENTS LICENSE. Prohibits any person from
taking certain actions regarding any variable contract, unless such person
shall have a valid and current license issued under Article 21.07-1 of this
code, rather than a certificate from the State Board of Insurance,
authorizing such person to act within this state as a general life,
accident, and health, agent, rather than variable agent. Provides that the
licensing and regulation of a person acting as a variable agent is subject
to the same provisions applicable to the licensing and regulation of other
agents under Chapter 21A, of this code. Deletes text prohibiting any such
certificate from being issued unless certain conditions are met. Deletes
existing Sections (b), (c), (d), (e), (f), (g), and (h).
SECTION 5.03. Amends Subsection (c), Article 5.13-1, Insurance Code, to
require the right of such insurers to issue prepaid legal services
contracts on certain bases is hereby recognized, and qualified agents of
such insurers who are licensed under Article 21.07-1 or 21.14, rather than
Articles 21.07 and 21.14, of this code, rather than of the Insurance Code,
as amended, and Chapter 213, Acts of the 54th Legislature, 1955, as amended
(Article 21.07-1, Vernon's Texas Insurance Code, to be authorized to write
such coverages under such rules as the commissioner may prescribe. Makes
conforming changes.
SECTION 5.04. Amends Chapter 10, Insurance Code, by adding Article
10.37-3, as follows:
Art. 10.37-3. AGENT'S LICENSE REQUIRED. Prohibits a person from
soliciting or procuring insurance contracts on behalf of a fraternal
benefit society unless the person meets certain conditions. Provides that
the licensing and regulation of agents for fraternal benefit societies
under this chapter is subject to the requirements adopted under Chapter
21A, of this code and other existing or subsequent applicable laws
governing the licensing of those agents. Provides that a provision of such
a law is applicable to a license applicant and license holder under this
chapter.
SECTION 5.05. Amends Article 16.24A, Insurance Code, as follows:
Art. 16.24A. New heading: LICENSING OF AGENTS. Prohibits any person or
firm from soliciting, writing, signing, executing, or delivering insurance
policies, binding insurance risks, collecting premiums, or otherwise acting
in the capacity of an insurance agent, rather than a local recording agent,
in the solicitation or sale of insurance for a farm mutual insurance
company unless the person or firm holds a licensed issued, rather than is
licensed, under Chapter 21A, rather than Article 21.14, of this code.
Deletes text regarding who qualifies for a license as an agricultural
insurance agent.
SECTION 5.06. Amends Section 9, Article 17.25, Insurance Code, to require
agents for such companies to be licensed and appointed as provided by
Chapter 21A, rather than in Article 21.07 or 21.14, of this code.
SECTION 5.07. Amends Sections 4, 19, and 21, Article 21.07-3, Insurance
Code (Managing General Agents' Licensing Act), as follows:
Sec. 4. New heading: REDEMPTION OF SHARES. Deletes existing Subsections
(a), (b), (c), (d), (f), (g), (h), (i), and (j). Makes a conforming
change.
Sec. 19. New heading: ADMINISTRATION AND REGULATION OF MANAGING GENERAL
AGENTS; VIOLATIONS OF ACT. Provides that the licensing and regulation of a
person acting as a managing general agent is subject to the laws and
requirements applicable to the licensing and regulation of other agents
under Chapter 21A, Insurance Code. Requires any person, firm, or
corporation who violates any of the provisions of this Act or any rule,
regulation, or order adopted under this Act or Chapter 21A, Insurance Code,
to be subject to Sections 2A, 3A, 4A, 5A, 6A, Article 21.01-2, Insurance
Code. Deletes text regarding sanctions under. Makes conforming changes.
Sec. 21. ADMINISTRATION OF ACT. Deletes text regarding regulations.
Makes conforming changes.
SECTION 5.08. Amends Article 22.14, Insurance Code, to require all agents
of stipulated premium companies to be licensed in accordance with the
provisions of Subchapter A of Chapter 21 of this code, rather than Article
21.07 of Chapter 21 of this code.
SECTION 5.09. Amends Chapter 23, Insurance Code, by adding Article 23.23A,
as follows:
Art. 23.23A. REGULATION OF AGENTS. Provides that the licensing and
regulation of an agent authorized to solicit prepaid legal services
contracts for corporations complying with this chapter is subject to
Chapter 21A, of this code.
ARTICLE 6. SURPLUS LINES
SECTION 6.01. Amends Section 2(a) (1), Article 1.14-2, Insurance Code, to
define "surplus lines agent."
SECTION 6.02. Amends Section 2(a) (2), Article 1.14-2, Insurance Code, to
require a surplus lines agent, as a condition of being licensed as a
surplus lines agent and as a condition of continuing to be licensed as a
surplus lines agent, to offer the proof of financial responsibility in
respect of transactions with insured under policies of surplus lines
insurance as required by reasonable rules, rather than reasonable rules and
regulations, of the department. Deletes text regarding offering proof of
solvency and demonstrating capacity. Makes conforming and nonsubstantive
changes.
SECTION 6.03. Amends Section 2(a) (3), Article 1.14-2, Insurance Code, to
require any surplus lines license granted under the Article 21.07-3,
V.T.C.S. (Managing General Agents' Licensing Act), rather than Acts, 1967,
60th Legislature, Chapter 727, but not licensed under Article 21.14 of this
code to be limited to the acceptance of business originating through a
regularly licensed general property and casualty agent, rather than
recording agent, and does not, rather than shall not, authorize the surplus
lines agency to transact business directly with the applicant for
insurance.
SECTION 6.04. Amends Section 4(b), Article 1.14-2, Insurance Code, to
authorize the department to issue a surplus lines license to an applicant
if the applicant submits a properly completed license application and an
application fee as determined by the department and the department
determines that the applicant, rather than an agent as defined by
Subdivision (1) of Subsection (a) of Section 2 is a certain individual; is
a corporation or partnership that has at least one certain officer or
director or at least one certain active partner; is currently licensed as a
general property and casualty agent under Article 21.14 of this code or as
a managing general agent under the Managing General Agent's Licensing Act
(Article 21.07-3, Vernon's Texas Insurance Code); and provides proof of
financial responsibility as required under Section 2 of this article; and
is a nonresident insurance agent authorized under Article 21.11 of this
code who holds a general property and casualty license from the department
and whose authority as a surplus lines agent is limited to acting on behalf
of a purchasing group operating in this state in the placement of liability
insurance for risks located in this state. Deletes text regarding
submitting a completed license application on a form approved by the
department and passing a qualifying examination approved by the department.
Deletes text regarding certain conditions placed on an agent.
SECTION 6.05. Amends Section 4(c), Article 1.14-2, Insurance Code, to
provide that in addition to the requirements of this article, the
administration and regulation of a surplus lines agent's license is
governed Chapter 21A, of this code, except that Article 21.07 of this code
does not apply to a license issued under this article. Deletes text
regarding unless the State Board of Insurance adopts a system for staggered
renewal of licenses, each license issued is for a two year term.
SECTION 6.06. Amends Section 4(d), Article 1.14-2, Insurance Code, to
authorize the department to revoke or suspend the license or deny the
renewal of that license in accordance with Article 21.012 of this code, if
a license holder does not maintain the qualifications necessary to obtain
the license. Deletes text regarding by filing a completed application and
paying a nonrefundable renewal fee not to exceed $50, an unexpired license
may be renewed.
ARTICLE 7. REPEALER
SECTION 7.01. Repealers:
(1) Sections 4(f), (g), and (h), Article 1.14-2, Insurance Code (Requires
the commissioner of insurance to collect in advance from an agent who
request a duplicate license a fee not to exceed $20, required to be set by
the State Board of Insurance; Requires the board to deposit all fees in the
State Treasury to the credit of the State Board of Insurance operating
fund; such fees are not redeemable; and Provides that unless the State
Board of Insurance accepts a qualifying examination administered by a
testing service, each person required to be examined shall pay a fee before
being examined; the State Board of Insurance shall determine the amount of
the fee, a certain fee must be paid, and certain paid fee may not be
refunded, respectively).
(2) Section 15, Article 17.25, Insurance Code (Violation by agent).
(3) Section 20A.15, Insurance Code (Regulation of Agents).
Section 20A.15A, Insurance Code (Agent for Single Health Care
Service Plans).
(4) Sections 1, 3, 4, and 6, Article 21.01-2, Insurance Code (Application,
Licensing by endorsement, Continuing education, and Statutory references,
respectively).
(5) Article 21.02-1, Insurance Code (Penalty for Unlawfully Acting as an
Agent).
(6) Article 21.05, Insurance Code (Who May Not Be Agents).
(7) Article 21.07, Insurance Code, the following sections:
(A) Sections 1B and 1C (Licensing of limited liability companies and
Licensing of banks, respectively).
(B) Section 3, as amended by Chapters 596 and 972, Acts of the 75th
Legislature, Regular Session, 1997 (Issuance of License Under Certain
Circumstances).
(C) Sections 3B, 4, 4A, 5, 7, 8, 9, 10, 10A, 11, 12, 13, 14, 15, 15A, 16,
17, 18, 19, and 20 (Resident Status; Certain Nonresidents Maintaining
Office in the State; Exemption of Applicant for License to Write Health and
Accident Insurance; Examination of Applicant for License to Write Life
Insurance Upon Any One Life in Excess of $10,000; Failure of Applicant to
Qualify for License; Expiration and Renewal of License; Temporary License;
Insurance Carrier to notify State Board of Insurance of termination of
contract; communications privileged; Denial, Refusal, Suspension or
Revocation of License; Ineligibility based on felony conviction; Judicial
review of acts of State Board of Insurance; Penalty; Texas department of
insurance may establish rules and regulations; Fees and Use of Funds; Dual
licensing; Certain Agents for Stipulated Premium Companies; Wording on
License; Expiration of existing licenses; Assignment of Agent's
Commissions; Agent for United States Military Personnel in Foreign
Countries; and Duplicate License; Fee, respectively).
(D) Section 21, as added by Chapter 820, Acts of the 75th Legislature,
Regular Session, 1997 (Rental Car Companies).
(E) Section 21, as added by Chapter 1196, Acts of the 75th Legislature,
Regular Session, 1997 (Credit Insurance Agents).
(8) Article 21.07A, Insurance Code (Penalty for Acting As, or Employing,
Life, Health, or Accident Insurance Agent Without License).
(9) Article 21.07-1, Insurance Code (Legal Reserve Life Insurance Agents;
Examination; Licenses).
(10) Article 21.07-3, Insurance Code, the following sections:
(A) Sections 4A, 4B, and 4C (Persons other than managing general agents
who may share in profits of a managing general agent; Continuing
requirements for licensed corporations; and Security for liability,
respectively).
(B) Section 5(h) (Prohibits except as provided herein , a licensee that
qualifies under this section from being owned in whole or in part by
certain banks or holding companies. Provides that this section does not
apply to any licensee that on a certain date is owned by certain banks or
holding companies. Requires the commissioner, before renewing a license,
to require certain actions from a licensee).
(C) Sections 6 and 6A (Examination Required; Exceptions and Continuing
Education, respectively).
(D) Sections 8, 9, and 10 (Conduct of Examinations; Expiration of License;
Renewal; and Fees, respectively).
(E) Sections 12, 13, 14, and 15 (Denial, Refusal, Suspension, or
Revocation of Licenses; Notice and Hearings: Judicial review of acts of
commissioner; and Notice to last address, respectively).
(F) Section 17 (Fees Collected).
(G) Section 20 (Enforcement of Act).
(11) Section 14, Article 21.14-1, Insurance Code (Notice to Insurance
Commissioners of Solicitor's Appointment; Authority to Solicit).
(12) Article 21.15, Insurance Code (Revocation of Agent's Certificate).
(13) Article 21.15-2, Insurance Code (Penalty for Soliciting Without
Certificate of Authority).
(14) Article 21.15-3, Insurance Code (Agent Procuring by Fraudulent
Representation; Penalty).
(15) Article 21.15-4, Insurance Code (Agent or Physician Making False
Statement; Penalty).
(16) Article 21.15-7, Insurance Code (Interim Study of Agents and Agents'
Licenses Statutes by Commissioner).
(17) Section 10, Article 21.58A, Insurance Code (Unlawful and prohibited
practices; penalties).
(18) Article 23.23, Insurance Code (Regulation of Agents).
ARTICLE 8. GRANDFATHER CLAUSE; TRANSITION
SECTION 8.01. Provides that on the effective date of this Act, a person
who holds a license issued by the department that is in good standing is
considered licensed under the applicable licensing law as amended by this
Act; entitled to act as an agent under the new license type, subject to
this article; and subject to the provisions of the Insurance Code as
amended by this Act.
SECTION 8.02. (a) Provides that a person who, immediately before the
effective date of this Act, holds an agent license issued by the Texas
Department of Insurance and who obtained that license by passing a written
examination is entitled to the appropriate license as provided by Chapter
21A, Insurance Code, as amended by this Act, without further examination.
(b) Provides that a person who, immediately before the effective date of
this Act, holds an agent license issued by the department and who obtained
that license without taking a written examination or who actually solicited
insurance on behalf of a stipulated premium company, farm mutual company,
or county mutual insurance company before January 1, 1999, is entitled to
the appropriate license as provided by Chapter 21A, Insurance Code, as
amended by this Act, but must pass the appropriate license examination not
later than the second anniversary of the date of issuance, to retain the
license. Provides that the license of a person who does not pass the
license examinations as required by this subsection expires on the second
anniversary of the date of issuance and may not be renewed.
(c) Provides that a person who, immediately before the effective date of
this Act, holds an agent license issued by the department and who obtained
that license without taking a written examination or who actually solicited
insurance on behalf of a stipulated premium company, farm mutual company,
or county mutual insurance company on or after January 1, 1999, but before
the effective date of this Act, is entitled to the appropriate license as
provided by Chapter 21A, Insurance Code, as amended by this Act, but must
pass the appropriate license examination not later than May 31, 2000, to
retain the license. Provides that the license of a person who does not
pass the license examinations as required by this subsection expires on May
31, 2000.
(d) Provides that a person who has actually solicited insurance on behalf
of a stipulated premium company, farm mutual company, or county mutual
insurance company for at least 24 months preceding the effective date of
this Act is entitled to the appropriate license as provided by Chapter 21A,
Insurance Code, as amended by this Act, without further examination.
SECTION 8.03. (a) Authorizes the department to issue life, accident, and
health insurance on behalf of a fraternal benefit society immediately
before the effective date of this Act on submission to the department by
the person certain information and fee.
(b) Requires a person, to retain a license issued under Subsection (a) of
this section, who has solicited insurance on behalf of a fraternal benefit
society for less than two years as of the effective date of this Act to
pass the license examination required under Chapter 21A, Insurance Code,
not later than the 180th day after the date of issuance of the license.
Provides that the license of a person who does not pass the license
examinations as required by this subsection expires on the 180th day after
the date of issuance of the license and may not be renewed.
ARTICLE 9. EFFECTIVE DATE; TRANSITION; EMERGENCY
SECTION 9.01. Effective date: September 1, 1999.
Makes application of Section 3, Article 21.01-1, Insurance Code
this Act prospective to January 1, 2001.
SECTION 9.02.Emergency clause.
SUMMARY OF COMMITTEE CHANGES
SECTION 1.02.
Amends Section 2(a), Article 21.01, Insurance Code, to require each
applicant, except as provided by Subsection (c), for a license to act as an
insurance agent in this state to submit a personal written examination that
is prescribed by the department and administered in the English or Spanish
language, and must pass the examination to the satisfaction of the
department.
Amends Section 2(d), Article 21.01, Insurance Code, by adding Subdivision
9, to prohibit the department from requiring a person to take an
examination under this article if the person is an applicant for a general
life, accident, and health license who was authorized to solicit insurance
on behalf of a fraternal benefit society on September 1, 1999, if the
applicant had, does not, or limits certain solicitations of insurance;
holds a certain license in a certain capacity; and requires each
examination administered under this article to be offered in English and
Spanish.
Amends Section 3(b) and (f), Article 21.01, Insurance Code, to prohibit an
agent from being required to complete more than 15 continuing education
hours annually as a result of holding, rather than including an agent who
holds, more than one license for which continuing education is required.
Requires each individual who holds a license issued by the department to
complete 4 hours, rather than10 hours, of continuing education in ethics
during each license renewal period. Authorizes the department to negotiate
agreements with independent contractors under which the independent
contractor certifies and registers continuing education courses , rather
than programs, and providers.
SECTION 1.03.
Amends Section 1A(f), Article 21.01-2, Insurance Code, to authorize the
department to renew without reexamination an expired license of a person
who was licensed in this state, moved to another state, and is currently
licensed and has been in continual practice in the other state for the
period preceding application, rather than two years preceding application.
SECTION 1.04.
Amends Section 2A (d) (3), Article 21.01-2, Insurance Code, to provide that
this subsection applies to a person who solicits any contract of insurance
or acts as an agent for a person, including an insurance company,
association, or organization, not authorized to engage in the business of
insurance in this state without holding a license issued under Article
1.14-2 of this code.
SECTION 1.05.
Replaces Section 3A (g), Article 21.01-2, Insurance Code, to provide that
Subsections (c) - (f) of this section do not apply to a person who is
licensed under, or holds a certificate of authority issued under, Chapter 9
of this code.
SECTION 1.09.
Amends Section 1 (a) and adds Subsection (b), Article 21.07, Insurance
Code, to require no person to act as an agent of any insurance company,
health maintenance organization, or other type of insurance carrier
licensed to do business in the State of Texas and which insurance carrier's
agents are required to be licensed under the provision of this subchapter,
rather than Article, on the date that this Act shall become effective,
unless that person, rather than individual or entity, shall have first
procured a license from the department as provided by this subchapter, and
no such insurance carrier shall appoint any person to act as its agent
unless such person shall have obtained a license under the provisions of
this subchapter, rather than article, and no such person who obtains a
license shall engage in business as an agent until that person shall have
been appointed to act as an agent by some duly authorized insurance carrier
designated by the provisions of this code, rather than Article and
authorized to do business in the State of Texas. Sets forth what the
provisions of this subchapter do not apply to.
SECTION 1.10.
Amends Section 1A, Article 21.07, Insurance Code, to redefine "control,"
and "sub-agent."
SECTION 1.11.
Amends Section 2(f) and Subsections (k) (4) (A), and (q) and adds
Subsection (g) and (h), Article 21.07, Insurance Code, to require the
department to issue a license to an individual to engage, rather than or to
a general partnership engaging, in the business of insurance, if the
department finds that the individual meets certain requirements. Requires
an individual agent licensed under Section 2, Article 21.07-1, of this code
or Section 2, Article 21.14, of this code who is operating as an individual
agent and who is not covered by an errors and omissions insurance policy of
a general agency or corporation to certify to the department that the agent
will maintain the ability to pay any amount that the individual agent might
become legally obligated to pay due to any claim made against the agent by
a customer and caused by a negligent act, error, or omission of the
individual agent or any person for whose acts the individual agent is
legally liable in the conduct of business under this code. Defines
"customer." Sets forth the ways in which an individual agent is required to
maintain proof of the ability to pay the amount. Provides that binding
commitment to issue a policy or bond described by Subsection (g) of this
section is sufficient in connection with an application for a license.
Provides that an individual agent licensed under both Articles 21.07-1 and
21.14 is only required to maintain one errors and omissions policy bond to
comply with Subsection (g) of this section. Requires such ability to be
maintained in certain ways including an errors and omissions policy
insuring such corporation or partnership against errors and omissions in at
least the sum of $250,000, rather than the sum of $100,000. Authorizes the
commissioner to require that the information required by Subdivisions (1)
through (4) of that subsection for an individual be provided regarding each
partner of the partnership or limited partnership, each member of the
syndicate or group, and each person who controls the partner or member, if
a person required to file a statement under Subsection (p), rather than
Subsection (n), of this section is a partnership, limited partnership,
syndicate, or other group. Authorizes the commissioner to require that the
information required by Subdivisions (1) through (4) of that subsection be
provided regarding the corporation; each individual who is an executive
officer or director of the corporation; and each person who is directly or
indirectly the beneficial owner of more than 10 percent of the outstanding
voting securities of the corporation, if a partner, member, or person is a
corporation or the person required to file the statement under Subsection
(p) rather than Subsection (n), of this section is a corporation.
Redestignates Subsections (g)-(s) as (i)-(u). Makes a nonsubstantive
change.
SECTION 1.12.
Adds Section 3A, Article 21.07, Chapter 21A, Insurance Code, regarding a
temporary license.
SECTION 1.13.
Redesignated from proposed SECTION 1.12. Amends Section 6, Article 21.07,
Insurance Code, by adding Subsection (d), to provide that a person acting
as a sub-agent is not required to be separately appointed by each insurance
carrier that has appointed the licensed person who has designated the
sub-agent in writing to the department. Requires termination of the
sub-agent by the licensed person to be reported promptly to the department
and terminates the sub-agent's authority to act for the licensed person and
that person's insurance carriers.
SECTION 1.14.
Redesignated from proposed SECTION 1.13. Amends Article 21.07, Insurance
Code, by adding Section 6E, regarding a requirement to appoint sub-agent.
SECTION 2.01.
Amends Sections 2 (a) (4) and 3, Subsections (c) and (c) (1), Chapter 21A,
Insurance Code, to set forth certain persons, acting in certain ways, whom
are required to have a general life, accident, and health insurance license
including an agent writing fixed or variable annuity contracts or variable
life contracts. Provides that a license is not required for an agent,
regularly salaried officer, employee, representative, or member of a
fraternal benefit society who devotes less than 50 percent of the person's
time to the solicitation or procurement of insurance contracts for the
society. Sets forth certain amounts and certain contracts solicited and
procured including life insurance contracts that generate, in the
aggregate, more than $20,000 of direct premium for all lives insured for
the preceding calendar year, if no interest-sensitive life insurance
certificate is solicited or procured with a face amount of insurance that
exceeds $35,000 unless the person has obtained the designation of
"Fraternal Insurance Counselor," rather than if no permanent life insurance
contract is written that exceeds $10,000 coverage on an individual life and
no term life insurance contract is written that exceeds $50,000 of coverage
on an individual life. Authorizes a person who holds a general life,
accident, and health license issued under the requirements of this
subchapter to write additional types of insurance contracts as provided
under Section 5 of this article or under a specialty license program
established by the department without obtaining an additional license.
Redesignates Section 4 from proposed Section 5.
SECTION 3.01.
Amends Sections 2(3), 6(2), 7(b), and adds Section 6(5), Article 21.14,
Insurance Code, to delete text regarding certain persons acting in certain
manners who are required to have a general property and casualty license
including a salaried employee of an agent or sub-agent described under
Subdivision (1) or (2) of this subsection who performs assigned duties that
include binding insurance risks. Sets forth, notwithstanding any other
law, the limited property and casualty license requirement for each person
who desires to act as an agent writing certain types of insurance and
prepaid legal services contracts including any form of insurance authorized
under Chapter 16 of this code for a farm insurance company, except that a
license is not required under this subsection for a person who wrote
policies that generated, in the aggregate, less than $20,000 in direct
premium for the preceding calendar year; and only industrial fire insurance
policies covering dwellings, household goods, and wearing apparel on a
weekly, monthly, or quarterly basis on a continuous premium payment plan
written for an insurance company whose business is devoted exclusively to
that business as described by Article 17.02 of this code, except that a
license is not required under this subsection for a person who wrote
industrial fire insurance policies that generated, in the aggregate, less
than $20,000 in direct premium for the preceding calendar year. Requires
each continuing education course provided by the insurance carrier to be
submitted to the department for approval as provided by Section 3, Article
21.01-1, of this code. Requires a person registered under this section to
comply with the continuing education requirements adopted under Section 3,
Article 21.01-1, of this code, as if the person were a licensed agent.
Deletes Section 6(2).
Amends Article 21.14, Insurance Code, by adding Section 8, regarding
insurance service representative license.
SECTION 4.01.
Amends Section 1, Article 21.11, Insurance Code, to require the department
to license a person who is not a resident of this state to act as a
nonresident agent if the department finds certain conditions exist
including an applicant for the nonresident license, if an individual holds
a license, rather than subject to Subsection (b) of this section, holds a
license, as an agent in the state of residence and either obtained the
license by passing a written examination or held the license before the
time a written examination was required to obtain the license; or subject
to Subsection (b) of this section, has passed the examination for an
agent's license required under Article 21.01-1 of this code and satisfies
the requirements adopted under Section 2, Article 21.07, of this code for
licensing of an individual.
SECTION 5.02.
Adds a heading.
SECTIONS 6.01-6.06.
Adds Article 6 regarding surplus lines.
SECTION 7.01.
Redesignated from proposed SECTION 6.01. Adds Subsection 1. Redestignates
Subsections (1)-(17) as (2)-(18).
SECTION 8.01.
Redesignated from proposed SECTION 7.01.
SECTION 8.02.
Redesignated from proposed SECTION 7.02. Amends Subsections (b) and (c) to
provide that a person who, immediately before the effective date of this
Act, holds an agent license issued by the department and who obtained that
license without taking a written examination or who actually solicited
insurance on behalf of a stipulated premium company, farm mutual company,
or county mutual insurance company before January 1, 1999, is entitled to
the appropriate license as provided by Chapter 21A, Insurance Code, as
amended by this Act, but must pass the appropriate license examination not
later than the second anniversary of the date of issuance, to retain the
license. Provides that a person who, immediately before the effective date
of this Act, holds an agent license issued by the department and who
obtained that license without taking a written examination or who actually
solicited insurance on behalf of a stipulated premium company, farm mutual
company, or county mutual insurance company on or after January 1, 1999,
but before the effective date of this Act, is entitled to the appropriate
license as provided by Chapter 21A, Insurance Code, as amended by this Act,
but must pass the appropriate license examination not later than May 31,
2000, to retain the license.
Adds Subsection (d) regarding a certain person being entitled to an
appropriate license.
SECTION 8.03.
Redesignated from proposed SECTION 7.03. Deletes proposed Subsection (c).
SECTION 9.01.
Redesignated from proposed SECTION 8.01.
SECTION 9.02.
Redesignated from proposed SECTION 8.02.