HBA-EVB C.S.S.B. 957 76(R) BILL ANALYSIS Office of House Bill AnalysisC.S.S.B. 957 By: Madla Insurance 5/10/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Currently, the Insurance Code maintains specific requirements for issuing a license to a person who provides insurance services. Upon a review of the licensing statutes, the Agents' Licensing Advisory Committee recommended, with the support of the insurance commissioner, several changes to the licensing requirements. One of the changes to the licenses issued by the Texas Department of Insurance (department) would be to create a "specialty" license for a business, instead of for an individual employee, that provides point of sale insurance products, such as credit insurance, rental car insurance, and travel insurance. The department also would no longer require an adjuster license to retain a place of business in Texas, or a life insurance agent to possess three years prior experience, but would require counselors of life and health insurance to maintain continuing education credentials. C.S.S.B. 957 amends certain licensing requirements for a specialty license, a life and health insurance counselor license, an adjuster license, an agricultural insurance license, and a self-service storage facility license. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1.01 (Section 6, Article 21.09, Insurance Code), SECTION 2.01 (Section 10, Article 21.07-2, Insurance Code), SECTION 3.01 (Section 24, Article 21.07-4, Insurance Code), and SECTION 4.01 (Section 5, Article 21.14-2, Insurance Code) of this bill and to the Texas Department of Insurance in SECTION 3.01 (Section 17, Article 21.07-4, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS ARTICLE 1. SPECIALTY LICENSES SECTION 1.01. Amends Subchapter A, Chapter 21, Insurance Code, by adding Article 21.09, as follows: ARTICLE 21.09. SPECIALTY LICENSES Sec. 1. GENERAL PROVISIONS. (a) Authorizes the commissioner of insurance (commissioner) to issue a specialty license to an applicant who has complied with the requirements of this article. Provides that a specialty license authorizes the license holder to act as an agent for the types of insurance specified in this article for any insurer authorized to write these types of insurance in this state. Provides that a person who holds a license under this article is known as a "specialty license holder." (b) Provides that for a specialty license to be issued under this article, the applicant must submit to the commissioner a written application, a certain certification by an insurer authorized to do business in this state, and a nonrefundable license fee set by the Texas Department of Insurance (department). (c) Provides that a specialty license issued under this article authorizes an employee of the license holder to act as an agent with respect to the kinds of insurance specified in this article if the employee is trained under Subsection (d) of this section to act individually on behalf of the specialty license holder; is acting on behalf of and under the supervision of the license holder; and is not compensated based primarily on the amount of insurance sold by the employee under this article. (d) Requires each person licensed under this article to conduct a training program for each individual who is acting on behalf of the license holder with respect to the specific type of insurance. Provides that the training program must be submitted to the commissioner for approval before the training program is used and must meet certain minimum standards. (e) Requires a specialty license holder acting under this article, except as otherwise provided by this article, to comply with all applicable provisions of this subchapter. (f) Provides that a specialty license holder is not required, notwithstanding any other provision of this subchapter or any rule adopted by the commissioner, to treat premiums collected from a consumer purchasing insurance when completing an associated consumer transaction as money received in a fiduciary capacity if the insurer represented by the specialty license holder has consented in writing, signed by an officer of the insurer, that premiums need not be segregated from money received by the license holder on account of the associated consumer transaction; and the charges for insurance coverage are itemized but not billed to the consumer separately from the charges for the associated consumer transaction. (g) Prohibits insurance from being issued under this article unless at each location at which sales of insurance policies covered by this article occur, brochures or other written materials are prominently displayed and readily available to the prospective consumer that: _summarize, clearly and correctly, the material terms of insurance coverage offered to consumers, including the identity of the insurer; _disclose that the policies offered by the license holder may provide a duplication of coverage already provided by a consumer's personal auto insurance policy, homeowner's insurance policy, personal liability insurance policy, or other source of coverage; _state that, except as specifically provided by another law of this state or the United States, the purchase by the consumer of the kinds of insurance specified in this article is not required to complete the associated consumer transaction; _describe the process for filing a claim in the event the consumer elects to purchase coverage and in the event of a claim; and _contain any additional information on the price, benefits, exclusions, conditions, or other limitations of the policies required by the commissioner by rule; and (2) evidence of coverage is provided to each consumer who elects to purchase the coverage. (h) Authorizes the commissioner, if a specialty license holder violates this subchapter, to impose any disciplinary action authorized by Article 21.01-2 (General Provisions Applicable to Certain License Holders) of this code; or after notice and opportunity for hearing, impose other penalties, including suspending the transaction of insurance at specific locations where a violation of this subchapter has occurred, as the commissioner considers necessary or appropriate to implement the purposes of this subchapter. (i) Prohibits a specialty license holder from in any manner advertising, representing, or otherwise holding out the license holder or any employee of the license holder as a licensed insurance agent under another article of this code unless the entity or individual actually holds the applicable license. (j) Provides that a person who holds a general agent's license issued under Chapter 213, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-1(Legal Reserve Life Insurance Agents; Examinations, Licenses), V.T.I.C.), as amended, or Article 21.14 (Licensing of Local Recording Agents and Solicitors; Life, Health and Accident Insurance Excepted; Other Exceptions) of this code or who holds a substantially equivalent license under this code, as determined by the commissioner, is not required to obtain a specialty license but is subject to the other requirements of this article in the solicitation, sale, or delivery of an insurance product subject to this article. (k) Requires each insurance company appointing an agent under this article to submit a certification of the appointment signed by an officer of the insurer and affirm that the insurer has satisfied itself that the license holder is trustworthy and competent to act as an insurance agent on behalf of the insurer. (l) Provides that an examination is not required for issuance of a license under this article and continuing education requirements do not apply to a license issued under this article. (m) Authorizes a person who is licensed as an agent for a legal reserve life insurance company or as a local recording agent, or who holds a substantially equivalent license under this code, as determined by the commissioner, and who enters into a contract with an insurer to act as the insurer's agent in soliciting or writing policies or certificates of insurance covered by this article to assign and transfer to the agent's employer any commission, fee, or other compensation to be paid to the agent under the agent's contract with the insurer, but only if the sale of the insurance product occurred within the scope of the agent's employment. Sec. 2. RENTAL CAR COMPANIES. (a) Defines "rental agreement," "rental car company," "renter," "vehicle," and "vehicle equipment." (b) Requires the commissioner, notwithstanding any other provision of this article or this code, to issue a specialty license under Section 1 of this article to a rental car company, or to the franchisee of a rental car company, that complies with this section only for the limited purposes set forth in this section. (c) Authorizes the rental car company or franchisee licensed under Section 1 of this article to act as an agent for an authorized insurer only in connection with the rental of vehicles or vehicle equipment and only with respect to certain excess liability insurance, certain accident and health insurance, certain personal effects insurance, or any other coverage that the commissioner may approve as meaningful and appropriate in connection with the rental of vehicles or vehicle equipment. (d) Prohibits insurance from being issued under this section unless the rental period under the rental agreement does not exceed 30 consecutive days; and the brochures or other written materials containing the disclosures required by Section 1(g) of this article are prominently displayed and readily available to the prospective renter of a vehicle or vehicle equipment. Sec. 3. CREDIT INSURANCE. (a) Provides that "credit insurance" includes credit life insurance; credit accident and health insurance; credit property insurance; credit involuntary unemployment insurance; and insurance that covers the difference between the actual cash value of a motor vehicle used as security for a loan or lease and the outstanding balance of that loan or lease in the event of loss or damage in which the vehicle is rendered an actual or constructive total loss while the debt for which the vehicle serves as security exceeds the actual cash value of the vehicle. Defines "credit insurance agent" and "credit property insurance." (b) Authorizes the commissioner, notwithstanding any other provision of this article or this code, to issue a license under Section 1 of this article to a retail distributor of goods, an automobile dealer, a bank, a state or federal savings and loan, a state or federal credit union, a finance company, a production credit association, a manufactured home retailer, or a mobile home retailer that complies with this section only for the limited purposes set forth in this section. (c) Authorizes a credit insurance agent, on appointment by the insurance company, to act as the agent of any company authorized to engage in the business of insurance under this code in the sale of any type of credit insurance that the company is authorized to write. Provides that the authority conferred under this section specifically permits the sale of both individual and group credit insurance. (d) Provides that a license holder and the license holder's representative are not required to make the disclosures required by Section 1(g) of this article if the license holder or the license holder's representative complies with all disclosure requirements prescribed by another provision of this code or another law of this state or the United States relating to the sale or delivery of a credit insurance product that is subject to this section. Sec. 4. TRAVEL INSURANCE LICENSE. (a) Defines "planned trip," "travel agency," and "traveler." (b) Authorizes the commissioner, notwithstanding any other provision of this article or this code, to issue a specialty license under Section 1 of this article to a travel agency, the franchisee of a travel agency, or a public carrier that complies with this section only for the limited purposes set forth in this section. (c) Authorizes the travel agency or franchisee licensed under Section 1 of this article to act as an agent for any authorized insurer only in connection with the sale or arrangement of transportation or accommodations for travelers and only with respect to: _certain accident and health insurance that provides coverage to a traveler _insurance that provides coverage to a traveler for expenses incurred as a result of trip cancellation or interruption of a planned trip; _personal effects insurance that provides coverage to a traveler for the loss of, or damage to, personal effects that occurs during the planned trip; _life insurance covering risks of travel during a planned trip that does not exceed $60,000 on any one life; or _any other coverage that the commissioner may approve as meaningful and appropriate in connection with the transportation or accommodations arranged through a travel agency. (d) Prohibits insurance from being issued under this section unless the brochures or other written materials containing the disclosures required by Section 1(g) of this article are prominently displayed and readily available to the prospective traveler. Sec. 5. SELF-SERVICE STORAGE FACILITY LICENSE. (a) Defines "rental agreement," "renter," "self-service storage facility," and "storage space." (b) Authorizes the commissioner, notwithstanding any other provision of this article or this code, to issue a specialty license under Section 1 of this article to a self-service storage facility or to the franchisee of a self-service storage facility that complies with this section only for the limited purposes set forth in this section. (c) Authorizes a self-service storage facility or franchisee licensed under Section 1 of this article to act as an agent for any authorized insurer only in connection with the rental of storage space and only with respect to insurance that provides hazard insurance coverage to renters for the loss of, or damage to, tangible personal property in storage or in transit during the rental period; or any other coverage the commissioner may approve as meaningful and appropriate in connection with the rental of storage space. (d) Prohibits insurance from being issued under this section unless the brochures or other written materials containing the disclosures required by Section 1(g) of this article are prominently displayed and readily available to the prospective renter. Sec. 6. RULES. Authorizes the commissioner to adopt rules necessary to implement this article and to meet the minimum requirements of federal law and regulations. ARTICLE 2. LIFE AND HEALTH INSURANCE COUNSELOR LICENSE SECTION 2.01. Provides that Chapter 29, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-2, V.T.I.C.), is transferred to the Insurance Code, redesignated as Article 21.07-2, Insurance Code, and amended, as follows: New title: ARTICLE 21.07-2. LIFE AND HEALTH INSURANCE COUNSELOR LICENSE Sec. 1. DEFINITION OF TERM. Requires the term "Life and Health Insurance Counselor," rather than "Life Insurance Counselor" as used in this article, rather than Act, to mean any person who, for money, fee, commission or any other thing of value offers to examine, or examines any policy of life, accident, or health insurance, any health benefit plan, or any annuity or pure endowment contract for the purpose of giving, or gives, or offers to give, any advice, counsel, recommendation or information in respect to the terms, conditions, benefits, coverage or premium of any such policy or contract, or in respect to the expediency or advisability of altering, changing, exchanging, converting, replacing, surrendering, continuing or rejecting any such policy, plan, or contract, or of accepting or procuring any such policy, plan, or contract from any insurer or issuer of a health benefit plan, or who in or on advertisements, cards, signs, circulars or letterheads, or elsewhere, or in any other way or manner by which public announcements are made, uses the title "insurance adviser," "insurance specialist," "insurance counselor," "insurance analyst," "policyholders' adviser," "policyholders' counselor," or any other similar title, or any title indicating that the person, rather than he, gives, or is engaged in the business of giving advice, counsel, recommendation or information to an insured, or a beneficiary, or any person having any interest in a life, accident, or health insurance contract, health benefit plan contract, annuity or pure endowment contract. Provides that this definition is not intended to prevent a person who has obtained the professional designation of chartered life underwriter (CLU), chartered financial consultant (ChFC) or certified financial planner (CFP) by completing a course of instruction recognized within the business of insurance from using that designation to indicate professional achievement. Sec. 2. New title: LICENSE REQUIRED; ISSUANCE BY DEPARTMENT. Prohibits any person from acting as a Life and Health Insurance Counselor, as defined by Section 1 of this article, unless so authorized by a license issued by the department, rather than the Board of Insurance Commissioners of the State of Texas. Makes conforming and nonsubstantive changes. Sec. 3. New title: EXEMPTIONS. Makes conforming and nonsubstantive changes. Sec. 4. New title: CONTRACT, WRITING REQUIRED; DUPLICATES; OTHER REQUISITES. Makes conforming and nonsubstantive changes. Sec. 4a. PROHIBITION OF DUAL COMPENSATION. Makes conforming and nonsubstantive changes. Sec. 5. MODE OF LICENSING AND REGULATION. Deletes text requiring an applicant for licensure to submit documentation relating to the length of time the applicant has been licensed as a Life Insurance Counselor. Requires the department, without further examination, to issue a license under this article to an individual who, on September 1, 1999, holds a Life Insurance Counselor license issued by the department. Makes conforming and nonsubstantive changes. Sec. 6. New title: INTENT OF LEGISLATURE; STATUTES AND AMENDMENTS APPLICABLE. Requires that the licensing and regulation of any person acting as a life and health insurance counselor, except as provided by this article, be subject to the same statutes and requirements applicable to the licensing and regulation of agents under this subchapter, rather than agent, of legal reserve life insurance companies. Makes conforming and nonsubstantive changes. Sec. 7. New title: VIOLATIONS. Deletes text that relates to the commission of an offense and penalty for such an offense. Makes conforming and nonsubstantive changes. Sec. 8. New title: PARTIAL INVALIDITY. Makes conforming and nonsubstantive changes. Sec. 9. CONTINUING EDUCATION. Requires a person who holds a license issued under this article to complete continuing education as required by rules of the department or any applicable article of this code. Sec. 10. RULES. Authorizes the commissioner to adopt rules necessary to implement this article and to meet the minimum requirements of federal law and regulations. Sec. 11. REFERENCE IN OTHER LAW. Provides that a reference in any law to Chapter 29, Acts of the 54th Legislature, Regular Session, 1955, means this article. ARTICLE 3. ADJUSTERS LICENSES SECTION 3.01. Amends Chapter 407, Acts of the 63rd Legislature, Regular Session, 1973 (Article 21.07-4, V.T.I.C.), by amending Sections 15, 16, 17, and 23 and adding Section 24, as follows: Sec. 15. PLACE OF BUSINESS. Makes conforming and nonsubstantive changes. Sec. 16. EXPIRATION AND RENEWAL OF LICENSES. Provides that the expiration and renewal of licenses issued under this Act are governed by rules of the department or any applicable article of the Insurance Code or another insurance law of this state. Deletes text regarding certain exceptions and certain rights of the commissioner. Sec. 17. DENIAL, SUSPENSION, OR REVOCATION OF LICENSE. Authorizes the department to discipline an adjuster or deny an application under department rules or any other applicable article of the Insurance Code or another insurance law of this state. Authorizes the rules to specify grounds for discipline that are comparable to grounds for discipline of other license holders under this subchapter. Deletes text specifying causes for discipline. Makes conforming and nonsubstantive changes. Sec. 23. DUPLICATE LICENSE; FEE. Requires the department, rather than the commissioner of insurance, to collect in advance from an adjuster requesting a duplicate license a fee in an amount determined by the department, rather than not to exceed $20. Deletes text requiring the State Board of Insurance to determine the amount of the fee. Makes conforming and nonsubstantive changes. Sec. 24. RULES. Authorizes the commissioner to adopt rules necessary to implement this Act and to meet the minimum requirements of federal law and regulations. ARTICLE 4. AGRICULTURE AGENTS SECTION 4.01. Amends Article 21.14-2, Insurance Code, as follows: ARTICLE 21.14-2. AGRICULTURAL INSURANCE AGENTS Sec. 1. APPOINTING CERTAIN AGRICULTURAL INSURANCE AGENTS. Authorizes an insurance company that holds a valid certificate of authority issued by this state to authorize the company to engage in the insurance business in this state, and whose authority in this state and in each other jurisdiction in which the company is licensed to do business is limited, rather than but limiting the insurance business only, to the transaction of the business of insurance of risks on growing crops, to appoint and act through agents who hold, rather than qualify for, a license under Article 21.14 of this code, subject to this article. Sec. 2. New title: REQUIREMENTS FOR APPOINTMENT. (a) Provides that to appoint a license holder, rather than obtain a license, to act as an agent under this article, an insurance company, rather than applicant, must submit a completed appointment form, rather than written application, to the department, rather than commissioner of insurance on a form prescribed by the State Board of Insurance, and pay a nonrefundable fee in an amount determined by the commissioner, rather than $50. Sets forth that the appointment form must bear an endorsement signed by a representative, rather than an agent, of an insurance company that meets the requirements of Section 1 of this article. Deletes text that provides that such a form must state that the applicant is a resident of this state. (b) Makes conforming and nonsubstantive changes. (c) Authorizes the department to waive any examination requirement imposed under this subchapter for a license applicant seeking a company appointment under this article if the applicant has successfully completed an examination as required under the Federal Crop Insurance Corporation guidelines for delivery of the federal crop insurance program. Deletes text related to the expiration date of a license. Makes conforming and nonsubstantive changes. (d) Authorizes the department, at its discretion, to accept continuing education hours completed under the guidelines of the Federal Crop Insurance Corporation as satisfying the continuing education requirements imposed under this subchapter. Deletes text relating to an applicant for an original or renewal license and examination and continuing education requirements. Sec. 3. New title: MULTIPLE APPOINTMENTS AUTHORIZED. Authorizes a license holder appointed under this article to act as an agent for more than one insurance company, but authorizes them to act as an agent under this article only with respect to the business of insurance on growing crops. Deletes text relating to the suspension or cancellation of the license of an agent. Sec. 4. New title: APPLICATION OF OTHER LAW. Provides that this subchapter applies, rather than Article 21.14 of this code does not apply, to the licensing and, rather than or, regulation of an agent appointed under this article. Sec. 5. RULES. Authorizes the commissioner to adopt rules necessary to implement this article and to meet the minimum requirements of federal law and regulations. ARTICLE 5. REPEALER SECTION 5.01. Repealer: (1) Section 21 (Rental Car Companies), Article 21.07, Insurance Code, as added by Chapter 820, Acts of the 75th Legislature, Regular Session, 1997; (2) Section 21 (Credit Insurance Agents), Article 21.07, Insurance Code, as added by Chapter 1196, Acts of the 75th Legislature, Regular Session, 1997; and (3) Sections 18 (Automatic Revocation) and 19 (Duration of Suspension), Chapter 407, Acts of the 63rd Legislature, Regular Session, 1973 (Article 21.07-4, V.T.I.C). ARTICLE 6. GRANDFATHER PROVISIONS; EFFECTIVE DATE; EMERGENCY SECTION 6.01. Effective date: September 1, 1999. SECTION 6.02. (a) Requires the Texas Department of Insurance, not later than January 1, 2000, to issue an appropriate license under Article 21.09, Insurance Code, as added by this Act, to a person who, immediately before the effective date of this Act, holds an agent license issued by the Texas Department of Insurance under Section 21, Article 21.07, Insurance Code, as added by Chapter 820, Acts of the 75th Legislature, Regular Session, 1997, or Section 21, Article 21.07, Insurance Code, as added by Chapter 1196, Acts of the 75th Legislature, Regular Session, 1997. Sets forth that on issuance of the new license, the license holder is subject to Article 21.09, Insurance Code, as added by this Act. (b) Sets forth that a travel agency or franchisee is not required to be licensed as provided by Section 4, Article 21.09, Insurance Code, as added by this Act, before January 1, 2000. (c) Sets forth that a self-service storage facility or franchisee is not required to be licensed under Section 5, Article 21.09, Insurance Code, as added by this Act, before January 1, 2000. (d) Provides that a person required to be licensed under Article 21.07-2, Insurance Code, as redesignated and amended by this Act, who was not required to be licensed under Chapter 29, Acts of the 54th Legislature, Regular Session, 1955 (Article 21.07-2, V.T.I.C.), as it existed immediately before the effective date of this Act, is not required to be licensed as provided by this Act before January 1, 2000. (e) Provides that a person who holds a license to operate as an agricultural insurance agent under Article 21.14-2, Insurance Code, on the effective date of this Act is eligible for a license under Article 21.14, Insurance Code, if the person applies for the license to the Texas Department of Insurance before March 1, 2000, and pays any required fees. Provides that to maintain the license, the person must pass the required qualifying examination for that license on or before March 1, 2002. SECTION 6.03. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.S.B. 957 modifies the original in SECTION 1 (proposed Section 2, Article 21.09, Insurance Code) to redefine "rental agreement" to include a written agreement governing the use of vehicle equipment. The substitute also redefines "rental car company," "renter," "vehicle," and "vehicle equipment" to make conforming changes. Additionally, the substitute defines "vehicle" to include a motor home, motorcycle, a trailer with a gross vehicle weight rating of 10,000 pounds or less, or specified trucks and defines "vehicle equipment" to mean a cartop carrier, tow bar, or tow dolly specifically designed for use with the vehicle. The substitute further authorizes a rental car company or franchisee licensed under Section 1 to act as an agent for an authorized insurer in regard to personal effects insurance that provides coverage to renters and other rental vehicle occupants for the loss of, or damage to, household belongings, and other applicable types of insurance in regard to vehicle equipment. Furthermore, the substitute makes other conforming changes. C.S.S.B. 957 modifies the original in SECTION 1 (proposed Section 5, Article 21.09, Insurance Code) to reorder the definitions alphabetically.