By Alexander H.B. No. 3730
76R2325 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the creation, powers, and duties of the Texas Insurance
1-3 Fraud Prevention Authority.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 21, Insurance Code, is amended by adding
1-6 Subchapter G to read as follows:
1-7 SUBCHAPTER G. INSURANCE FRAUD EDUCATION AND PREVENTION
1-8 Art. 21.911. DEFINITIONS. In this subchapter:
1-9 (1) "Authority" means the Texas Insurance Fraud
1-10 Prevention Authority.
1-11 (2) "Board" means the board of directors of the
1-12 authority.
1-13 (3) "Fund" means the insurance fraud prevention fund
1-14 established under Article 21.928 of this code.
1-15 (4) "Insurance fraud" means any act committed by a
1-16 person with intent to defraud or deceive an insurer by preparing or
1-17 presenting to an insurer a statement that:
1-18 (A) the person knows contains false or
1-19 misleading information material to an insurance claim; and
1-20 (B) affects a person's right to receive a
1-21 payment or the amount of payment to which the person is entitled.
1-22 (5) "Insurance fraud unit" means a public entity
1-23 created to investigate and prevent insurance fraud. The term
1-24 includes the fraud unit established in the department under Article
2-1 1.10D of this code and any other fraud prevention enforcement unit
2-2 established under the jurisdiction of:
2-3 (A) the office of the attorney general;
2-4 (B) the Department of Public Safety;
2-5 (C) a county or municipal law enforcement
2-6 agency;
2-7 (D) a prosecutorial agency; or
2-8 (E) a court of this state.
2-9 (6) "Insurer" means an insurance company or other
2-10 entity that engages in the business of insurance in this state. The
2-11 term includes a self-insurer.
2-12 Art. 21.912. ESTABLISHMENT OF AUTHORITY; APPLICATION OF
2-13 SUNSET ACT. (a) The Texas Insurance Fraud Prevention Authority is
2-14 established to conduct investigations into the occurrence of
2-15 insurance fraud and to administer programs to prevent insurance
2-16 fraud in this state.
2-17 (b) The authority is subject to Chapter 325, Government Code
2-18 (Texas Sunset Act). Unless continued in existence as provided by
2-19 that chapter, the authority is abolished and this subchapter
2-20 expires September 1, 2005.
2-21 Art. 21.913. BOARD MEMBERSHIP. (a) The authority is
2-22 governed by a board of directors. The board consists of six
2-23 members appointed by the governor with the advice and consent of
2-24 the senate as follows:
2-25 (1) two public members who are insurance
2-26 policyholders;
2-27 (2) two members who are representatives of domestic or
3-1 foreign insurers who write any form of insurance in this state; and
3-2 (3) two representatives of law enforcement agencies.
3-3 (b) In addition to the appointed members, the following
3-4 persons shall serve on the board as voting, ex-officio members:
3-5 (1) the director of the Department of Public Safety or
3-6 the director's designee;
3-7 (2) the attorney general or the attorney general's
3-8 designee; and
3-9 (3) the commissioner or the commissioner's designee.
3-10 (c) Appointments to the board shall be made without regard
3-11 to the race, color, handicap, sex, religion, age, or national
3-12 origin of the appointee.
3-13 Art. 21.914. MEMBERSHIP RESTRICTIONS. (a) In this article,
3-14 "Texas trade association" means a nonprofit, cooperative, and
3-15 voluntarily joined association of business or professional
3-16 competitors in this state designed to assist its members and its
3-17 industry or profession in dealing with mutual business or
3-18 professional problems and in promoting their common interest.
3-19 (b) A person is not eligible for appointment as a public
3-20 member of the board if the person or person's spouse:
3-21 (1) is registered, certified, or licensed by an
3-22 occupational regulatory agency in the field of insurance or law
3-23 enforcement;
3-24 (2) is an officer, employee, or paid consultant of a
3-25 Texas trade association in the field of insurance or law
3-26 enforcement;
3-27 (3) is employed by or participates in the management
4-1 of a business entity or other organization receiving funds from the
4-2 authority;
4-3 (4) owns or controls, directly or indirectly, more
4-4 than a 10 percent interest in a business entity or other
4-5 organization receiving funds from the authority; or
4-6 (5) uses or receives a substantial amount of tangible
4-7 goods, services, or funds from the authority, other than
4-8 reimbursement authorized by law for service on the board.
4-9 (c) A person may not serve as a board member or act as
4-10 general counsel to the authority if the person is required to
4-11 register as a lobbyist under Chapter 305, Government Code, because
4-12 of the person's activities for compensation on behalf of a
4-13 profession related to law enforcement or insurance.
4-14 Art. 21.915. TERMS; VACANCY. (a) The appointed members of
4-15 the board serve staggered six-year terms, with the terms of two
4-16 members expiring February 1 of each odd-numbered year.
4-17 (b) If there is a vacancy during a term, the governor shall
4-18 appoint a replacement who meets the requirements of the vacant
4-19 office to fill the unexpired term.
4-20 Art. 21.916. GROUNDS FOR REMOVAL. (a) It is a ground for
4-21 removal from the board that a member:
4-22 (1) does not have at the time of appointment the
4-23 qualifications required by Article 21.913 or 21.914 of this code;
4-24 (2) does not maintain during service on the board the
4-25 qualifications required by Article 21.913 or 21.914 of this code;
4-26 (3) cannot, because of illness or disability,
4-27 discharge the member's duties for a substantial part of the
5-1 member's term; or
5-2 (4) is absent from more than half of the regularly
5-3 scheduled board meetings that the member is eligible to attend
5-4 during a calendar year unless the absence is excused by majority
5-5 vote of the board.
5-6 (b) The validity of an action of the board is not affected
5-7 by the fact that it is taken when a ground for removal of a board
5-8 member exists.
5-9 (c) If the executive director has knowledge that a potential
5-10 ground for removal exists, the executive director shall notify the
5-11 presiding officer of the board of the potential ground. The
5-12 presiding officer shall then notify the governor that a potential
5-13 ground for removal exists. If the potential ground for removal
5-14 involves the presiding officer, the executive director shall notify
5-15 the assistant presiding officer, who shall then notify the governor
5-16 that a potential ground for removal exists.
5-17 Art. 21.917. REIMBURSEMENT FOR TRAVEL EXPENSES. A member of
5-18 the board is entitled to reimbursement for the travel expenses
5-19 incurred by the member while conducting the business of the board,
5-20 as provided by the General Appropriations Act.
5-21 Art. 21.918. OFFICERS; MEETINGS. (a) The governor shall
5-22 designate a member of the board as the presiding officer of the
5-23 board to serve in that capacity at the pleasure of the governor.
5-24 The board shall elect from its membership a person to serve as
5-25 assistant presiding officer.
5-26 (b) The board shall conduct regular meetings at least six
5-27 times a year. The board may meet in special meetings at the call
6-1 of the presiding officer or at the call of at least four board
6-2 members.
6-3 Art. 21.919. TRAINING; CONTINUING EDUCATION. (a) Before an
6-4 appointed board member may assume the member's duties and before
6-5 the member may be confirmed by the senate, the member must complete
6-6 at least one course of a training program established by the board
6-7 under this article.
6-8 (b) The training program shall provide information to a
6-9 participant regarding:
6-10 (1) this subchapter;
6-11 (2) the programs operated by the authority;
6-12 (3) the role and functions of the authority;
6-13 (4) the rules of the board;
6-14 (5) the current budget for the authority;
6-15 (6) the results of the most recent formal audit of the
6-16 authority;
6-17 (7) the requirements of Chapters 551, 552, 2001, and
6-18 2002, Government Code;
6-19 (8) the requirements of the conflict of interest laws
6-20 and other laws relating to public officials; and
6-21 (9) any applicable ethics policies adopted by the
6-22 Texas Ethics Commission.
6-23 (c) In addition to the training course required under
6-24 Subsection (a) of this article and as required by board rule, each
6-25 appointed board member periodically shall participate in a
6-26 continuing education course prepared by the insurance fraud unit of
6-27 the department in the detection, identification, and prosecution of
7-1 insurance fraud.
7-2 Art. 21.920. PERSONNEL. The board shall employ an executive
7-3 director to manage administrative and day-to-day operations of the
7-4 authority and may employ other staff as necessary to implement this
7-5 subchapter.
7-6 Art. 21.921. SEPARATION OF RESPONSIBILITIES. The board
7-7 shall develop and implement policies that clearly separate the
7-8 policymaking responsibilities of the board and the management
7-9 responsibilities of the executive director and the staff of the
7-10 board.
7-11 Art. 21.922. QUALIFICATIONS AND STANDARDS OF CONDUCT. The
7-12 executive director or the executive director's designee shall
7-13 provide to members of the board and to board employees, as often as
7-14 necessary, information regarding the requirements for office or
7-15 employment under this subchapter, including information regarding a
7-16 person's responsibilities under applicable laws relating to
7-17 standards of conduct for state officers or employees.
7-18 Art. 21.923. CAREER LADDER PROGRAM; PERFORMANCE EVALUATIONS.
7-19 (a) The executive director or the executive director's designee
7-20 shall develop an intra-agency career ladder program that addresses
7-21 opportunities for mobility and advancement of employees within the
7-22 authority. The program must require intra-agency posting of all
7-23 positions concurrently with any public posting.
7-24 (b) The executive director or the executive director's
7-25 designee shall develop a system of annual performance evaluations
7-26 based on documented employee performance. All decisions regarding
7-27 merit pay for an authority employee must be based on that system.
8-1 Art. 21.924. EQUAL EMPLOYMENT OPPORTUNITY POLICY. (a) The
8-2 board or the board's designee shall prepare and maintain a written
8-3 policy statement that implements a program of equal employment
8-4 opportunity to ensure that all personnel decisions are made without
8-5 regard to race, color, disability, sex, religion, age, or national
8-6 origin.
8-7 (b) The policy statement must include:
8-8 (1) personnel policies, including policies relating to
8-9 recruitment, evaluation, selection, training, and promotion of
8-10 personnel, that show the intent of the board to avoid the unlawful
8-11 employment practices described by Chapter 21, Labor Code; and
8-12 (2) an analysis of the extent to which the composition
8-13 of the authority's personnel is in accordance with state and
8-14 federal law and a description of reasonable methods to achieve
8-15 compliance with state and federal law.
8-16 (c) The policy statement must be:
8-17 (1) updated annually;
8-18 (2) reviewed by the Commission on Human Rights for
8-19 compliance with Subsection (b)(1); and
8-20 (3) filed with the governor's office.
8-21 Art. 21.925. RULES. The board shall adopt rules as
8-22 necessary to implement this subchapter.
8-23 Art. 21.926. DONATIONS. The authority may solicit and
8-24 accept gifts and grants.
8-25 Art. 21.927. PLAN OF OPERATION. (a) The authority shall
8-26 develop and implement a plan of operation.
8-27 (b) The plan of operation must include:
9-1 (1) an assessment of the scope of the problem of
9-2 insurance fraud and the economic impact of that fraud on consumers
9-3 of insurance products, including an assessment of areas of the
9-4 state in which the problem is greatest, if any;
9-5 (2) an analysis of various methods of combating the
9-6 problems of insurance fraud;
9-7 (3) a plan for the development and operation of the
9-8 grant program established under Article 21.928 of this code to
9-9 provide financial support to combat insurance fraud; and
9-10 (4) an estimate of the funds required to implement the
9-11 plan of operation.
9-12 Art. 21.928. FUND; GRANT PROGRAM. (a) The insurance fraud
9-13 prevention fund is a fund outside the state treasury. The
9-14 comptroller is the custodian of the fund and may invest the money
9-15 in the fund in the manner in which money in the state treasury is
9-16 invested.
9-17 (b) The comptroller shall deposit to the credit of the fund
9-18 any gift or grant of money accepted by the authority and money
9-19 collected under Article 21.929 of this code. The comptroller shall
9-20 make payments from the fund at the request of the authority, except
9-21 that a payment may not exceed the amount in the fund.
9-22 (c) Interest or income on amounts deposited in the fund
9-23 shall be credited to the fund.
9-24 (d) Money credited to the fund shall be used by the
9-25 authority to:
9-26 (1) pay administrative costs incurred by the
9-27 authority;
10-1 (2) provide financial support in the form of grants
10-2 to:
10-3 (A) law enforcement agencies to support
10-4 insurance fraud enforcement units;
10-5 (B) state agencies to support insurance fraud
10-6 enforcement units; and
10-7 (C) law enforcement agencies, local and state
10-8 prosecutors, judicial agencies, and neighborhood, community,
10-9 business, and nonprofit organizations for programs designed to
10-10 reduce insurance fraud;
10-11 (3) conduct educational programs designed to inform
10-12 the public of methods of preventing insurance fraud and
10-13 understanding when and what types of fraud are being perpetrated;
10-14 (4) support the insurance fraud tips program conducted
10-15 by the department under Article 21.932 of this code; and
10-16 (5) conduct independent examinations of insurance
10-17 fraud and deceit or intentional misrepresentation of any kind in
10-18 the insurance process and to publish information and reports on
10-19 those examinations.
10-20 (e) In any fiscal year, the amount of administrative and
10-21 public awareness expenses of the authority, including salaries,
10-22 travel and marketing expenses, and other overhead expenses, may not
10-23 exceed eight percent of the total expenditures of the authority.
10-24 Art. 21.929. ASSESSMENT ON INSURERS. (a) This article
10-25 applies to an insurer who writes the following coverage in this
10-26 state:
10-27 (1) property and casualty insurance coverage;
11-1 (2) accident and health insurance coverage;
11-2 (3) credit accident and health insurance coverage; and
11-3 (4) health insurance coverage written under life,
11-4 annuity, and accident lines.
11-5 (b) Not later than February 1 of each year, each insurer
11-6 subject to this article shall pay into the fund in trust an amount
11-7 equal to the product obtained by multiplying the base amount of
11-8 $12.5 million by a fraction, the numerator of which is the earned
11-9 premium for the coverages listed in Subsection (a) of this article
11-10 written by that insurer during the preceding calendar year, and the
11-11 denominator of which is the earned premium for those coverages
11-12 written by all insurers during the same period.
11-13 (c) Workers' compensation insurance coverage written in this
11-14 state may not be considered in determining the assessment under
11-15 Subsection (b) of this article.
11-16 (d) The total assessment for accident and health insurance
11-17 coverage described under Subsections (a)(2) and (3) of this article
11-18 may not exceed 10 percent of the total assessment authorized by
11-19 this article. If the total assessment for that coverage exceeds 10
11-20 percent, the insurers writing that coverage shall share the limited
11-21 assessment in the same proportion as they would otherwise have
11-22 shared the assessment for that coverage without the limit. Any
11-23 deficiency in the total assessment caused by the application of the
11-24 limit imposed under this subsection shall be shared by all other
11-25 insurers being assessed in the same proportions as those insurers
11-26 are sharing the remainder of the assessment.
11-27 (e) The authority may recommend that the legislature vary
12-1 the base amount established under Subsection (b) of this article if
12-2 the authority demonstrates a need to conduct more effective
12-3 programs and that distribution of money under the grant program
12-4 established under Article 21.928 of this code is reasonable.
12-5 (f) The authority shall notify the department of any insurer
12-6 who fails to pay the assessment required by this article. Failure
12-7 to pay the assessment constitutes grounds for revocation or
12-8 suspension of the insurer's certificate of authority.
12-9 Art. 21.930. AUDIT. (a) The board shall periodically audit
12-10 the plans and programs that are funded in whole or in part by the
12-11 authority to evaluate the effectiveness of those plans and
12-12 programs.
12-13 (b) The board shall withdraw funding from a plan or program
12-14 if the authority determines that the plan or program is ineffective
12-15 or does not need financial support from the authority.
12-16 Art. 21.931. ANNUAL REPORT. (a) Not later than April 1 of
12-17 each year, the authority shall issue a written report regarding its
12-18 activities during the preceding calendar year and shall provide
12-19 copies of the report to the lieutenant governor and the speaker of
12-20 the house of representatives.
12-21 (b) The report must include an analysis of each grant made
12-22 by the authority under Article 21.928 of this code, and the results
12-23 of the grant, based on:
12-24 (1) the effectiveness of the operation funded through
12-25 the grant in reducing insurance fraud; and
12-26 (2) any resulting arrests and prosecutions for
12-27 insurance fraud.
13-1 Art. 21.932. INSURANCE FRAUD TIPS PROGRAM. (a) The
13-2 authority shall develop a statewide insurance fraud tips program to
13-3 be administered by the department. The department shall implement
13-4 rules adopted by the board to administer the program.
13-5 (b) The department shall provide a system of statewide
13-6 access to the program to persons who wish to provide information or
13-7 furnish evidence concerning suspected, anticipated, or completed
13-8 fraudulent insurance acts. The system may include operation of a
13-9 toll-free telephone number.
13-10 (c) The department's fraud unit may initiate an
13-11 investigation of a report received through the statewide access
13-12 system.
13-13 (d) Except as provided by order of a court, the department
13-14 may not disclose the identity of any person who uses the insurance
13-15 fraud tips program to provide information or evidence.
13-16 (e) A person who uses the insurance fraud tips program in
13-17 good faith to provide information or evidence to the department is
13-18 not liable for damages arising from the provision of the
13-19 information or evidence.
13-20 (f) Except as provided by Subsection (g) of this article,
13-21 information acquired by the department through the insurance fraud
13-22 tips program established under this article is privileged and
13-23 confidential and may not be maintained as part of a public record.
13-24 (g) The department, on receiving information or evidence
13-25 under this article, shall provide the information or evidence and
13-26 the results of any related investigation to an appropriate law
13-27 enforcement authority or insurance fraud unit and to the affected
14-1 insurer.
14-2 SECTION 2. (a) In this section, "insurance fraud rate"
14-3 means the best estimate of the scope of insurance fraud and the
14-4 monetary impact of that fraud on this state, as determined from
14-5 uniform crime statistics or any other study determined to be
14-6 acceptable by the commissioner of insurance.
14-7 (b) The Texas Insurance Fraud Prevention Authority shall
14-8 determine a base insurance fraud rate not later than March 1, 2000,
14-9 and shall report the rate to the lieutenant governor and the
14-10 speaker of the house of representatives not later than March 31,
14-11 2000.
14-12 (c) Not later than October 1, 2002, the Texas Insurance
14-13 Fraud Prevention Authority shall determine the insurance fraud rate
14-14 using all available information and shall report the rate to the
14-15 lieutenant governor and the speaker of the house of
14-16 representatives. If that rate is equal to or larger than the base
14-17 insurance fraud rate, the authority is abolished, and contracts
14-18 entered into by the authority terminate, effective November 30,
14-19 2002. If that rate is smaller than the rate initially established,
14-20 the authority shall continue in operation subject to sunset review.
14-21 (d) If the authority is abolished under Subsection (c) of
14-22 this section with unencumbered money remaining in the insurance
14-23 fraud prevention fund, the comptroller shall, after deducting
14-24 administrative costs for liquidation, return the remainder to each
14-25 insurer assessed under Article 21.929, Insurance Code, as added by
14-26 this Act, in the preceding calendar year in a share proportionate
14-27 to the assessment paid by that insurer for that year.
15-1 SECTION 3. In making initial appointments to the Texas
15-2 Insurance Fraud Prevention Authority, the governor shall appoint
15-3 two members for terms expiring February 1, 2003, two members for
15-4 terms expiring February 1, 2005, and two members for terms expiring
15-5 February 1, 2007.
15-6 SECTION 4. This Act takes effect September 1, 1999.
15-7 SECTION 5. The importance of this legislation and the
15-8 crowded condition of the calendars in both houses create an
15-9 emergency and an imperative public necessity that the
15-10 constitutional rule requiring bills to be read on three several
15-11 days in each house be suspended, and this rule is hereby suspended.