LEGISLATIVE BUDGET BOARD Austin, Texas FISCAL NOTE, 77th Regular Session March 17, 2001 TO: Honorable John T. Smithee, Chair, House Committee on Insurance FROM: John Keel, Director, Legislative Budget Board IN RE: HB1384 by Dunnam (Relating to review of the termination of agreements with certain insurance agents; providing an administrative penalty.), As Introduced ************************************************************************** * Estimated Two-year Net Impact to General Revenue Related Funds for * * HB1384, As Introduced: positive impact of $0 through the biennium * * ending August 31, 2003. * * * * The bill would make no appropriation but could provide the legal * * basis for an appropriation of funds to implement the provisions of * * the bill. * ************************************************************************** General Revenue-Related Funds, Five-Year Impact: **************************************************** * Fiscal Year Probable Net Positive/(Negative) * * Impact to General Revenue Related * * Funds * * 2002 $0 * * 2003 0 * * 2004 0 * * 2005 0 * * 2006 0 * **************************************************** All Funds, Five-Year Impact: ************************************************************************** *Fiscal Probable Probable Revenue Change in Number of * * Year Savings/(Cost) from Gain/(Loss) from State Employees from * * Texas Department of Texas Department of FY 2001 * * Insurance Operating Insurance Operating * * Fund Account/ Fund Account/ * * GR-Dedicated GR-Dedicated * * 0036 0036 * * 2002 $(534,205) $534,205 8.0 * * 2003 (490,342) 490,342 8.0 * * 2004 (490,342) 490,342 8.0 * * 2005 (490,342) 490,342 8.0 * * 2006 (490,342) 490,342 8.0 * ************************************************************************** Technology Impact Additional computers and software for eight Full-time equivalent positions (FTEs) of $21,592 in the fiscal year 2002. Fiscal Analysis The bill adds Article 21.14A to Subchapter A, Chapter 21 of the Insurance Code to establish grounds for which an insurer could, for cause, terminate a contractual agreement with local recording agents or solicitors and to establish prohibited grounds for termination. The bill requires insurers to establish a termination review process when an agent is involuntarily terminated. The Texas Department of Insurance (TDI) estimates the provisions of the bill would cause an increase in workload in three areas: (1) establishing the lists of individuals who are eligible to serve as review board members, (2) setting review board hearings, and (3) preparing the Commissioner's orders following review and monitoring appeals of such orders. The Commissioner must set a hearing date for review board hearings requested by agents and must notify the parties of the time, date and place of the hearing, which must be conducted not later than the 30th day after the request is received by the Commissioner. The provisions of the bill require the Commissioner to set a fee in an amount reasonable and necessary, but not to exceed $10 for each local recording agent license and solicitor license, to cover the costs incurred by TDI in administering the provisions of the bill. The effective date of the bill is September 1, 2001. Methodology TDI estimates that the provisions of the bill would require a total of eight additional FTEs including half of an attorney with expertise to develop a method to establish a dispute resolution system and to compile a list of individuals to serve as review board members. The attorney would also assist in the development of rules to determine alternate methods of selection for review board members, prepare Commissioner's orders and monitor appeals of orders referred to the Office of the Attorney General. Setting the hearings would require the services of two docket clerks and one administrative technician for maintaining the lists of eligible review board members. TDI estimates about 700 additional requests for hearings per year as a result of the bill. Currently, an attorney at TDI handles approximately 208 agent enforcement cases per year. Therefore, up to 3.5 additional attorneys would be required to handle the increased workload. TDI estimates that twenty-five percent of the estimated 700 terminations or approximately 175 would be appealed. It would also require one legal assistant to provide on-going research. It is assumed the agency would adjust fees to offset any costs associated with the implementation of the bill. Local Government Impact No significant fiscal implication to units of local government is anticipated. Source Agencies: 304 Comptroller of Public Accounts, 302 Office of the Attorney General, 454 Texas Department of Insurance LBB Staff: JK, JO, DE, RT