H.B. 1525 78(R)    BILL ANALYSIS


H.B. 1525
By: Thompson
Insurance
Committee Report (Amended)



BACKGROUND AND PURPOSE 

Legislation enacted by the 77th Legislature required the Commissioner of
Insurance to conduct a study of the Texas marketplace for small face
amount life insurance and the issue that some policy premiums may exceed
the face amount of the policy at some point in time.  Additionally, the
National Association of Insurance Commissioners has adopted model law
requiring disclosure on any small face amount policy.  H.B. 1525 sets
forth disclosure requirements for small face amount life insurance. 

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly
granted to the Commissioner of Insurance in SECTION 1 (Section 1101.205,
Insurance Code) of this bill. 

ANALYSIS

H.B. 1525 amends the Insurance Code to require insurers, as specified, to
disclose to an applicant for a small face amount policy the year in which
the cumulative premiums paid for the policy will exceed the death benefit
under the policy.  The bill requires an insurer to provide the disclosure
on receipt of the application and again not later than the date on which
the policy is delivered.  If the cumulative premiums may exceed the face
amount of the policy for some demographic or benefit combination but not
for all combinations, an insurer may elect to provide disclosure only in
those circumstances in which the premiums may exceed the face amount or
for all demographic and benefit combinations.  The bill prohibits a
disclosure from being attached to a policy, but authorizes the delivery of
a disclosure with the policy. 

The bill requires an insurer, including its agent, to provide information
to policyholders on request regarding the disclosure.  The bill authorizes
the Commissioner of Insurance (Commissioner) to adopt, by rule, minimum
requirements for disclosure statements.  The bill authorizes the
Commissioner to consider any model regulations proposed by the National
Association of Insurance Commissioners, in adopting any rules under this
section.  

EFFECTIVE DATE

September 1, 2003.

EXPLANATION OF AMENDMENTS

Committee Amendment No. 1 requires insurers subject to disclosure
requirements to provide disclosure if at any point in time over the term
of the policy the cumulative premiums paid may exceed the face amount of
the policy at that point in time.  The amendment requires the disclosure
to be provided to the policy owner or certificate holder no later than at
the time the policy or certificate is delivered.