SRC-JEC S.B. 1619 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 1619
78R4969 KCR-DBy: Ellis, Rodney
State Affairs
4/8/2003
As Filed


DIGEST AND PURPOSE 

Currently, many small face amount life insurance policies are priced so
that over the life of the policy, the insured person is likely to pay
multiples of the death benefit for the coverage, which, at a certain
point, could be considered to constitute usury.  As proposed, S.B. 1619
places caps on the multiples of premium paid that an insurer may charge on
a policy.  The caps are indexed to age at the issuance of the policy and
are based on actuarial analysis performed by staff at the Texas Department
of Insurance. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION  1 (Section 1101.255, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 1101, Insurance Code, by adding Subchapter F,
as follows: 

SUBCHAPTER F.  MAXIMUM AMOUNT OF PREMIUMS CHARGED FOR CERTAIN LIFE
INSURANCE POLICIES 

Sec. 1101.251.  DEFINITION.  Defines "insurer."  Provides that the term
does not include a fraternal benefit society. 

Sec. 1101.252.  APPLICABILITY.  Provides that this subchapter applies only
to a life insurance policy issued in this state with an initial face
amount of $15,000 or less. 

Sec. 1101.253.  MAXIMUM AMOUNT OF PREMIUMS PAID.  (a)  Prohibits an
insurer from charging or collecting premiums for a life insurance policy
that in the aggregate, less dividends paid in cash, exceed the amount
computed under this section by multiplying the amount of the maximum death
benefit available under the policy by the appropriate numerical factor
associated with the age of the insured at the time the policy is issued. 

(b) - (i)  Set forth the numerical factors appropriate to each age
category for the computation required by Subsection (a). 

Sec. 1101.254.  EFFECT OF PAYING MAXIMUM PREMIUMS.  Provides that when the
aggregate premiums paid for a life insurance policy reach the maximum
amount computed under Section 1101.203, the life insurance policy becomes
a paid-up policy. 

Sec. 1101.255.  RULES.  Authorizes the commissioner of insurance to adopt
rules necessary for the implementation of this subchapter. 

SECTION 2.  Effective date:  September 1, 2003.
            Makes application of this Act prospective to January 1, 2004.