SRC-LBB S.B. 1622 78(R)   BILL ANALYSIS


Senate Research Center   S.B. 1622
78R6190 DLF-DBy: Ellis, Rodney
State Affairs
4/8/2003
As Filed


DIGEST AND PURPOSE 

Some insurers sometimes sell multiple small policies to the same
individual.  There are agents' commissions and servicing costs for each
policy.  As proposed, S.B. 1622 requires insurers selling policies less
than $2,000 to offer an option to the policyholder, over the life of the
policy, to increase the death benefit up to $15,000.  This bill also
prohibits an insurer from issuing another life insurance policy of $2,000
or less to the same insured. 

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 (Section 1101.204, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 1101, Insurance Code, as effective June 1,
2003, by adding Subchapter E, as follows: 

SUBCHAPTER E.  CERTAIN POLICIES WITH SMALL FACE VALUE

Sec. 1101.201.  APPLICABILITY.  (a)  Provides that this subchapter applies
to each insurer authorized to write life insurance under Chapter 841 (
Life, Health, or Accident Insurance Companies), 882 (Statewide Mutual
Assessment Companies), 884 (Stipulated Premium Insurance Companies), or
982 (Foreign and Alien Insurance Companies). Provides that this subchapter
does not apply to an insurer operating under Chapter 881 (Mutual Life
Insurance Companies), 885 (Fraternal Benefit Societies), 886 (Local Mutual
Aid Associations), 887(Provisions Applicable to Certain Mutual Assessment
Companies), or 888 (Burial Associations) or an insurer exempt under
Section 887.102. 

(b)  Provides that this subchapter applies to any individual or group life
insurance policy, other than a term life insurance policy, issued in this
state, including an industrial insurance policy offered under Chapter 1151
(Industrial Life Insurance). 

Sec. 1101.202.  REQUIRED INCREASE IN DEATH BENEFIT.  (a)  Requires a life
insurance policy that provides a death benefit of $2,000 or less to
include an option for the insured to increase the death benefit to not
more than $15,000. 

(b)  Requires the insurer to provide the additional death benefit required
by this section without evidence of insurability and at the insurer's
current applicable rates for issuance of a new policy to the insured at
the insured's age at the time the option is exercised. 

(c)  Prohibits the exercise of an option under Subsection (a) from
resulting in a reduction of the cash value of the life insurance policy. 

Sec. 1101.203.  PROHIBITION.  Prohibits an insurer that issues a life
insurance policy that provides a death benefit of $2,000 or less and that
includes the option to increase coverage required by Section 1101.202 from
issuing a subsequent life insurance policy that provides a death benefit
of $2,000 or less to the same insured. 
 Sec. 1101.204.  RULES.  Authorizes the commissioner of insurance to adopt
rules as necessary to implement this subchapter. 

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