By:  Brimer                                                       S.B. No. 178


A BILL TO BE ENTITLED

AN ACT

relating to regulation of sharing of certain profits and fees by 
premium finance companies and certain related persons or entities.
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Section 651.001, Insurance Code, is amended by 
adding Subdivisions (2-a) and (8-a) to read as follows:
		(2-a)  "Insurance agent" means a person licensed under 
Subchapter E, Chapter 981, or Chapter 4051, 4052, 4053, 4054, or 
4055.
		(8-a)  "Premium finance agreement servicer" means a 
person, partnership, or other entity that provides a premium 
finance company with collection, billing, or other services related 
to the administration of premium finance agreements.
	SECTION 2.  The heading to Subchapter C, Chapter 651, 
Insurance Code, is amended to read as follows:

SUBCHAPTER C.  REGULATION OF INSURANCE PREMIUM

FINANCE COMPANIES AND OTHERS
	SECTION 3.  Section 651.110, Insurance Code, is amended to 
read as follows:  
	Sec. 651.110.  LIMITATIONS ON CERTAIN INDUCEMENTS OR SHARING 
OF PROFITS AND FEES [REBATE OF FINANCE CHARGE].  (a)  This section 
applies to:
		(1)  an [An] insurance premium finance company;
		(2)  an insurance agent;                                               
		(3)  a premium finance agreement servicer; or                          
		(4)  [or] an affiliate, employee, agent, or other 
representative of an insurance premium finance company or a premium 
finance agreement servicer.
	(a-1)  A person, partnership, or other entity described by 
Subsection (a) may not:
		(1)  pay, allow, or offer to pay or allow in any manner 
to an insurance agent [or broker] or an employee of an insurance 
agent [or broker or to any other person] any consideration or 
compensation for soliciting, accepting an application for, 
delivering, or administering[, from the charge for financing 
specified in the] premium finance agreements [agreement or from 
another source]; [or]
		(2)  pay, allow, or offer to pay or allow an insurance 
agent or an employee of an insurance agent to share in the profits 
of any person, partnership, or other entity if any portion of the 
share of profits is determined, either in whole or in part, by the 
amount of premium dollars financed or premium finance agreements 
placed;
		(3)  pay, allow, or offer to pay or allow an insurance 
agent or an employee of an insurance agent to share in any portion 
of fees, including late fees, that are related to the premium 
finance agreement; or
		(4)  give or offer to give any valuable consideration 
or inducement of any kind directly or indirectly to an insurance 
agent [or broker] or an employee of an insurance agent [or broker].
	(b)  Subsection (a-1) [(a)(2)]  does not prohibit the giving 
or offering of an article of merchandise to an insurance agent or an 
employee of an insurance agent that has a value of $10 [$1] or less 
on which there is an advertisement of the insurance premium finance 
company.
	(c)  Subsection (a-1) [(a)]  does not prohibit a person, 
partnership, or other entity described by Subsection (a) [an 
insurance premium finance company] from making a payment under a 
contractual agreement with a validly organized and operating 
association of insurance agents or a subsidiary of the association 
if no part of a payment received under the agreement:
		(1)  is distributed to an insurance agent [or broker] 
or an employee of an insurance agent [or broker]; or
		(2)  inures directly to the benefit of a member of the 
association or an employee of the member.
	(d)  A contractual agreement under Subsection (c):                             
		(1)  must be in writing; and                                                  
		(2)  is not valid until commissioner [department] 
approval is received.
	(e)  Subsection (a-1) does not prohibit an insurance agent 
from being the sole owner or sole shareholder of an insurance 
premium finance company and receiving the profits and fees of the 
insurance premium finance company if:
		(1)  the insurance agent discloses the agent's 
ownership interest in the insurance premium finance company to each 
insured placed by the agent with the insurance premium finance 
company owned by the agent;
		(2)  the disclosure to the insured appears prominently 
on the insurance premium finance application immediately above the 
signature block for the insured; and
		(3)  the disclosure language is substantially similar 
to the following:
	THE INSURANCE PREMIUM FINANCING AGREEMENT YOU ARE 
ENTERING INTO IS WITH A PREMIUM FINANCE COMPANY OWNED 
SOLELY BY YOUR INSURANCE AGENT. INCOME GENERATED BY 
THE FEES AND FINANCE CHARGES IN THIS AGREEMENT WILL BE 
SHARED WITH YOUR INSURANCE AGENT.
	SECTION 4.  (a)  The change in law made by this Act applies 
only to an act committed or a transaction that occurs on or after 
the effective date of this Act.
	(b)  An act committed or a transaction that occurs before the 
effective date of this Act is covered by the law in effect on the 
date that the act was committed or the transaction occurred, and the 
former law is continued in effect for that purpose.
	SECTION 5.  This Act takes effect immediately if it receives 
a vote of two-thirds of all the members elected to each house, as 
provided by Section 39, Article III, Texas Constitution.  If this 
Act does not receive the vote necessary for immediate effect, this 
Act takes effect September 1, 2005.