By: Brimer S.B. No. 178
(In the Senate - Filed January 12, 2005; February 1, 2005,
read first time and referred to Committee on Business and Commerce;
May 16, 2005, reported adversely, with favorable Committee
Substitute by the following vote: Yeas 7, Nays 0; May 16, 2005,
sent to printer.)
COMMITTEE SUBSTITUTE FOR S.B. No. 178 By: Fraser
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.
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