80R10698 DWS-F

By: Flynn H.B. No. 3436

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of prepaid funeral benefits.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Section 154.101, Finance Code, is amended to read as follows:

Sec. 154.101. PERMIT REQUIREMENT. Subject to Section 154.1011, a [A] person must hold a permit issued under this subchapter to:

(1) sell prepaid funeral benefits, or accept money for prepaid funeral benefits, in this state under any contract; or

(2) solicit an individual's designation of prepaid funeral benefits to be provided out of a fund, investment, security, or contract, including a contract or policy of insurance authorized, and sold under a license issued, by the Texas Department of Insurance, to be created or purchased by that individual at the suggestion or solicitation of the seller.

SECTION 2. Subchapter C, Chapter 154, Finance Code, is amended by adding Section 154.1011 to read as follows:

Sec. 154.1011. INSURANCE COMPANY PROVIDING INSURANCE-FUNDED PREPAID FUNERAL BENEFITS. (a) Except as provided by this section, only an insurance company authorized to engage in business in this state may hold a permit to sell insurance-funded prepaid funeral benefits in this state.

(b) If the domiciliary law of an insurance company authorized to engage in business in this state does not permit the insurance company to hold a permit to sell insurance-funded prepaid funeral benefits in this state, the insurance holding company for the insurance company may hold the permit. The agreement between the insurance holding company and the insurance company regarding services related to sale and servicing of insurance policies to fund prepaid funeral benefits must be submitted to the Texas Department of Insurance for review as provided by Section 823.103, Insurance Code.

(c) An insurance company or its insurance holding company must hold a permit under this chapter before the insurance company may assume an existing insurance policy funding a prepaid funeral benefits contract subject to this chapter.

(d) A seller of insurance-funded prepaid funeral benefits that is not an insurance company or an insurance holding company and that holds a permit under this chapter on September 1, 2007, may continue to renew and hold a permit under this chapter if the seller complies with all applicable requirements of this chapter and rules adopted under this chapter other than the requirement that the seller be an insurance company or an insurance holding company.

SECTION 3. Section 154.156(a), Finance Code, is amended to read as follows:

(a) The purchaser of a prepaid funeral benefits contract may irrevocably waive the purchaser's right to cancel the contract under Section 154.155. The waiver must be in a separate writing signed by the purchaser and the seller not earlier than the 15th day after the date of the purchase of the contract. The form of the waiver must comply with the requirements for the form of a sales contract under Section 154.151. With respect to an insurance-funded prepaid funeral benefits contract, neither a waiver of the purchaser's right to cancel the funding insurance policy nor an irrevocable assignment of benefits under Section 154.206 may occur earlier than the 15th day after the date of the purchase of the contract.

SECTION 4. Section 154.202, Finance Code, is amended to read as follows:

Sec. 154.202. [EXECUTION OF] CONTRACT AND [IN CONJUNCTION WITH APPLICATION FOR] POLICY CONSTITUTE SINGLE TRANSACTION. (a) An insurance-funded prepaid funeral benefits contract must be executed in conjunction with the application for the issuance of the insurance policy or policies with an aggregate initial face value that does not materially exceed the total contract price.

(b) The prepaid funeral benefits contract, the application for issuance of the insurance policy, and the subsequently issued insurance policy collectively comprise a single transaction for the purpose of purchasing prepaid funeral benefits.

SECTION 5. Section 154.203(a), Finance Code, is amended to read as follows:

(a) Premiums [A seller shall remit to the insurance company the premiums] collected by the seller, or by an agent for the seller, for an insurance policy that funds prepaid funeral benefits must be credited to the purchaser's insurance policy not later than the earlier of:

(1) the 30th day after the date of collection from the contract purchaser; or

(2) any deadline provided by the Insurance Code.

SECTION 6. Section 154.206, Finance Code, is amended to read as follows:

Sec. 154.206. ASSIGNMENT OF RIGHT TO BENEFITS. Subject to Section 154.156(a), the [The] purchaser of an insurance-funded prepaid funeral benefits contract may irrevocably assign the purchaser's ownership of and rights to benefits under the insurance policy to the seller, the funeral provider, the trustee, or other person solely for the purposes specified and only to the extent permitted by this chapter. If the aggregate initial face value of the funding insurance policy or policies exceeds the total contract price, the benefits attributable to the excess face value may not be assigned under this section.

SECTION 7. Section 154.207, Finance Code, is amended to read as follows:

Sec. 154.207. WITHDRAWAL OF BENEFITS PAYABLE UNDER POLICY. (a) The seller or funeral provider may withdraw the benefits payable under an insurance policy funding prepaid funeral benefits after:

(1) the beneficiary named in the contract dies;

(2) the funeral service is completed in compliance with applicable law; [and]

(3) the seller has completed the documentation required by this chapter or rules adopted under this chapter regarding performance of the prepaid funeral benefits contract in accordance with its terms, subject to any modifications permitted by law; and

(4) the insurance company is presented with:

(A) appropriate affidavits by an officer or designated agent of the seller on forms prescribed by the department, attesting to matters required by Subsections (a)(2) and (3); and

(B) a certified copy of the death certificate.

(b) Notwithstanding requirements in Subchapter B, Chapter 542, Insurance Code, or Subchapter C, Chapter 1103, Insurance Code, relating to timely payment of policy proceeds, an insurance company may not disburse proceeds of an insurance policy used to fund prepaid funeral benefits under this chapter to a funeral provider until the insurance company receives the affidavits required under Subsection (a)(4)(A). If an insurance company does not receive the affidavits within 60 days after the date of receipt of due proof of loss, the assignment to the funeral provider has no further effect and the insurance company shall pay the proceeds to the beneficiaries otherwise entitled under the policy.

(c) The seller shall maintain copies of the affidavits, the [and] death certificate, and other required documentation for examination by the department.

SECTION 8. Subchapter E, Chapter 154, Finance Code, is amended by adding Sections 154.208 and 154.209 to read as follows:

Sec. 154.208. RELATIONSHIP TO INSURANCE LAWS. (a) A seller of an insurance-funded prepaid funeral benefits contract must comply with this chapter and applicable provisions of the Insurance Code, and no presumption exists that either this chapter or the Insurance Code takes precedence over the other. To the extent applicable, the offer, sale, and performance of an insurance-funded prepaid funeral benefits contract must comply with both this chapter and the Insurance Code. In interpreting this section, the presumption is that:

(1) both this chapter and the Insurance Code are intended to be effective according to their terms;

(2) a just and reasonable result feasible of execution is intended; and

(3) public interest is favored over any private interest.

(b) This chapter does not limit the jurisdiction of the Texas Department of Insurance with respect to insurance-related matters arising out of the offer and sale of insurance-funded prepaid funeral benefits. An insurer in this state may not conduct any business not authorized by the Insurance Code.

(c) In developing rules that apply to insurance-funded prepaid funeral benefits, the commission shall work in conjunction with the commissioner of insurance to the extent practicable.

Sec. 154.209. REPRESENTATIONS REGARDING LIFE INSURANCE. (a) A person that markets and sells life insurance for a purpose other than funding a prepaid funeral benefits contract subject to this chapter may not represent or imply that the life insurance is intended to fund prearranged funeral services or merchandise through the use of:

(1) a noncontractual checklist of funeral services and merchandise, other than cash advance items, that invites or permits the purchaser to both make selections for a funeral and designate a funeral provider; or

(2) a contingent or revocable assignment of benefits under the insurance policy to a designated funeral provider.

(b) A violation of this section is an unfair method of competition or an unfair or deceptive practice in the business of insurance under Subchapter B, Chapter 541, Insurance Code.

SECTION 9. Section 154.412, Finance Code, is amended by adding Subsection (f) to read as follows:

(f) After the issuance of an order under this section, the commissioner may initiate an administrative claim for ancillary relief, including a claim for costs incurred in the administration, transfer, or other disposition of the seized assets and records, or costs reasonably expected to be incurred in connection with administration and performance of any outstanding prepaid funeral benefits contracts sold by a person subject to the order. The remedy provided by this subsection is not exclusive and does not limit the discretion of the commissioner to seek additional remedies authorized under this subchapter.

SECTION 10. Sections 154.003 and 154.004, Finance Code, are repealed.

SECTION 11. 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, 2007.