BILL ANALYSIS

S.B. 1672

By: Taylor

Insurance

Committee Report (Unamended)

BACKGROUND AND PURPOSE

Interested parties such as the US Travel Insurance Association seek to correct inconsistencies among the states relating to the licensing and regulation of travel retailers that sell travel insurance, while also providing greater consumer protection. The National Conference of Insurance Legislators (NCOIL) recently drafted model legislation to further that effort, and the National Association of Insurance Commissioners and NCOIL have both taken steps to provide a workable solution to resolve regulatory inconsistencies across the states for travel insurance providers and travel retailers. These parties assert that the state should establish a licensing framework that reflects the unique distribution system of travel insurance in the travel industry and that appropriately places the regulatory burden on the insurer or managing general agent who develops and distributes the product.  S.B. 1672 seeks to enhance consumer protection in the travel insurance industry by clarifying accountability and notice requirements and by clearly distinguishing licensable and non-licensable activities for limited lines products such as travel insurance.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the commissioner of insurance in SECTIONS 5 and 6 of this bill.

ANALYSIS

S.B. 1672 amends the Insurance Code to authorize the commissioner of insurance to issue a specialty license to an applicant authorizing the license holder to sell, solicit, or negotiate travel insurance through a licensed insurer. The bill establishes that a travel retailer that operates on behalf of and under the license and direction of a supervising entity does not require a travel insurance license and removes the authority of the commissioner to issue a limited-purpose, specialty license to a travel agency, the franchise of a travel agency, or a public carrier that complies with statutory provisions regulating travel insurance. The bill authorizes an insurer authorized to engage in the business of travel insurance in Texas to designate a travel insurance supervising entity that is a licensed managing general agent, a licensed third-party administrator, or a licensed insurance agent, including a specialty license holder and a person who holds a general property and casualty license, a general life, accident, and health license, or a substantially equivalent license as determined by the commissioner.

S.B. 1672 authorizes a travel retailer, defined in the bill as a business entity that makes, arranges, or offers travel services, to offer and disseminate certain specified types of travel insurance as a service to the retailer's customers on behalf of and under the license and direction of a supervising entity, rather than authorizing a travel agency or licensed franchisee to act as an agent for an authorized insurer in the provision of such services. The bill restricts the travel retailer's authority to the offering or dissemination of travel insurance in connection with the sale or arrangement of events, in addition to transportation or accommodations, for travelers.  The bill includes in the specified services that a travel retailer has authority to offer and disseminate, with respect to travel insurance, accident and health insurance that provides coverage to a traveler for accidental death or dismemberment and for medical expenses resulting from a sickness, in addition to an accident, involving the traveler that occurs during the planned trip; insurance that provides coverage to a traveler for expenses incurred as a result of trip cancellation or interruption of a planned event, in addition to a planned trip; personal effects insurance that provides coverage to a traveler for loss of or damage to personal effects during the planned event, in addition to the planned trip; and insurance that provides coverage for damage to accommodations or rental vehicles.  The bill removes provisions authorizing the sale of life insurance capped at $150,000 on any one life covering risks of travel during a planned trip. The bill establishes that travel insurance does not include major medical expense coverage for a traveler on a planned trip for six months or more, including an individual working abroad, an expatriate, and a military service member on deployment.

S.B. 1672 requires a travel retailer, or the supervising entity, to provide to a traveler seeking to purchase travel insurance a description of the material terms or the actual terms of the coverage; a description of the claims filing process; a description of the review and cancellation process for the insurance policy; and the name and contact information for the insurer and the supervising entity. The bill authorizes travel insurance coverage to be provided under an individual policy or a group or master policy. The bill authorizes a supervising entity designated by an insurer that provides travel insurance to authorize a travel retailer to offer and disseminate a travel insurance policy on behalf of the supervising entity by establishing a retailer registry to be maintained and updated on an ongoing basis in a form prescribed by commissioner rule and requires an insurer to notify the Texas Department of Insurance (TDI) in the manner prescribed by commissioner rule of the supervising entity's designation. The bill requires the registry to include the name, address, and contract information, and federal employer identification number, if any, of each registered travel retailer and an individual contact person at the retailer and requires submission of the registry to TDI on commissioner request.

S.B. 1672 requires the supervising entity to certify in a form prescribed by commissioner rule that each registered travel retailer is in compliance with federal law regarding crimes by or affecting persons engaged in the business of insurance whose activities affect interstate commerce. The bill requires the supervising entity to designate an individual who is an officer of the entity and a licensed agent as the compliance officer responsible for compliance with insurance laws, rules, and regulations related to travel insurance. The bill requires the compliance officer and the officers of the supervising entity that direct or control the supervising entity's travel insurance business to submit fingerprints as required by commissioner rule. The bill requires the supervising entity to provide travel insurance instruction and training to each employee of a registered travel retailer whose duties include offering and disseminating travel insurance; subjects the instruction and training material to commissioner review; and requires the instruction and training material to include instruction relating to the insurance offered, ethical sales practices, and required disclosures to travelers. The bill establishes that the supervising entity is responsible for the acts of a travel retailer and requires the supervising entity to use reasonable means to ensure each registered retailer's compliance with provisions governing travel insurance.

S.B. 1672 requires a travel retailer offering and disseminating travel insurance to register with an insurer in a retailer registry. The bill requires the travel retailer to make available to travelers brochures or written materials that provide specified contact information for the authorized insurer and the supervising entity; that explain that the purchase of travel insurance is not required for the purchase from the travel retailer of any other product or service; and that disclose that the travel retailer is authorized to provide general information about travel insurance but is not qualified or authorized to provide answers to questions about specific policy terms or to evaluate the adequacy of the traveler's existing insurance coverage. The bill prohibits a travel retailer from evaluating or interpreting technical words or phrases used in a travel insurance policy or benefits under or terms of the policy; from evaluating or providing advice related to a traveler's existing insurance coverage; and from advertising or otherwise holding out the travel retailer as a license holder or an insurance expert. The bill authorizes a travel retailer in compliance with provisions governing travel insurance to receive compensation for offering and disseminating travel insurance on behalf of a supervising entity on or after the date the retailer registers with the insurer. The bill subjects a supervising entity and a travel retailer registered with the supervising entity to statutory provisions governing sanctions, emergency cease and desist orders, and deceptive, unfair, and prohibited practices in the business of insurance.

S.B. 1672 requires the commissioner to promulgate forms as soon as practicable after the bill's effective date but not later than January 1, 2014. The bill applies only to a travel insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2014.

EFFECTIVE DATE

September 1, 2013.