BILL ANALYSIS

C.S.H.B. 1498

By: Guerra

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Two elderly constituents in House District 41 were surprised to learn that their life insurance policies had an automatic loan provision clause that drained their $10,000 policies to practically zero. The state should protect elderly individuals and other vulnerable populations from confusing or clandestine clauses in insurance policy contracts that would similarly harm other Texans. C.S.H.B. 1498 seeks to require an insurer to provide adequate notice to an applicant for a life insurance policy with regard to any automatic loan provision in their contract.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the commissioner of insurance in SECTION 1 of this bill.

ANALYSIS

C.S.H.B. 1498 amends the Insurance Code to require an insurer to do the following before issuing a life insurance policy that contains an automatic premium loan provision:

· provide a written notice disclosing the provision that:

o is printed in at least 16-point font on a separate page of the application or enrollment form for the policy;

o includes an affirmation that the insurer read the notice aloud in both English and another language, if required; and

o is signed by the applicant separately from the rest of the application or enrollment form; and

· read the notice aloud to the applicant.

If any related policy document is in a language other than English, notice is required to be provided and read in that language in addition to English. The bill authorizes the commissioner of insurance to adopt rules as necessary to implement the bill's provisions, including rules establishing what satisfies the oral notice requirement. The bill applies only to an insurance policy delivered or issued for delivery on or after January 1, 2024.

EFFECTIVE DATE

September 1, 2023.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 1498 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

The substitute includes a provision absent from the introduced requiring a notice to be provided and read in both English and another language in addition to English if any related policy document is in a language other than English. In addition, the substitute includes a requirement not in the introduced for the written notice to include an affirmation that the insurer read the notice aloud in accordance with that requirement, if applicable.

The substitute includes a provision not in the introduced authorizing the commissioner to adopt rules as necessary to implement the bill's provisions, including rules establishing what satisfies the oral notice requirement.

Whereas the introduced applied to insurance policies delivered, issued for delivery, or renewed on or after January 1, 2024, the substitute applies only to insurance policies delivered or issued for delivery on or after that date.