BILL ANALYSIS

C.S.H.B. 4432

By: Dean

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

The bill author has informed the committee that when the Texas Workers' Compensation Insurance Fund was created in 1991, the board member qualifications were drafted to ensure the insurance industry was not overrepresented, which could have impeded the mission to serve as a competitive force in the marketplace, and that these qualifications have been carried over to the fund's successor, the Texas Mutual Insurance Company. Under current state law, a person is not eligible to serve on the Texas Mutual Insurance Company board of directors if the person or a family member within the second degree of affinity or consanguinity has any association with, or financial interest in, a person or entity required to be registered or licensed under the Insurance Code. However, as the bill author has informed the committee, while this structure sought to ensure Texas Mutual Insurance Company board members had appropriate separation from workers' compensation insurance affiliates, the list of persons required to register under the Insurance Code has grown to cover a broad array of tangentially related industries, making it increasingly difficult for the Texas Mutual Insurance Company to fill vacancies on its board. C.S.H.B. 4432 seeks to streamline the filling of vacancies while maintaining safeguards against conflicts of interest to enhance the board's effectiveness in the workers' compensation marketplace by revising the qualifications for Texas Mutual Insurance Company board members.

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 this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 4432 amends the Insurance Code to revise the professional characteristics of an individual, and another individual who has a specified relationship with the individual, that prohibit the individual from serving as a member of the board of directors of the Texas Mutual Insurance Company  as follows:

· changes from an individual who is registered or licensed under the Insurance Code or who is required to be registered or licensed under that code to an individual who is a licensed insurance agent;

· changes from an individual who is employed by or acting as a consultant to a person registered or licensed under the Insurance Code or required to be registered or licensed under that code to an individual who serves as an employee, officer, director, or consultant, or in any other capacity for an insurer writing workers' compensation insurance in Texas or an affiliate of an insurer writing workers' compensation insurance in Texas; and

· changes from an individual who owns, controls, has a financial interest in, or participates in the management of an organization registered or licensed under the Insurance Code or required to be registered or licensed under that code to an individual who owns, controls, has a financial interest in, or participates in the management of an insurer writing workers' compensation insurance in Texas or an affiliate of an insurer writing workers' compensation insurance in Texas.

Additionally, the bill changes the nature of the relationship between those individuals that, when combined with the specified professional characteristics, renders the individual ineligible to serve as a board member from being related within the second degree by consanguinity or affinity to being related within the first degree by consanguinity or affinity. The bill also removes the prohibition against the individual residing in the same household with another individual with those specified professional characteristics.

C.S.H.B. 4432 expressly does not affect the entitlement of a member serving on the board of directors of the Texas Mutual Insurance Company immediately before the bill's effective date to continue to serve for the remainder of the member's term.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 4432 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 establishing that the bill's provisions do not affect the entitlement of a member serving on the board of directors of the Texas Mutual Insurance Company immediately before the bill's effective date to continue to serve for the remainder of the member's term.