HBA-JLV H.B. 2206 77(R)    -BILL ANALYSIS


Office of House Bill AnalysisH.B. 2206
By: Dutton
Financial Institutions
3/20/2001
Introduced



BACKGROUND AND PURPOSE 

Current law allows people to purchase pre-need funeral contracts to assist
their families in paying for funerals at the time of need.  Money paid in
advance is used to purchase an insurance policy or is placed in a prepaid
funeral benefits trust.  These trusts are regulated by the Texas Department
of Banking, which monitors funeral homes' adherence to the state Finance
Code and keeps a list of acceptable investments that these companies can
make, including savings accounts, certificates of deposit, mutual funds,
stocks, and bonds.  Insurance policies are monitored by the Texas
Department of Insurance.  While pre-need funeral contracts are a growing
part of the funeral industry, there may also be a need for more regulation.
Some consumers are concerned about what happens to the interest being
earned by these trusts and insurance policies. While all interest earned in
funeral benefits trusts belong to the funeral home, current law does not
state who owns the interest in insurance policies.  House Bill 2206
requires an insurance company to pay  the estate of the deceased or named
beneficiary the benefits in excess of the cost of the funeral and modifies
provisions governing the cancellation of funeral benefits contracts. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

ANALYSIS

House Bill 2206 amends the Finance Code to require an insurance company, at
the time of death, to pay any benefits in excess of the cost of the funeral
to the estate of the deceased or a named beneficiary other than a seller or
funeral provider that is a party to the contract.   The bill provides that
the Texas Department of Banking (department) must approve a standard sales
contract form for prepaid funeral benefits (contract), which must provide
for reasonable consumer modification of funeral benefits at the time of
need without penalty.  The bill provides that a purchaser of a contract may
only pay the seller a finance charge for a funeral-related product or
service delivered at the time of purchase.  The bill provides that a
purchaser who cancels a contract before the 31st day after the date of the
contract is entitled to withdraw all money paid to the seller and all
earnings attributable to that money.  The bill provides that earnings
attributable to money paid to a seller do not include an amount allowed to
be withdrawn to pay certain expenses.  The bill authorizes the purchaser of
a contract to change the funeral provider without penalty.  Before the
change, if the funeral provider is also the seller under the contract, the
change is considered a cancellation of the contract.  The bill prohibits an
insurance-funded sales contract for prepaid funeral benefits from providing
for premium payments that in the aggregate would exceed the face value of
the insurance policy. The bill repeals provisions authorizing a purchaser
to waive the purchaser's right to cancel the contract. 

EFFECTIVE DATE

September 1, 2001.