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.