HBA-NRS S.B. 414 77(R) BILL ANALYSIS Office of House Bill AnalysisS.B. 414 By: Madla Insurance 3/14/2001 Engrossed BACKGROUND AND PURPOSE Insurance Code provisions relating to an interim study of agents and agents' licenses statutes, enacted in 1997, required the commissioner of insurance to review and evaluate the current agents' licensing statutes and make recommendations to the legislature to reduce the number and type of agent licenses, determine which statutory provisions should apply uniformly to all insurance licenses and address new marketing methods, and any other problems which may exist. On November 12, 1999, the president signed into law an act which makes significant changes to the delivery of financial services in the United States. The Gramm-Leach-Bliley Act (P.L. 106-102) contains provisions which require increased uniformity in insurance agent licensing criteria among the various states. Senate Bill 414 modifies the Insurance Code to conform with federal guidelines concerning agent licensing criteria and to allow for proper implementation of the Gramm-Leach-Bliley Act in Texas. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1.01 (Section 4, Article 21.01, Insurance Code), SECTION 1.02 (Sections 1 and 3, Article 21.01-1, Insurance Code), SECTION 1.03 (Section 1A, Article 21.01-2), SECTION 1.06 (Section 5A, Article 21.01-2), SECTION 1.11 (Section 2, Article 21.07), SECTION 4.05 (Section 5, Article 21.11), SECTION 6.05 (Section 3A, Article 1.14-2), SECTION 7.03 (Article 5.13-1), SECTION 7.07 (Section 21, Article 21.07-3) of this bill. ANALYSIS Senate Bill 414 amends the Insurance Code to simplify and reform the regulation of insurance agents by consolidating the types of licenses issued to insurance agents and to promote uniformity in the licensing, examination, continuing education, and disciplinary requirements for agents in this state and with other states (Sec. 1, Art. 21.01). The bill modifies provisions relating to a certificate of authority or license required for participating in the business of insurance (Sec. 2, Art. 21.01). The bill sets forth that provisions relating to agents and agents' licenses apply to specified persons (Sec. 3, Art. 21.01 and Sec. 2, Art. 21.07). The bill authorizes the commissioner of insurance (commissioner) to adopt rules as necessary to implement provisions related to agents and agents' licenses and to meet the minimum requirements of federal law and regulations (Sec. 4, Art. 21.01). The bill sets forth provisions relating to agents' qualifying written examinations and provides for examination administration by the commissioner, rather than the State Board of Insurance (board). In the absence of an agreement with a testing service, the bill requires the Texas Department of Insurance (department), rather than the board, to administer any required qualifying examination in accordance with provisions relating to an agents' qualifying examination. The bill authorizes the commissioner to adopt rules relating to the scope, type, and conduct of the written examinations and the times and places at which the examinations will be conducted (Secs. 1 and 2, Art. 21.01-1). The bill provides that the department has exclusive jurisdiction for all matters relating to the continuing education of insurance agents licensed under the Insurance Code. The bill sets forth provisions relating to continuing education requirements for each individual who holds a license issued by the department. The bill requires the commissioner by rule to prescribe the criteria for an exemption or extension of continuing education requirements by means of a timely written request from an agent that is authorized by the department. The bill authorizes the commissioner by rule to provide for other reasonable exemptions. The bill requires the department to certify continuing education programs for agents and authorizes only a program that satisfies the criteria established by rule by the commissioner to receive certification. The bill requires the commissioner to establish a nonrefundable certification fee by rule for an application for certification of a continuing education program. The bill authorizes the commissioner to adopt rules establishing the requirements for continuing education program providers and sets forth provisions relating to the administration of the continuing education program (Sec. 3, Art. 21.01-1). The bill provides for the expiration and renewal of licenses, and authorizes the commissioner by rule to change the two-year expiration period for a license if the commissioner finds that the change is necessary to promote a uniform license period among this state and other states (Sec. 1A, Art. 21.01-2). The bill sets forth prohibited activities and penalties for engaging in such activities (Sec. 2A, Art. 21.01-2). S. B. 414 sets forth provisions relating to the denial or refusal of a license application, including provisions related to suspension or revocation of certain licenses and disciplinary actions that the department may take against an applicant or license holder (Sec. 3A, Art. 21.01-2). The bill provides for judicial review of a refusal, suspension, or revocation of a license or application, automatic fines for certain violations, and enforcement of these provisions (Secs. 4A, 5A, and 6A, Art. 21.01-2). The bill provides that the referral by an unlicensed person of a customer or potential customer to a licensed insurance agent is not an act of an agent, unless the unlicensed person discusses specific insurance policy terms or conditions with the customer or potential customer (Art. 21.02). The bill does not apply to specified persons (Sec. 1, Art. 21.07). The bill sets forth and modifies provisions relating to the application for and issuance of a license, including the issuance of a license to a partnership or corporation, and the issuance of a temporary license (Sec. 2, Art. 21.07 and Sec. 3A, Art. 21.07). The bill modifies provisions relating to the filing with the department of additional appointments by an agent who is authorized to work for more than one insurance carrier and the insurance carriers involved. If a general life, accident, and health agent or general property and casualty agent who has been appointed by an insurance carrier authorized to engage in the business of insurance in this state appoints a subagent, the bill requires the general agent to notify the department about the appointment (Sec. 6, Art. 21.07). The bill requires an insurance carrier to file specified information with the department upon termination of the appointment of an agent for cause and provides that information disclosed to the department concerning the termination is to be considered privileged and confidential except under certain subpoenas. The bill requires the department to collect from each agent of an insurance carrier certain nonrefundable fees for each appointment to be deposited to the credit of the department's operating fund (Secs. 6B and 6C, Art. 21.07). S. B. 414 also establishes the Texas Life, Accident, and Health Agents License Act and identifies agents subject to the Act (Sec. 1, Art. 21.07-1). The bill sets forth that a general life, accident, and health license is required for each person who acts in a specified capacity (Sec. 2, Art. 21.07-1). The bill authorizes a person who holds a general life, accident, and health license to write certain additional types of insurance contracts without obtaining an additional license (Sec. 3, Art. 21.07-1). The bill sets forth provisions relating to a limited life, accident, and health insurance licensing and funeral prearrangement life insurance licensing (Secs. 4 and 5, Art. 21.07-1). The bill prohibits a funeral prearrangement life insurance agent from writing certain coverage or acting as an agent for more than one insurance company (Sec. 5, Art. 21.07-1). The bill also sets forth provisions relating to the issuance of a license to an agent who writes life insurance that does not exceed $15,000 (Sec. 6, Art. 21.07-1). The bill establishes the Texas Property and Casualty Agents License Act and sets forth provisions relating to licensing, emergency licensing, and writing of specified insurance (Secs. 1, 2, 3, 4, and 5, Art. 21.14). The bill provides for the issuance of a limited property and casualty license (Sec. 6, Art. 21.14). The bill requires a full-time home office salaried employee of an insurance carrier to register with the department and establishes fees, continuing education requirements, and disciplinary procedures for certain acts (Sec. 7, Art. 21.14). The bill requires each person employed on a salaried basis that performs certain assigned duties in the office of a property and casualty agent to obtain an insurance service representative license (Sec. 8, Art. 21.14). The bill sets forth provisions related to the issuance of a license to act as an agent for a county mutual insurance company including the completion of a written examination (Sec. 9, Art. 21.14). The bill deletes current provisions relating to the licensing of local recording agents and solicitors and exceptions for companies or businesses engaged in the sale of life, health, and accident insurance and certain other exemptions. The bill removes provisions establishing an advisory council appointed by the board for continuing education information and assistance (Art. 21.14). S. B. 414 modifies provisions relating to a nonresident agent's license, including continuing education requirements, for the purpose of permitting such agents to conduct the business of insurance in Texas. The bill authorizes the issuance of a reciprocal nonresident license and authorizes the commissioner to adopt rules as necessary to implement provisions related to nonresident agents and to meet the minimum requirements of federal law and regulations (Secs. 1,2,3, and 5, Art. 21.11). The bill modifies provisions relating to an adjusters license and surplus line agents and agents' licenses (Sec. 1, Art. 21.07-4, V.T.I.C. and Secs. 2 and 3, Art. 1.14-2). The bill authorizes the commissioner, rather than the board, to adopt, rather than promulgate, rules necessary to implement provisions relating to surplus lines insurance or satisfy requirements under federal regulations (Sec. 3A, Art. 1.14-2). The bill modifies provisions relating to the issuance and revocation of a surplus lines license to an applicant (Sec. 4, Art. 1.14-2). The bill modifies provisions related to a variable contract agents license (Sec. 7, Art. 3.75). The bill provides for the licensing of agents for fraternal benefit societies (Art. 10.37-3). The bill modifies provisions regarding the Managing General Agents' Licensing Act, including redemption of shares, licensing and regulation of an agent and administration of the Act (Secs. 4, 19, and 21, Art. 21.07-3, V.T.I.C.). The bill redefines a bank to mean a depository institution (Sec. 1, Art. 21.21-9). The bill sets forth provisions regarding the regulation of agents authorized to solicit prepaid legal services and the licensing and regulation of an agent authorized to solicit job protection insurance for an insurance carrier (Art. 23.23A, and Art. 25.06). The bill repeals specified provisions (SECTION 8.01). The bill sets forth provisions for the transition period including examinations, licensing, and continuing education requirements, and provides for a grandfather clause relating to the changes in law made by the Act (SECTIONS 9.01 and 9.02). EFFECTIVE DATE September 1, 2001. The continuing education requirements for insurance agents requesting a renewal of a license apply to an application request made on or after January 1, 2003.