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SUBCHAPTER T. SPECIALTY INSURANCE LICENSE 28 TAC §§19.1902, 19.1905 and 19.1909

The Commissioner of Insurance adopts amendments to §19.1902, §19.1905 and §19.1909 concerning specialty insurance licenses. Sections 19.1902 and 19.1909 are adopted without changes to the proposed text as published in the November 2, 2001 issue of the Texas Register (26 TexReg 8709) and will not be republished. Section 19.1905 is adopted with changes.

The adopted amendments are necessary to maintain effective regulation of the specialty insurance license by conforming the licensing requirements to the business operations that use these licenses and to provide the public with insurance products through trained persons without disruption of the public´s access to or the availability of the associated consumer transactions. The adopted amendments will apply equally to all specialty insurance licenses including the telecommunications specialty license added by amendments to Article 21.09 in Senate Bill 466, 77th Legislature.

The adopted amendments allow a specialty license holder to register all locations, except franchises, where its associated consumer transactions occur and specialty insurance products are sold and require the specialty license holder to train those persons selling insurance under its license. The adopted amendments also redefine the terms franchisee and franchisor and enable a specialty license holder to register non-franchise locations at which its associated consumer transactions occur and insurance is sold. For the purposes of this subchapter, the amendments also broaden the definition of employee beyond a direct contractual relationship.

The department has determined that a clarification change is necessary in §19.1905 (b). The first sentence of that section has been changed to clarify that the word "only" is intended to relate to the word "location" and not the word "register."

The adopted amendments to §19.1902, the definitions section, revise the definitions of franchisee and franchisor to prevent the specialty license holder´s business relationships from being classified as a franchise solely because of its type of business activity. The adopted amendments also add a definition of registered location to standardize this term throughout the subchapter; remove contractual references from the definition of employee; and add a definition of supervision to support the definition of employee. The adopted amendments also delete the term franchise location and define the term location as a place of business. The adopted amendment to §19.1905(a) removes the requirement that insurance sales may only be conducted at locations owned and operated by the specialty license holder. The adopted amendments to §19.1905(b) and (f) require applicants and specialty license holders to register locations at which both the associated consumer transaction and the sale of insurance occur under the specialty license. The adopted amendments to §19.1905(d) and (e) clarify the licensing relationships of franchisees and franchisors under this subchapter.

The adopted amendment to §19.1909(a) reflects the term employee is not limited to the scope of the individual's employment.

Finally, this adoption deletes the word business where the term business location is used in the subchapter.

No comments were received.

The amendments are adopted under Insurance Code Article 21.09 and §36.001. Article 21.09 §6 provides the Commissioner may adopt rules necessary to implement the specialty license. Section 36.001 provides that the Commissioner of Insurance may adopt rules to execute the duties and functions of the Texas Department of Insurance only as authorized by statute.

§19.1902. Definitions. The following words and terms, when used in this subchapter, shall have the following meanings unless the context clearly indicates otherwise.

(1) Associated consumer transaction--A retail exchange of goods or services other than insurance which is the basis of the relationship between the specialty license holder and its customer.

(2) Control--The power to direct or cause the direction of the management and policies of a specialty license holder, whether directly or indirectly. For the purpose of this subchapter, a person is considered to control:

(A) a corporate specialty license holder if the person is an officer or director of the corporation or if the person, individually or acting with others, directly or indirectly, holds with the power to vote, owns, or controls, or holds proxies representing, at least 10 percent of the voting stock or voting rights of the corporate specialty license holder; or

(B) a partnership if the person through a right to vote or through any other right or power exercises rights in the management, direction, or conduct of the business of the partnership.

(3) Corporation--A legal entity organized under the business corporations laws or limited liability company laws of this state, another state, or a territory of the United States.

(4) Credit accident and health insurance--A type of insurance as set out in Insurance Code Article 3.53.

(5) Credit involuntary unemployment insurance--A type of insurance as set out in Insurance Code Article 21.79E.

(6) Credit life insurance--A type of insurance as set out in Insurance Code Article 3.53.

(7) Department--The Texas Department of Insurance.

(8) Depository institution--Any bank or savings association as defined under 12 U.S.C. §1813 including a state or federal credit union.

(9) Employee--A person that:

(A) is trained to act individually on behalf of the specialty license holder;

(B) is acting on behalf of and under the supervision of the license holder; and

(C) is not compensated based primarily on the amount of insurance sold.

(10) Franchisee--A person that is granted a franchise by a franchisor.

(11) Location--A place of business.

(12) Franchisor--A person that grants a franchise to a franchisee.

13) Partnership--An association of two or more persons organized under the partnership laws or limited liability partnership laws of this state, another state, or a territory of the United States.

(14) Person--An individual, partnership, corporation, or depository institution.

(15) Specialty insurance product--Any of the types of insurance set out in Insurance Code Article 21.09.

(16) Specialty license holder or specialty licensee--A person who holds a license under Insurance Code Article 21.09.

(17) Registered Location--A location that has been identified by an applicant or specialty license holder to the department as a place at which the applicant's or specialty license holder's associated consumer transactions occur and insurance sales will be conducted under the specialty license and for which all applicable registration fees have been paid.

(18) Supervision--Supplying trained employees with forms, specific requirements and procedures necessary for the sale of insurance under the specialty license.

§19.1905. Place of Business.

(a) An applicant may obtain a single specialty license which authorizes the applicant to conduct insurance business under Article 21.09 at registered locations.

(b) An applicant for a specialty license under Article 21.09 shall register with the department only those locations where applicant's associated consumer transactions occur and insurance sales will be conducted under the specialty license. All existing locations where applicant's associated consumer transactions occur and insurance sales will be conducted must be included with the applicant's original license application form. An applicant may submit a separate registration form as required under §19.902(c) of this title (relating to One Agent, One License) for each location or a single notarized list containing the physical address of each location.

(c) The registration of an additional location shall be treated as an expansion of the specialty license holder's authority, and a fee equal to the license fee shall be paid for each additional location as provided by §19.902 of this title.

(d) An applicant or specialty license holder that is also a franchisor may not register a location of a franchisee.

(e) An applicant or specialty license holder that is a franchisee may not register a location of the franchisor or another franchisee. The independent owner of each franchisee must submit an application for specialty license and location registration separate from any application and location registration submitted by the franchisor.

(f) A specialty license holder who transfers locations, opens an additional location or acquires a location already in operation is required to register each new location where specialty license holder's associated consumer transactions occur and insurance sales will be conducted which was not registered by the license holder at the time the original license application was filed with the department. The requirements set out in §19.902(c) of this title shall govern a registration under this subsection.

(g) No applicant for or holder of a specialty license shall be required to file multiple registrations for a previously registered location as a result of seeking more than one specialty license authority.

(h) A specialty license holder may not solicit insurance from a location which the license holder has not registered with the department under this section.

§19.1909. Employee Training.

(a) Each employee of a specialty license holder who performs any act of an insurance agent shall complete a training program which satisfies the requirements of Article 21.09 §1(d).

(b) An insurance company authorized to write the specialty insurance product shall submit an outline of the training program to the department for approval prior to use by a specialty license holder.

(c) The training outline shall be sufficiently detailed to demonstrate that the specialty license applicant's employees will receive training in the disclosures required under the applicable statutes and regulations as well as training in each specific type of specialty insurance product which the applicant seeks authorization to solicit.

(d) An applicant for or holder of a specialty insurance license shall submit all employee training materials to the department upon request. If the department finds that a training program is deficient, misrepresents any aspect of the insurance transaction or contains inaccuracies misleading to the public, the department may institute a disciplinary action against the insurance company that prepared the training materials. If the department finds that a training program is modified by or is not properly administered by the specialty license holder, the department may take any disciplinary action authorized under §19.1910 of this title (relating to Denial or Refusal of Specialty License Application; Suspension or Revocation of Specialty Licenses; Discipline of Specialty License Holders) against the specialty license holder.



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