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You are here: Home . rules . 2006 . 0724a-059

SUBCHAPTER B. INSURANCE HOLDING COMPANY SYSTEM REGULATORY ACT

28 TAC §7.209

1. INTRODUCTION. The Texas Department of Insurance proposes amending §7.209(d), concerning the fingerprint requirement for insurance company individuals and officers in connection with Form A filings. Form A is a statement regarding the acquisition or change of control of a domestic insurer. The proposed amendment is necessary to conform the existing fingerprint requirement for individuals regulated under §7.209(d), including individual applicants or persons who are the chairman of the board, chief executive officer, president, chief financial officer, treasurer, and controller of the applicant if the applicant is not an individual, with a new fingerprint submission requirement that the Department is proposing for adoption in amended §1.501 and new §§1.503 - 1.509. Additionally, proposed amendments to §1.501 clarify that individuals regulated under §7.209(d) are subject to existing §1.502 of this title (relating to Licensing Persons with Criminal Backgrounds). The proposed amendments to §1.501 and proposed new §§1.503 - 1.509 are also published in this edition of the Texas Register. The proposed amendment to §7.209(d) is also necessary to make the nonsubtantive revision of setting the listed titles in lower case.

The Department anticipates that the proposal will be effective no earlier than 90 days following the date the proposal is adopted by the Commissioner. The Department is requesting input from commenters on the most viable effective date. The actual effective date will then be determined following the review and consideration of all comments.

2. FISCAL NOTE. Matt Ray, Deputy Commissioner, Licensing Division, has determined that for each year of the first five years the proposed amendments and new sections will be in effect, there will be an approximate $7,500 annual increase in revenue to state government as a result of the enforcement and administration of this proposal due to the estimated additional fingerprint submissions to the DPS. This amount is based on an estimated additional 500 Form A related submissions annually that will likely result from the proposed amended §7.209(d), proposed amended §1.501, proposed new §§1.503 - 1.509, and the statutorily authorized $15 fee for each submission collected by the DPS. Government Code §411.088(a)(2) authorizes the DPS to charge the $15 fee for each criminal history record information inquiry. It is the Department's understanding based on information provided by the DPS that this fee is for the costs of processing fingerprints and maintaining the records and systems used by the DPS in processing submissions. Therefore, the additional submissions may result in increased costs to the DPS, which may substantially offset or eliminate the additional revenue. It is anticipated that most individuals within Texas will utilize the convenience and reliability offered by the authorized electronic fingerprint services and, as such, the Department estimates that there will be no measurable fiscal impact to local governments from the capture of fingerprints on paper cards by local law enforcement agencies as a result of the enforcement or administration of this proposal. There will be no anticipated effect on local employment or the local economy as a result of the proposal.

3. PUBLIC BENEFIT/COST NOTE. Mr. Ray has determined that for each year of the first five years the proposed amendment is in effect, the anticipated public benefit will be a more thorough and comprehensive review of the suitability of individuals regulated under §7.209(d), including individual applicants or persons who are the chairman of the board, chief executive officer, president, chief financial officer, treasurer, and controller of the applicant if the applicant is not an individual, who are seeking to obtain a license or authorization from the Department. This more thorough and comprehensive review will further ensure that each of these individuals is honest, trustworthy, reliable, and fit to hold the authorization. The total probable economic costs to individuals required to comply with the proposed amended §7.209(d), proposed amended §1.501, and proposed new §§1.503 - 1.509, are estimated to range between $48.95 and $56. This cost estimate is based on compliance with the proposed amendment to §1.501(a) and proposed new §§1.503 - 1.509. Any economic costs to comply with the proposed amendment to §1.501(b) result from the enactment of several statutes in the Occupations Code, Labor Code, and the Insurance Code, and are not a result of the adoption, enforcement, or administration of the proposal. These statutes include Occupations Code Chapter 53 (states the general procedure a licensing authority must employ when considering the consequences of a criminal record on granting or continuing a person's license, authorization, certificate, permit, or registration), Occupations Code §53.025 (authorizes a licensing authority to issue guidelines relating to its practice under Chapter 53), and Labor Code §407A.051 (authorizes the Commissioner to establish application requirements for self-insured workers' compensation groups).

The estimated $48.95 - $56 cost to individuals to comply with the proposed amendment to §1.501(a) and proposed new §§1.503 - 1.509 is for the charges by a vendor or criminal law enforcement agency to capture fingerprints and the fees charged by the DPS and the FBI to process the fingerprints and provide the Department with the individual's criminal history information. It is anticipated that these costs will apply only once to an individual affected by this rule as long as that individual maintains a continuous license or authorization with the Department. These costs are in line with, or less than, those required under similar requirements in other states. For example, California requires a $76 fee, Florida requires a $64 fee, and Idaho requires a $60 fee.

The estimated $48.95 - $56 cost is based on the following considerations. The Department estimates that the cost of being fingerprinted will be $9.95, $10, or $17, depending on the vendor chosen by the individual. The $9.95 amount is based on the charge that is collected, according to the DPS, by the DPS' electronic fingerprint vendor for electronically capturing an individual's fingerprints. The $10 amount is based on the current maximum charge criminal law enforcement agencies are authorized to collect, as provided under the Human Resources Code §80.001(b), from individuals for capturing fingerprints, usually on paper cards. Additionally, the Department's licensing examination vendor currently charges $10 to electronically capture the fingerprints of an applicant taking a Department examination. The $17 amount is based on the Department's examination vendor's charge for electronically capturing fingerprints on an individual who is not taking a Department licensing examination. The current cost of processing fingerprints by the DPS and FBI are, respectively, $15 and $24 per individual. Any other economic costs to comply with the proposal result from existing rules or from the enactment of the Government Code and the Insurance Code, including Government Code §§411.083 (dissemination of criminal history record information by the DPS), 411.086 (relevant rules adopted by the DPS), 411.106 (authorizes the Department to access criminal history record information from the DPS), Insurance Code §§801.056 (authorizes the Department to request a complete set of fingerprints from individuals controlling an insurance company, an insurance company's corporate officers, and individual applicants for any license, permit registration, certification, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code), and 4001.103 (authorizes the Department to request a complete set of fingerprints from individual applicants for any license, permit, certificate, registration, or other authorization issued by the Department to engage in a regulated activity under Insurance Code Title 13 (Regulation of Professionals)) and are not a result of the adoption, enforcement, or administration of proposed amendment of §1.501(a) and proposed new §§1.503 - 1.509.

On a per individual basis, there will be no difference in the cost of compliance between a large and small business as a result of the proposal since the costs will be the same for each category of individual required to comply with the proposal. Different business models or personnel benefits offered may result in cost differences between entities; these differences, however, are a matter of choice and are not a result of the proposed rules. Based upon the cost of labor per hour, there is no disproportionate economic impact on small or micro businesses. Even if the proposal results in some adverse effect on small or micro businesses, the agency has considered the purpose of the applicable statutes, which is to maintain effective regulation of the insurance industry by further ensuring that persons applying for licensure or authorization, including the officers, directors, partners, and controlling shareholders of insurance agencies, insurance companies and other regulated entities, are honest, trustworthy, reliable, and fit to hold the licensure or authorization, and has determined that it is neither legal nor feasible to waive the provisions of the proposal for small or micro businesses. Additionally, it is the Department's position that the various applicable statutes require equal application of any fingerprint identification process to all affected individuals.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on September 5, 2006 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comments must be simultaneously submitted to Matt Ray, Deputy Commissioner, Licensing Division, Mail Code 107-1A, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.

The Commissioner will consider the adoption of the proposed amendments and new sections in a public hearing under Docket No. 2645 scheduled for September 6, 2006 at 10:00 a.m. in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas. Written and oral comments presented at the hearing will be considered.

5. STATUTORY AUTHORITY. The amendment is proposed under the Occupations Code Chapter 53; Government Code Chapter 411; and Insurance Code Chapters 801, 823, and 36. Occupations Code Chapter 53 states the general procedure a licensing authority must employ when considering the consequences of a criminal record on granting or continuing a person's license, registration or authorization. Occupations Code §53.025 authorizes a licensing authority to issue guidelines relating to its practice under Chapter 53. Government Code §411.106 authorizes the Department to receive criminal history information from the DPS regarding insurance company principals and officers and applicants for any license, permit, or other authorization issued by the Department to engage in a regulated activity under the Insurance Code. Government Code §§411.083 and 411.087 authorize the Department to obtain, through the DPS, criminal history information from the FBI on those individuals described in Government Code §411.106. Insurance Code §801.056 authorizes the Department to request a complete set of fingerprints from an insurance carrier applicant, or the applicant insurance company's corporate officers. Insurance Code §823.157 authorizes the Commissioner to deny the acquisition or change of control of an insurer if the Commissioner determines that due to a lack of trustworthiness or integrity of the persons who would control the operations of the domestic insurer, the acquisition or change of control would not be in the interest of the insurer' policyholders and the public. Insurance Code §36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

6. CROSS REFERENCE TO STATUTE. The following statutes are affected by the proposal:

Rule No. Statute

§7.209 Occupations Code Chapter 53, Government Code Chapter 411, and Insurance Code Chapters 801 and 823

7. TEXT.

§7.209. Form A.

(a) - (c) (No change.)

(d) Identity and background of individuals associated with the applicant.

(1) Furnish biographical data for the applicant if such person is an individual, or for all persons who are directors, executive officers, or owners of 10% or more of the voting securities of the applicant if the applicant is not an individual, with such biographical data in the form of the biographical affidavit form adopted by reference under §7.201(a)(1) of this title (relating to Forms Filings). Copies of this form are available from Financial Analysis and Examinations, Mail Code 303-1A, Texas Department of Insurance, P.O. Box 149099, 333 Guadalupe, Austin, Texas 78714-9099.

(2) The [Furnish fingerprint cards for the] applicant if such person is an individual, or for persons who are the chairman of the board, chief executive officer, president, chief financial officer, treasurer, and controller [Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer, Treasurer, and Controller] of the applicant if the applicant is not an individual , shall comply with the requirements of Chapter 1, Subchapter D of this title (relating to Effect of Criminal Conduct). [Copies of fingerprint cards may be obtained by sending a written request to Licensing Division, Mail Code 107-1B, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104, by telecopy or facsimile to (512) 475-1819, or by e-mail to LICENSE@tdi.state.tx.us. The request should include the name of the requestor, address, phone number and number of cards requested and should be limited to the actual number needed up to a maximum of 25 cards per order. Fingerprint cards are also available from local law enforcement agencies, such as sheriff and police departments, and agent testing centers. Each fingerprint card submitted should be accompanied by the full name of the law enforcement agency or testing center, the printed or typed identity of the individual performing the fingerprinting, the address, the phone and telecopy or facsimile numbers of the law enforcement agency or testing center].

(e) - (n) (No change.)



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