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You are here: Home . rules . 2007 . 0829-059

SUBCHAPTER I. LICENSING FEES 28 TAC §§19.801 and 19.802 SUBCHAPTER K. CONTINUING EDUCATION AND ADJUSTER PRELICENSING EDUCATION PROGRAMS

28 TAC §19.1002

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §§19.801, 19.802, and 19.1002, concerning the licensing, registration, examination, and appointment fees, and continuing education requirements for the newly created personal lines property and casualty agent license and the life agent license. The Department proposes these amendments to implement SB 1263, 80th Legislature, Regular Session, effective September 1, 2007, which established the personal lines property and casualty agent license and the life agent license to increase uniformity in insurance agent licensing criteria among the various states. The Department is proposing the repeal of existing §19.803, which is to be published in a future issue of the Texas Register. Although both proposals concern Chapter 19, Subchapter I of this title (relating to Licensing Fees), this proposal will not affect the proposed repeal.

The proposed amendments to §§19.801 and 19.802 are necessary to maintain effective regulation of insurance licensees by establishing fees sufficient to cover Department administration costs, which include licensure and enforcement of disciplinary requirements, among other regulatory protections. The proposed amendment to §19.1002 is necessary to incorporate the new license types created by SB 1263 into the Department's existing fee rule and continuing education rules. The proposed amendments are also necessary to update the Insurance Code references throughout the sections in accordance with the nonsubstantive revisions of the Insurance Code enacted by the 77th Legislature, effective June 1, 2003, and 79th Legislature, effective September 1, 2005.

Proposed amendments to §19.801(c) clarify the use of the subagent appointment in relation to the general agent, and the newly created personal lines property and casualty agent and life agent license types, and also consolidate in this section existing provisions from §19.802(d) relating to appointment of subagents by general lines agents. Prior to the enactment of SB 1263, only general agents could appoint another general agent as a subagent under §4001.205 of the Insurance Code. SB 1263 extends this authority by authorizing general agents, personal lines property and casualty agents, and life agents to appoint other general agents, personal lines property and casualty agents, and life agents as subagents.

Insurance agents are prohibited under the Insurance Code from writing a line of business for which the agent is not licensed by the Department. As to subagents, this prohibition is further reflected in Insurance Code §4001.109 that, while not requiring the subagent to hold each license of the appointing agent, requires the subagent to be licensed to write each line that the subagent is employed to write. Thus, an appointing agent may only write a line of business that the appointing agent is licensed to write; and a subagent may only write a line of business that both the subagent and appointing agent are licensed to write.

For example, a general agent appointed as a subagent by a personal lines property and casualty or life agent is limited to personal lines property and casualty or life agent products through that appointment. To write products in addition to personal lines or life products, that general agent would be required to have a direct appointment from the insurance company issuing the additional products. Conversely, a personal lines property and casualty agent or life agent appointed by a general agent is limited to those lines authorized under their personal lines property and casualty or life agent licenses.

Therefore, the amendment to §19.801(c)(1) adds the personal lines property and casualty agent and life agent license types to the existing language for consistency with the amended statute that these license types may appoint subagents. Section 19.801(c) is proposed to be amended by adding a new paragraph (2)(A) - (D) to address the subagent appointment process. Proposed new subparagraphs (2)(A) and (B) of §19.801(c) specify that only general lines agents, personal lines property and casualty agents, or life agents may appoint subagents and that only general lines agents, personal lines property and casualty agents, or life agents may be appointed as subagents. Proposed new §19.801(c)(2)(A) and (B) also consolidate a similar provision related to general lines subagent appointments in existing §19.802(d) for the purpose of making this subsection more complete concerning the subagent appointment process. Proposed new §19.801(c)(2)(C) provides clarification within the rule of the subagent's authority by restating Insurance Code §4001.109. Proposed new §19.801(c)(2)(D) consolidates a similar provision from existing §19.802(d) for the purpose of making this subsection complete concerning the subagent appointment process. Proposed amendments to subsections (e) and (f) of §19.801 add introductory titles to make the style consistent with subsections (a) - (d) of that section.

Proposed amendments to §19.802(b) add new subparagraphs (22) and (23) to include personal lines property and casualty agents and life agent license types created by SB 1263 and propose application, renewal, appointment, and Department administered examination fees for these license types. Under existing law, including Insurance Code §4001.006, the Department is required to set fees in amounts that are reasonable and necessary to implement and enforce Insurance Code Title 13. SB 1263 establishes the personal lines property and casualty license and the life agent license types in Insurance Code Title 13, Subtitle B. The Department anticipates no cost difference in administering the two new license types when compared to other agent license types. Therefore, the Department is proposing the same fees for these license types as other agent license types because these previously adopted fees have already been determined to comply with the statutory requirements of reasonable and necessary.

Individuals holding either a personal lines property and casualty agent license or life agent license are subject to the Department's continuing education program both specifically under Insurance Code §4004.053(a), as amended by SB 1263, and existing §4004.051, since these licenses are regulated under Subchapter B, Title 13, Insurance Code. The proposed amendment to §19.1002(b)(16) revises the definition of Licensee by adding the personal lines property and casualty agent and life agent license types. Under the amended definition, personal lines property and casualty agents and life agents will be required to meet the same statutory continuing education requirements as other licensees under the Insurance Code Chapter 4004 and §§19.1001 - 19.1021. These requirements include completing 15 hours of continuing education annually as required by §4004.053, as amended; completing at least 50 percent of course work in classroom or classroom equivalent environments as required under §4004.051(c); and completing at least two hours of ethics training per each two-year license renewal period as required by §4004.054. Under the proposed amendment to §19.1002(b)(16), for purposes of continuing education requirements, both resident and nonresident individuals holding the new license types would be treated consistently with individuals holding existing license types.

In addition, but unrelated to the new licenses, the proposed amendments to §§19.801, 19.802, 19.1002 make nonsubstantive revisions to references to certain agent license titles for consistency with the statute, including change of general lines property and casualty agent to general property and casualty agent; general lines life, accident, and health agent to general life accident and health agent; and, for the purpose of referring to both collectively, general lines agent to general agent.

2. FISCAL NOTE. Matt Ray, Deputy Commissioner, Licensing Division, has determined that for the first five years the proposed amendments to §§19.801 and 19.802 will be in effect, there will be an estimated increase in revenue to state government in the approximate amount of $637,750 annually for the first and second years and $647,000 in the third through fifth years as a result of the enforcement and administration of these amendments. This estimated increase is due to the initial licensing and biennial license renewal of personal lines property and casualty agents and life agents. Based on information from other states with similar licenses, Mr. Ray anticipates that approximately 12,755 two-year personal lines property and casualty agent and life agent licenses will be issued during each of the first two years this proposal is in effect with an application fee of $50 generating $637,750 in annual revenue. During the third through fifth year the new license types are in effect, Mr. Ray anticipates that the number of original licenses issued by the Department will be approximately 3,996 annually and that renewals will be approximately 8,959 annually. This will result in an estimated 12,995 personal lines property and casualty agent and life agent licenses being issued or renewed annually, generating $647,750 in annual revenue. Mr. Ray further anticipates that the number of temporary licenses issued during each year of the first five years this proposal is in effect will not be affected, and thus will have no effect on annual revenue. This lack of effect on annual revenue is due to the fact that any fiscal impact of these license types will result from new licensees who were unable or unwilling to pass the more extensive general agent's examination but are willing or able to pass the personal lines property and casualty agent or life agent examination. A temporary license is a means by which a person can be licensed before passing the examination. The temporary license, however, is not currently used by all carriers, and the Department does not expect that carriers will change how they use the temporary license as result of the enactment of SB 1263. Therefore, while the number of applicants for each temporary license may shift between license types, the Department does not expect a measurable increase in the overall number of temporary license applicants. As required by the Texas OnLine Project pursuant to Government Code §2052.252, a $3 Texas OnLine subscription fee is included in the proposed renewal fee; in accordance with state law, the Department will transfer this fee to the Texas OnLine Authority for each license renewed. This fee is set by the Texas Department of Information Resources under Government Code §2054.252. The required subscription fee, which is mandated for licensing agencies that participate in Texas Online, is intended to cover the cost of implementation of online licensing services. Each participating licensing agency is required to increase their occupational license renewal fees for their entire licensee population in order to cover the cost of the subscription fee. Additionally, Mr. Ray has determined that for each year of the first five years the proposed amendments to §19.1002 will be in effect, there will be no fiscal impact to local governments as a result of the enforcement or administration of these amendments. There will be no measurable 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 amendments are in effect, the anticipated public benefit as a result of adopting and administering the proposed amendments will be the effective regulation and continuing education of personal lines property and casualty agent and life agent licensees and protection of persons who contract with personal lines property and casualty agent and life agent licensees. The anticipated public benefit of the proposed amendments to §§19.801 and 19.802, concerning licensing fees for personal lines property and casualty agent and life agent licensees, will be the payment of fees sufficient to cover Department administration costs, including, among other regulatory protections, licensure, enforcement of statutory and rule requirements, disciplinary actions, and market conduct examinations. The anticipated public benefit of the Texas Online subscription fees charged with each renewal will be increased and more efficient and effective access to state government online licensing services by the public and licensees. The anticipated public benefit of the proposed amendment to §19.1002 concerning the continuing education program is a better informed agent community to serve the public.

The probable economic costs to comply with the proposed amendments to §§19.801 and 19.802 result from the Department's adoption of original application, registration, renewal, appointment, and examination fees for the two new license types sufficient to cover the cost of license administration as required by the legislative enactment of SB 1263 and the requirements of existing law, including Insurance Code §4001.006(a) (authorizes the Department to collect a nonrefundable license fee and a nonrefundable appointment fee); §4001.006(c) (authorizes the Department to set fees that are reasonable and necessary to implement and enforce Insurance Code, Title 13); §4001.153 (authorizes the Department to charge and set temporary license fees); §4001.202 (authorizes the Department to charge and set agent appointment fees); §4002.005 (authorizes the Department to charge and set agent licensing examination fees); §4003.004 (authorizes the Department to set license renewal fees); §4003.005 (provides that a renewal fee collected under §4003.004 is nonrefundable); §4051.404 (applies §4001.006 to all fees collected under Chapter 4051, Subchapter I, relating to the new personal lines property and casualty agent license); and §4001.304 (applies §4001.006 to all fees collected under Chapter 4054, Subchapter G, relating to the new life agent license). Under the proposal, the cost for each separate personal lines property and casualty agent and life agent license would be $50 per original application in each year of the first five years the fees are in effect. The cost of renewing each personal lines property and casualty agent and life agent license would be $50 per biennial renewal. The cost of each appointment and subagent appointment would be $10, except that the Department does not charge an appointment fee for one appointment submitted with the original license application. The cost of applying for each temporary license would be $150. Three dollars of the license renewal fee results from the mandated Texas Online Project subscription fee charged pursuant to Government Code §2054.252, and not from the adoption, enforcement, or administration of the proposed amendments to §§19.801 and 19.802. The cost of each Department-administered personal lines property and casualty agent and life agent license examination would be $50, except when the Department contracts with a designated testing service to administer examinations, in which case the fee will be the amount authorized to be charged pursuant to the Department's agreement with the testing contractor.

Costs to comply with the proposed amendments to §19.1002, including the costs associated with continuing education requirements, result from the legislative enactment of SB 1263 and existing law and not as a result of the adoption, enforcement, or administration of this proposal.

There is no difference in the costs of compliance between a large and small or micro business as a result of the proposed amendments. The vast majority of the new applicants/licensees that will be subject to the proposed fees will be individuals and agencies that qualify as small or micro businesses under the Government Code §2006.001. Therefore, it is not feasible or cost effective to waive or reduce the proposed fees for small or micro businesses. Because the Insurance Code §4001.006 requires the Department to set fees in amounts that are reasonable and necessary to implement and enforce the regulation of agent licensing under the Insurance Code Title 13, waiving or reducing the proposed fees for small or micro businesses would either significantly and unjustly increase application/licensing costs for individuals and entities that do not qualify as small or micro businesses under §2006.001 of the Government Code or would result in the Department collecting inadequate fees for implementation and enforcement of the law. The Department anticipates that the cost to administer the two new license types will be the same as the cost for administering existing agent license types. Therefore, the Department is proposing the same fees for the new license types as the fees for the existing agent license types. The fees for the existing licensing types are previously adopted fees that have already been determined to comply with the statutory requirements of reasonable and necessary, including for small and micro businesses. The cost of labor per hour is not affected by the proposed amendments, and thus there is no disproportionate economic impact on small or micro businesses due to this cost factor either.

4. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

5. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on October 8, 2007, 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 comment 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. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

6. STATUTORY AUTHORITY. The amendments are proposed under Insurance Code §§4001.002, 4001.003(9), 4001.005, 4001.006, 4001.109, 4001.153, 4001.202, 4002.005, 4003.004, 4003.005, 4004.051, 4004.053, 4004.054, 4051.401, 4051.404, 4054.301, 4054.304, and 36.001, and Government Code §2054.252. Section 4001.002(a)(7) applies the provisions of Title 13, including Subtitle A, to persons licensed under Title 13, Subtitle B (Chapter 4051, Subchapter I, establishing the personal lines property and casualty license and Chapter 4054, Subchapter G, establishing the life agent license, are both within Insurance Code, Title 13 , Subtitle B). Section 4001.003(9) defines subagent. Section 4001.005 authorizes the Commissioner to adopt rules necessary to implement Insurance Code, Title 13. Section 4001.006(a) authorizes the Department to collect a nonrefundable license fee and a nonrefundable appointment fee. Section 4001.006(c) requires the Department to set fees that are reasonable and necessary to implement Insurance Code, Title 13. Section 4001.109 requires a subagent to be licensed to write each line of insurance that the subagent is employed to write, but does not require the subagent to hold each kind of license issued to the agent for whom the subagent acts. Section 4001.153 authorizes the Department to charge and set temporary license fees. Section 4001.202 authorizes the Department to charge and set agent multiple insurer appointment fees. Section 4002.005 authorizes the Department to charge and set agent licensing examination fees. Section 4003.004 authorizes the Department to set license renewal fees. Section 4003.005 provides that a renewal fee collected under §4003.004 is nonrefundable. Section 4004.051(a) requires individuals holding a Department issued license to complete continuing education. Section 4004.053(a), as amended by SB 1263, requires personal lines property and casualty agents and life agents to complete 15 hours of continuing education annually. Section 4051.051 establishes the general property and casualty license. Section 4051.401 establishes the personal lines property and casualty agent license. Section 4051.404 provides that §4001.006 applies to all fees collected under Chapter 4051, Subchapter I, regulating personal lines property and casualty agent licensing. Section 4054.051 establishes the general life, accident, and health insurance agent license. Section 4054.301 establishes the life agent license. Section 4054.304 provides that §4001.006 applies to all fees collected under Chapter 4054, Subchapter G, regulating life agent licensing. Section 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 the state. Government Code §2054.252(g) requires the Department to increase licensing fees in an amount sufficient to cover the Department's Texas OnLine Authority subscription fee cost.

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

Rule No. Statute

§§19.801 and 19.802 Government Code §2054.252; Insurance Code

§§4001.002, 4001.003, 4001.005, 4001.006, 4001.109, 4001.153, 4001.202, 4002.005, 4003.004, 4003.005, 4004.051, 4004.053, 4004.054, 4051.051, 4051.401, 4051.404, 4054.051, 4054.301, and 4054.304

§19.1002 Insurance Code §§4001.002, 4001.005 4004.051, 4004.053, 4004.054, 4051.051, 4051.401, 4054.051, and 4054.301

8. TEXT.

SUBCHAPTER I. LICENSING FEES

§19.801. General Provisions Regarding Licensing Fees and License Renewal.

(a) - (b) (No change.)

(c) Appointment.

(1) The fee for appointment of a currently licensed general [ lines] agent , personal lines property and casualty agent, or life agent as subagent by another general [ lines] agent , personal lines property and casualty agent, or life agent, or for appointment of an agent to represent additional insurers, health maintenance organizations, or nonprofit legal services corporations, shall accompany the notice of appointment. An appointment fee is not required for the first appointment filed with the original license application.

(2) Subagent appointments must comply with the following requirements: (A) o nly general lines agents, personal lines property and casualty agents, or life agents may appoint subagents;

(B) o nly general lines agents, personal lines property and casualty agents, or life agents may be appointed as subagents; and

(C) as provided in Insurance Code §4001.109, a subagent must be licensed to write each line of insurance that the subagent is employed to write, but is not required to hold each kind of license issued to the agent for whom the subagent acts, as required under Insurance Code §4001.109.

(3) General agents, personal lines property and casualty agents, and life agents may simultaneously have multiple subagent and insurance company appointments.

(d) Submission of fees. All fees shall be submitted by check or money order made payable to the Texas Department of Insurance, except for applicants who must qualify by examination, where the application is to be submitted to the Department's designated testing service, as provided under [ the] Insurance Code Chapter 4002, [ Article 21.01-1,] or if the license is renewable over the internet, where the renewal application is to be submitted under the Texas OnLine Project, in which case fees shall be submitted as directed by the designated testing service or the Texas OnLine Authority. Should the Department authorize other online or electronic original applications or other transactions, persons shall submit fees with the transaction as directed by the Department, the Texas OnLine Authority, or the Department's designated service provider.

(e) Fees fully earned. All fees are fully earned at the time the application, registration, and/or appointment is filed with the department, or the department's designated testing service, and are not refundable or transferable to another application, registration or appointment whether such fee is submitted to the department or the department's designated testing service. These fees shall not be reduced for any reason, except when the term of the license is prorated as set forth under subsection (b)(3) of this section.

(f) Examination fees. All fees for examination, whether administered by the department or the department's designated testing service, are fully earned when the examination is scheduled and are not refundable or transferable to any other applicant or examination, except where approved by the department as provided under Insurance Code § 4002.005(c) [ Article 21.01-1 §2(b)]. A separate fee is required for each new examination and reexamination. Examination fees shall not be reduced for any reason.

§19.802. Amount of Fees.

(a) (No change.)

(b) The amounts of fees are as follows:

(1) General [ lines -] life, accident, and health insurance agent:

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--$50;

(2) - (4) (No change.)

(5) General [ lines -] property and casualty agent:

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--50;

(E) emergency application for license issued under Insurance Code § 4051.054 [ Article 21.14 §5]--$50 (for original application with no additional charge for renewal).

(6) and (7) (No change.)

(8) Managing general agent:

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--$50;

(E) emergency application for license issued under Insurance Code § 4053.052[ Article 21.07-3 §7]--$50.

(9) Limited lines agent (includes agents licensed under Insurance Code Chapter 4051, Subchapter C and Chapter 4054, Subchapter C [ Articles 21.01-1 §4 and 21.14 §6]):

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--$50.

(10) - (17) (No change.)

(18) Temporary license application--For license types authorized by Insurance Code Chapter 4001, Subchapter D [ Article 21.07 §3A] to be issued on a temporary basis, $100 in addition to the original license application fee for each license type.

(19) - (21) (No change.)

(22) Life agent:

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--$50.

(23) Personal lines property and casualty agent:

(A) original application--$50;

(B) renewal--$50;

(C) additional appointment--$10;

(D) qualifying examination--$50;

(c) The limited lines agent license is a single license type that is authorized under [ two] Insurance Code Chapters 4051 and 4054. [ articles] Persons licensed as limited lines agents may be appointed to sell or solicit any line authorized by Insurance Code Chapter 4051, Subchapter C and Chapter 4054, Subchapter C [ Articles 21.07-1 §4 and/or 21.14 §6] without payment of additional license fees or examinations other than the necessary additional company appointment fees.

(d) A general [ lines] agent , personal lines property and casualty agent, or life agent appointed as subagent by another general [ lines] agent , personal lines property and casualty agent, or life agent is not a separate license type. All fees are the same for a general agent, personal lines property and casualty agent, or life agent [ lines agents] appointed as subagents, as are the fees for a general agent, personal lines property and casualty agent, or life agent [ lines agents] appointed by insurance companies. [ Only general lines agents may appoint subagents and the subagent must be licensed as a general lines agent. General lines agents may simultaneously have multiple subagent and insurance company appointments.]

(e) All fees are the same for both residents and nonresidents. Insurance Code Chapter 4056 [ Article 21.11] does not create an additional license type for nonresidents, but designates a procedure for licensing nonresidents under appropriate Texas license types.

SUBCHAPTER K. CONTINUING EDUCATION AND ADJUSTER PRELICENSING EDUCATION PROGRAMS

§19.1002. Definitions.

(a) Words and terms defined in Insurance Code §4001.003 [ Article 21.07 §1A] shall have the same meaning when used in this subchapter.

(b) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise.

(1) Adjuster--An individual licensed under Insurance Code Chapter 4101 [ Article 21.07-4].

(2) - (15) (No change.)

(16) Licensee-- An individual licensed under one or more of the following Insurance Code provisions:

(A) Chapter 4051, Subchapters B, C, D, E, and I (general property and casualty agent, limited lines agent, insurance service representative, county mutual agent, and personal lines property and casualty agent);

(B) Chapter 4052 (life and health insurance counselor);

(C) Chapter 4053 (managing general agent);

(D) Chapter 4054, Subchapters B, C, E, and G ( general lines - life, accident, and health agent, limited lines agent, life insurance not exceeding $15,000 agent, and life agent);

(E) Chapter 4101 (adjuster);

(F) Chapter 4102 (public insurance adjuster).

[ An adjuster or individual holding a license under the authority of Insurance Code Articles 21.07-1 §§2, 4 or 6 (general lines - life, accident, and health agent, limited lines agent, or life insurance not exceeding $15,000 agent); 21.07-2 (life and health insurance counselor); 21.07-3 (managing general agent); 21.07-5 (public insurance adjuster); or 21.14 §§2, 6, 8, or 9 (general lines - property and casualty agent, limited lines agent, insurance service representative or county mutual agent).]

(17) and (18) (No change.)

(19) Provider--An individual or organization including a corporation, partnership, depository institution, insurance company, or entity chartered by the Farm Credit Administration as defined in Insurance Code §4001.108 [ Article 21.07 §2(v)], registered with the department to offer continuing education courses for licensees and/or prelicensing instruction for adjusters.

(20) - (27) (No change.)



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