1. INTRODUCTION. The Texas Department of Insurance proposes amendments to Subchapter CC, §§3.4302, 3.4303, 3.4307 - 3.4311, and 3.4313, relating to the standards for acceleration-of-life-insurance benefits for individual and group policies and riders. The proposed amendments are necessary to delete obsolete statutory and internal Texas Administrative Code references and to correct minor nonsubstantive errors in the existing rule. The proposal does not make any substantive changes.
Insurance Code Article 3.50-6, which is referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003. Article 3.50-6 was re-adopted as §§1111.051 - 1111.053 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.70-8, which is referenced in §3.4303, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 3.70-8 was re-adopted as §§1201.003, 1201.059, 1201.105, 1351.002, and 1451.051 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.44a, which is referenced in §§3.4307 and 3.3409, was repealed in the nonsubstantive Insurance Code revision, Acts 2001, 77th Legislature, Chapter 1419, §31(a), effective June 1, 2003. Article 3.44a was re-adopted as Chapter 1105 in the same nonsubstantive Insurance Code revision. Insurance Code Article 3.28, which is referenced in §3.4310, was repealed in the nonsubstantive Insurance Code revision, Acts 2005, 79th Legislature, Chapter 727, §18(a)(3), effective April 1, 2007. Article 3.28 was re-adopted as §§425.051 - 425.070 in the same nonsubstantive Insurance Code revision. Insurance Code Article 21.21, which is referenced in §3.4311, was repealed in the nonsubstantive Insurance Code revision, Acts 2003, 78th Legislature, Chapter 1274, §26(a)(1), effective April 1, 2005. Article 21.21 was re-adopted as Chapter 541 in the same nonsubstantive Insurance Code revision. The proposal also amends in §3.4311(a) the reference to the title of Chapter 541 to correctly reflect its title as "Unfair Methods of Competition and Unfair or Deceptive Acts or Practices."
Amendments are also proposed to correct obsolete internal Texas Administrative Code references. Existing §3.4302(b)(2)(B) in the definition of the term "Long-term care illness" references home health care services "as defined and provided consistently with §3.3804(b)(13) and (14)." Amendments were adopted to §3.3804 on January 6, 2002 (26 TexReg 10886) to move paragraphs (13) and (14) to paragraphs (15) and (16). The proposed amendment to §3.4302(b)(2)(B) deletes the obsolete references to paragraphs (13) and (14) and uses the agency's general citation style, which references Long-term care illness "as defined and provided consistently with §3.3804(b)." Existing §3.4313(a) references the definition of an "invitation to contract" as defined in §21.114 of Title 28 of the Texas Administrative Code. Amendments were adopted to §21.114 on December 9, 2007 (32 TexReg 8830) to delete the definition of "invitation to contract" and to §21.102 to add the definition of "invitation to contract."
The proposal also makes changes to correct nonsubstantive errors in the existing rule. The title of the subchapter is amended to include hyphens in the phrase "Acceleration-of-Life-Insurance" to be consistent with the phrase as used throughout the subchapter. Existing §3.4302(b)(2)(A) in the definition of the term "Long-term care illness" references "§3.3812 of this title (relating to Policy Definition of Provider)." An amendment is proposed to the reference to the section title to correctly reflect its title as "Policy Standards for Provider." The proposal amends §3.4303(b) to include the word "the" before the phrase "Insurance Code" for consistency with agency style and makes changes to punctuation to correctly reflect the title of §3.4302 as "Acceleration-of-Life-Insurance: Scope of Benefits" in the reference to that section. The proposal amends §§3.4307, 3.4309, 3.4310, and 3.4311 to delete unnecessary commas. Existing §3.4308 does not include a reference to the complete title of §3.4306(3), and the proposal amends the reference to the §3.4306 title to correctly reflect its title as "Methods for Determining Benefits and Allowable Charges and Fees."
2. FISCAL NOTE. Jennifer Ahrens, Senior Associate Commissioner, Life, Health & Licensing Division, has determined that for each year of the first five years the proposal will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the proposal. There will be no measurable effect on local employment or the local economy as a result of the proposal.
3. PUBLIC BENEFIT/COST NOTE. Ms. Ahrens has determined that for each year of the first five years the proposal is in effect, the anticipated public benefit will be updated statutory and rule references and correction of other nonsubstantive errors in the existing rules that will result in increased clarity and readability of the rules. The proposed amendments are nonsubstantive and do not impose any additional requirements on any individual or entity, regardless of size, required to comply with the existing sections as amended by the proposal. Therefore, there are no costs required to comply with the proposal.
4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES. As required by the Government Code §2006.002(c), the Department has determined that the proposal will not have an adverse economic effect on small or micro-businesses. The proposed amendments are nonsubstantive and do not impose any additional requirements on any individual or entity, including small and micro businesses, required to comply with the existing sections as amended by the proposal. Therefore, there are no costs required to comply with the proposal for any small or micro business. In accordance with the Government Code §2006.002(c), the Department has therefore determined that a regulatory flexibility analysis is not required because the proposal will not have an adverse impact on small or micro businesses.
5. 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.
6. REQUEST FOR PUBLIC COMMENT. Because the proposed amendments do not make any substantive changes and relate only to deleting obsolete statutory and internal Texas Administrative Code references and correcting minor nonsubstantive errors, written comments on the proposal should be related only to the proposed amendments and not to any requested substantive changes to the sections. The Department will not consider comments requesting substantive changes to the sections. The Department, however, will be proposing substantive amendments to the standards for acceleration-of-life-insurance benefits for individual and group policies and riders later this year, and interested parties will have the opportunity to submit comments on proposed substantive changes at that time.
To be considered, any comments on this proposal must be submitted no later than 5:00 p.m. on May 27, 2008, 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 Jennifer Ahrens, Senior Associate Commissioner, Life, Health & Licensing Division, Mail Code 107-2A, 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.
7. STATUTORY AUTHORITY. The amendments are proposed under the Insurance Code §§1111.053, 1701.060, and 36.001. Section 1111.053 authorizes the Commissioner to adopt rules to implement Insurance Code Chapter 1111, Subchapter B, Accelerated Term Life Insurance Benefits. Section 1701.060 authorizes the Commissioner to adopt rules necessary to implement Chapter 1701, Policy Forms, including rules that establish procedures and criteria under which each type of form submitted to the department under Chapter 1701 will be reviewed and approved by the commissioner or exempted under §1701.005(b), and procedures and criteria under which particular types of forms designated by the commissioner may be given a summary review and approval, if considered appropriate by the commissioner, to expedite review and approval of those forms. Section 1701.002 specifies that Chapter 1701 is applicable to a policy, contract, or certificate of accident or health insurance, medical or surgical insurance, life or term insurance, including group life or term insurance, endowment insurance, industrial life insurance, fraternal benefit insurance, an annuity or endowment contract, an application attached or required to be attached to the policy, contract or certificate, or a rider or endorsement to be attached to, printed on, or used in connection with the policy, contract, or certificate. Section 36.001 authorizes the Commissioner of Insurance to 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.
8. CROSS REFERENCE TO STATUTE. The following statutes are affected by this proposal:
Rule Statute
§§3.4302, 3.4303, Insurance Code §§1111.053 and 1701.060
3.4307 - 3.4310, and 3.4313
§3.4311 Insurance Code §§1111.053, 1701.060, and
Chapter 541
9. Text.
§3.4302. Acceleration-of-Life-Insurance: Scope of Benefits.
(a) (No change.)
(b) The following words and terms, when used in this subchapter, shall have the following meanings, unless the context clearly indicates otherwise:
(1) (No change.)
(2) Long-term care illness--An illness or physical condition that results in the inability to perform the activities of daily living or the substantial and material duties of any occupation. Evidence of a long-term care illness includes, but is not limited to, illnesses or conditions which require:
(A) confinement in a convalescent nursing home, residential care or intermediate nursing facility, defined consistently with the provisions of §3.3812 of this title (relating to Policy Standards for [ Definition of] Provider); or
(B) adult day care services, as defined and provided consistently with §3.3804(b)[ (3) and (4)] of this title (relating to Definitions), and home health care services, as defined and provided consistently with §3.3804(b)[ (13) and (14)] of this title.
(3) - (4) (No change.)
(c) - (f) (No change.)
§3.4303. Required Policy Definitions; Evidence of Total and Permanent Disability.
(a) (No change.)
(b) Such illness, condition, care, or confinement is evidence of total and permanent disability for purposes of meeting the standards for providing acceleration-of-life-insurance benefits set forth in the Insurance Code, §§1111.052 [ Articles 3.50-6] and 1201.003 [ 3.70-8], and §3.4302 of this title (relating to Acceleration-of-Life-Insurance: [ Acceleration of Life Insurance ;] Scope of Benefits).
§3.4307. Limitations on Reduction of Cash Values. Except as otherwise authorized under the Lien Method for determining benefits under §3.4306(3) of this title (relating to Methods for Determining Benefits and Allowable Charges and Fees), if the cash values are reduced by the acceleration-of-life-insurance benefit, related charges and interest, the reduction shall not be unjust and shall not exceed an amount equal to the pro rata portion of the cash value associated with the death benefit used in providing the acceleration-of-life-insurance benefit. Future cash values shall not be less than the minimum cash values required by the Insurance Code Chapter 1105 [ , Article 3.44a], for the reduced future guaranteed death benefits. These minimum cash values are equal to the present value of the reduced future guaranteed benefits less the present value of future adjusted premiums, decreased by the amount of any indebtedness, including liens, under the life insurance contract. The mortality and interest used in calculating the minimum cash values will be as provided in the Insurance Code Chapter 1105 [ , Article 3.44a], for life insurance coverage, disregarding any acceleration-of-life-insurance benefits.
§3.4308. Pro Rata Limitations Reduction of Loan upon Acceleration of Benefits. Unless the insurer is using the Lien Method for determining benefits under §3.4306(3) of this title (relating to Methods for Determining Benefits and Allowable Charges and Fees), if there is a loan on the life insurance contract, the insurer may deduct up to a pro rata portion of the loan from the amount of the acceleration-of-life-insurance benefit.
§3.4309. Effect of Acceleration of Benefits on Nonforfeiture Calculations. An acceleration-of-life-insurance benefit provision or rider shall be disregarded in ascertaining nonforfeiture benefits under the Insurance Code Chapter 1105[ , Article 3.44a]. (remove underline in space between 1105 and [ in line 183)
§3.4310. Calculation of Reserves.
(a) Reserves for an acceleration-of-life-insurance benefit shall be based on tables of disablement, morbidity, or mortality appropriate for determining liability for the benefits provided. Such disablement or morbidity tables shall be certified as appropriate by a member of the American Academy of Actuaries and approved by the Texas Department of Insurance under the Insurance Code §§425.058(k) [ , Article 3.28, §§(3)(g)] and 425.069 [ 11]. Reserves for the death benefits or other supplementary benefits provided by a life insurance contract which includes an acceleration-of-life-insurance benefit shall be calculated disregarding such benefit, using mortality and interest rates as provided in the Insurance Code Chapter 425 [ , Article 3.28]. The basis of reserves for any life insurance contract which contains an acceleration-of-life-insurance benefit provision shall accompany the filing of the contract with the Texas Department of Insurance.
(b) (No change.)
§3.4311. Unfair, Discriminatory or Deceptive Practices Prohibited.
(a) Acceleration-of-life-insurance benefit provisions are subject to the Insurance Code Chapter 541 [ , Article 21.21] (concerning Unfair Methods of Competition and Unfair or Deceptive Acts or Practices) and rules promulgated under Chapter 541 [ Article 21.21].
(b) (No change.)
§3.4313. Notice and Disclosure Requirements for Marketing Materials.
(a) Any "invitation to contract," as defined in § 21.102 [ 21.114] of this title (relating to Scope [ Rules Pertaining Specifically to Life Insurance Advertising]), used in the marketing, solicitation or sale of a life insurance contract containing an acceleration-of-life-insurance provision shall clearly and concisely disclose the following:
(1) - (3) (No change.)
(b) (No change.)