The Commissioner of Insurance adopts amendments to §§19.602, 19.1001 - 19.1006 and new §§19.1007 - 19.1019 concerning the licensing of adjusters, the continuing education program for agents, adjusters, and full-time home office salaried employees, and adjuster prelicensing education program requirements. Sections 19.1004 and 19.1017 are adopted with changes to the proposed text as published in the September 13, 2002 issue of the Texas Register (27 TexReg 8704). Section 19.602 and §§19.1001 - 19.1003, 19.1005 - 19.1016 and §§19.1018 and 19.1019 are adopted without changes to the proposed text and will not be republished.

The amended §19.602 is necessary to maintain effective regulation of adjusters by ensuring that adjuster license applicants have demonstrated within a reasonable time period the specific knowledge required for licensure. The amended §§19.1001 - 19.1006 and new §§19.1007 - 19.1019 are necessary to maintain and expand the quality, variety, and accessibility of continuing education and adjuster prelicensing education programs.

Section 19.602 (b)(3) and (f) set forth the requirement that adjusters must be licensed within 12 months of successfully completing a department administered examination or certified prelicensing education course and examination. Section 19.602 (b)(4) and (c) - (f) clarify that Insurance Code Article 21.01-2 §1A (c) - (e), regarding renewal of licenses as authorized by Insurance Code Article 21.07-4 §16, apply to adjusters. These adopted sections will not affect emergency or temporary adjusters or adjuster applicants licensed in other states.

Amended §§19.1001 - 19.1006 and new §§19.1007 - 19.1019 generally reorganize, restate, revise, and clarify existing requirements; add requirements for classroom equivalent and adjuster prelicensing courses; set course and course provider fees; and set automatic fines. Section 19.1001 establishes the effective date of the adopted amendments and new sections. Section 19.1002 revises and deletes some definitions, and adds new definitions. Section 19.1003 revises and clarifies the number of continuing education hours each licensee must complete and sets forth the number and type of hours required for an adjuster prelicensing course. Section 19.1004 clarifies and sets forth the available continuing education exemptions and extensions. Section 19.1005 revises and clarifies the course provider application and registration process, establishes a single course provider designation for both continuing education and adjuster prelicensing education courses, and sets forth the requirements for instructors and speakers. Section 19.1006 revises and clarifies continuing education and adjuster prelicensing course criteria.

New §§19.1007 - 19.1015 substantially restate and reorganize existing §19.1006 (d) - (k) and §§19.1007 - 19.1013, which have been repealed elsewhere in this issue of the Texas Register.

Section 19.1007 clarifies course certification application requirements, course expirations and resubmissions. Section 19.1008 sets forth requirements for advertising courses, recording and modifying existing courses, and assigning courses. Section 19.1009 sets forth the requirements for classroom, classroom equivalent, self study, one-time-event, qualifying, and adjuster prelicensing education courses. Section 19.1010 sets forth the method of determining hours of course credit for classroom, classroom equivalent, self study, and qualifying courses. Section 19.1011 clarifies and sets forth the minimum standards for the successful completion of certified continuing education classroom, classroom equivalent, self study, and qualifying courses, but allows the course provider to implement increased standards at the course provider's discretion. Section 19.1012 restates existing language on obtaining department forms, and sets the fees for the registration of course providers and continuing education courses.

Section 19.1013 restates and clarifies existing licensee record keeping requirements. Section 19.1014 restates and clarifies existing course provider record maintenance requirements. Section 19.1015 restates and clarifies disciplinary action available to the department in the case of non-compliance by a licensee or course provider. Section 19.1016 establishes a series of automatic fines as authorized under Insurance Code Article 21.01-2 §5A.

Section 19.1017 establishes adjuster prelicensing education course content and examination requirements and is adopted with a grammatical change to §19.1017(f). Section 19.1018 establishes the areas that must be tested in an adjuster prelicensing education course final examination.

Section 19.1019 clarifies how full-time home office salaried employees and the insurers that employ them shall meet continuing education requirements that were amended by Senate Bill 414, and replaces existing §19.3006, which has been repealed elsewhere in this issue of the Texas Register.

General and Section 19.1005(e). A commentor suggests that insurance companies be granted an exemption from these rules when providing continuing education programs for their own personnel since insurance companies have a vested interest in having well trained personnel. Another commentor requests that insurance companies acting as providers be granted an extended registration period. Response: The department declines to grant such an exemption or extended registration period. Since the legislature first directed the department to establish a continuing education program for agents and adjusters, the department has included insurance companies within the scope of regulated providers. These rules were in effect when the legislature adopted changes to the continuing education system in Senate Bill 414, 77th Legislature, 2001. The legislature did not direct the department to treat insurance companies differently from other providers. Further, the department is not aware of any state in which insurance companies are granted such an exemption or extended registration period.

§19.602(b). A commentor requests that in making these amendments the department also create an examination exemption for members of the Society of Professional Adjusters (SPRA).

Response: The department declines to make this change. The purpose and scope of these amendments is to clarify existing examination and exemption requirements, particularly with regard to recent statutory changes and does not include expansion of existing examination exemptions.

§19.1002(21). A commentor requests that the department state in the rule that SPRA sponsored courses are qualifying courses. Another commentor is in favor of recognizing courses approved by the State Bar of Texas as qualifying courses but is less in favor of allowing courses approved by other state bar associations due to a concern that the department will have difficulty in determining the relevancy of the out-of-state courses.

Response: The department disagrees that a specific recognition is necessary or appropriate. SPRA courses may be qualifying courses if they meet the standards set forth in §19.1002(21). The department disagrees with the commentor's concern regarding out-of-state courses. This addition is based on the legislature's guidance in Article 21.01-2 §3(b). That guidance was not limited to courses accepted by in-state associations. The department does not believe that monitoring the content of such courses will be a greater problem than determining the content of State Bar of Texas accepted courses or other types of qualifying courses that have been accepted in the past. Further, the department believes that non-resident licensees subject to these rules may need such sources to earn classroom course credits. The department is particularly concerned about adjusters who may reside in a non-licensing state. §§19.1002(21) and 19.1013. A commentor is concerned with how licensees will obtain and present evidence of course completion and whether these types of courses are open to the general public.

Response: The department appreciates the commentor's concern and notes that any licensee completing a qualifying course will have an additional duty to maintain and demonstrate both that the course met the requirements of a qualifying course and that the licensee completed the course. In general, the department will continue to determine if a course meets the definition of a qualifying course, as it has in the past with unregistered courses, by requiring the licensee to submit documentation of the course content and documentation that the licensee has completed the course. Types of documentation are described in §19.1013 of the rule. Generally, courses approved by the State Bar of Texas are offered either by the State Bar or other providers accepted by the State Bar and, in many cases, are open to the public in a similar fashion to courses offered by insurance continuing education providers. For licensees completing its courses, the State Bar of Texas can provide a course completion receipt as it does for out-of-state attorneys. Other bar associations, as well as private providers, offering courses to the public should be able to offer similar course completion documentation. Licensees should confirm this before taking the course. §19.1003(d). A commentor notes that licensees may not complete hours in a subsequent licensing period to correct a shortage of hours in a previous reporting period and requests clarification of how a licensee can come into compliance for a particular reporting period if a sufficient number of credit hours has not been completed. Response: The department agrees that the rules specify that a licensee may not complete hours in a subsequent licensing period to correct a shortage of hours in a previous reporting period. The penalty for not completing the required number of hours in a reporting period is an automatic fine as set forth in §19.1016(b)(1). The statute is very specific regarding the number of credit hours required per reporting period and states that failure to obtain the required number of credit hours is a violation that is subject to an automatic fine.

§19.1005(A)(6). A commentor asks for clarification of the phrase "all names used by the provider to provide insurance related education courses in this state," and specifically if it includes listing all persons that are instructors, course preparers, or the name of the entity presenting the class.

Response: The department does not believe that it is necessary to further clarify this subsection in the rule. The phrase refers only to names used by the provider to provide courses and does not require or imply a listing of instructors or course preparers. The term "provider" is defined in §19.1002.

§19.1005(c)(2). Commentor requests that the department adds language clarifying that a person exempt under §19.1004 qualifies as an instructor "subject to continuing education."

Response: The department disagrees that further clarification is necessary. For the purposes of this subsection, the department will continue to consider persons who have an exemption listed in this subchapter as being subject to continuing education for the purpose of this subsection.

§§19.1005(e) A commentor requests that the department implement an automated message for sending provider or course renewal notices.

Response: The department appreciates the comment and will take it under advisement for the future. Currently the department does not have the resources to provide such notices nor are such notices required by statute. The rule does not prohibit such notices, so if in the future resources do become available the department can implement a notice system.

§19.1007(a)(3). A commentor stated that it will sometimes be difficult to obtain detailed course content outlines, especially from "speakers" at one-time-event continuing education courses, far enough in advance to submit them to the department for approval. The commentor suggests course providers not be required to submit course outlines together with applications for course approval, but rather to maintain outlines of presentations as has been done in the past.

Response: The department appreciates the commentor's concern; however, the department declines to change this requirement. As in the past, the department will handle specific situations by working with providers on a case-by-case basis.

§19.1014(c). A commentor suggests that the department publicize the form requirements of electronic submissions in advance of implementing an electronic course submission system to assist providers in compliance with that system.

Response: The department appreciates the comment and will take it under advisement if such a system is to be developed and implemented.

§19.1015(a)(1) and (b)(1). A commentor asserts that Texas Insurance Code Chapter 82, Article 21.01-2 Section 3A indicates that TDI can discipline a license holder who has willfully violated any insurance laws. Further, Texas Insurance Code 21.07-4 Section 17 indicates that the Texas Department of Insurance may specify rules for discipline that are comparable to grounds for discipline of other license holders. The commentor requests that the department change these paragraphs to add a willful requirement.

Response: The department disagrees and declines to make a change to the section since it correctly states the standard under Chapter 82 for which a licensee can be disciplined for violating a provision of the Insurance Code and the rules of the department. As provided in §82.051, the "commissioner may cancel or revoke an authorization if the holder of the authorization is found to be in violation of, or failed to comply with, this code or a rule of the commissioner." This section does not have a willful requirement. Section 82.052 states other available sanctions for violations under §82.051. Section 82.001 defines authorization in a manner that would include agents, adjusters and providers.

Article 21.01-2 §3A(a) provides that the provisions of Article 21.02-2 §3A are in addition to any remedy provided under Chapter 82. The code does not state that the violations and acts listed are in substitution for those listed in Chapter 82. This rule does not change the requirements for violations of these statutes or their associated penalties under the Insurance Code.

The department also disagrees with the commentor's assertion that the department, by rule, is creating a disciplinary structure for adjusters that is not comparable to that of other license holders. The legislature created both Chapter 82 and Article 21.01-2 §3A to apply to all license holders, including agents and adjusters. This is shown in the language of those statutes as well as the provisions of Articles 21.01 §3 and 21.07-4 §17, and §82.001. These statutes apply to adjusters without the necessity of a rule, but are stated here to assist licensees in identifying improper conduct and the disciplinary remedies available to the department. In this subchapter, adjusters are included within the term "licensees," as are agents, counselors, and other license holders subject to continuing education. The disciplinary effect of §19.1015(a) and this subchapter is directed at all licensees. The department believes that this is comparable treatment.

§19.1015(a)4 and (b)(15). A commentor requests that in addition to referring to "unauthorized materials" in these paragraphs, specific reference to §§19.1011(d)(11) and 19.1017(e) should be included to clarify what are "unauthorized materials."

Response: The department disagrees that further clarification is necessary since the request is to reference provisions already contained within the subchapter. Further, the department is concerned that the addition of such language might confuse providers that require monitored final examinations or set higher course completion standards as authorized in §19.1011(d)(2).

For with changes: American Insurance Association, Hammerman & Gainer, and State Farm Insurance Companies.

Against: None.

Subchapter G. LICENSING OF INSURANCE ADJUSTERS

28 TAC §19.602

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 17, 2002.

TRD-200208345

Gene C. Jarmon

Acting General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: January 6, 2003

Proposal publication date: September 13, 2002

For further information, please call: (512) 463-6327

Subchapter K. CONTINUING EDUCATION AND ADJUSTER PRELICENSING EDUCATION PROGRAMS

28 TAC §§19.1001 - 19.1019

§19.1004.Licensee Exemption from and Extension of Time for Continuing Education.

(a) Any exemption or extension granted to a licensee under subsections (b)- (f) of this section shall apply to all license types held by the licensee. Nothing within this subchapter shall be construed as preventing the department from auditing a licensee to confirm the continued existence of circumstances supporting the exemption or extension.

(b) Agents holding a Texas license issued under Insurance Code Articles 21.07-1, as Group I, legal reserve life insurance agents and general lines - life, accident and health insurance agents; 21.07-3, as managing general agents; and/or 21.14, as local recording agents, solicitors, general lines - property and casualty agents, and insurance service representatives, for at least 20 years or more as of December 31, 2002, are exempt from the requirements of this subchapter. Agents shall register and confirm that they qualify for this exemption by submitting a written request to the department indicating that they have met the longevity requirement. Agents must satisfy the continuing education requirements through the end of the 20th year of licensure. The number of credit hours for the final reporting period is calculated at the rate of one hour for each whole month between the last renewal date and the effective date of the exemption. Agents that have previously qualified for the longevity exemption authorized under the Insurance Code as in effect prior to September 1, 2001, shall remain qualified and do not have to reapply for this exemption.

(c) Licensees who on or after January 1, 2003, have been continuously licensed by the department for at least 20 years may apply for an exemption from the requirements of this subchapter. For purposes of this subsection "continuously licensed" means that the licensee has held a department-issued license for the entire period of time without any lapse in excess of 90 days in which the licensee was not licensed or failed to renew a license. Licensees shall apply for this exemption by submitting a written request to the department indicating that they have met the longevity requirement. Licensees must satisfy the continuing education requirements through the end of the 20th year of licensure. The number of credit hours for the final reporting period is calculated at the rate of one hour for each whole month between the last renewal date and the effective date of the exemption.

(d) Nonresident licensees who are in compliance with their resident state's continuing education requirements shall be exempt from this subchapter. Licensees shall qualify for this exemption based on the state of residence claimed in the licensee's initial application or by sending written notification to the department or its designee stating that the licensee is a resident of another state with a certificate of good standing, or by sending any other document acceptable to the department, showing that the licensee has a resident license in good standing in that state. A nonresident licensee that becomes a resident of Texas between renewals of the Texas license shall:

(1) be immediately subject to the continuing education requirements set forth in this subchapter;

(2) complete a prorated continuing education schedule as required in §19.1003(e) of this title (relating to Licensee Requirements); and

(3) not count hours completed prior to becoming a Texas resident towards completion of the prorated continuing education requirement.

(e) Licensees who meet the criteria of illness, medical disability, or circumstances beyond the control of the licensee may apply for an extension of time to complete their continuing education requirement or a waiver, in whole or in part, of the continuing education requirement. Business reasons do not constitute circumstances beyond the control of the licensee. The department shall establish the duration of the extension when it is granted. If the circumstances supporting the extension continue beyond the granted extension period, the licensee may reapply for an extension. The licensee must request the extension prior to the end of the reporting period for which it applies and must include at least the information set forth in paragraphs (1) - (6) of this subsection:

(1) Statement of the exact nature of the illness, medical disability or other extenuating circumstances beyond the control of the licensee that have prevented or will prevent the licensee from completing the required hours within the two year reporting period.

(2) Evidence in the form of medical reports from attending physician(s) and insurance claims regarding the illness or medical disability of the licensee or evidence through insurance claims and/or other documentation as determined regarding circumstances beyond the control of the licensee.

(3) Assessment of the condition of the licensee whether it is temporary, permanent or unknown.

(4) Statement as to whether the licensee will or will not be able to perform activities including any acts of an agent or adjuster.

(5) Estimated date when the licensee will be able to perform any activities including any acts of an agent or adjuster in accordance with the medical reports or other documents pertaining to circumstances beyond the control of the licensee.

(6) Any other information that may be requested by the department.

(f) Licensees called to active military service in a combat theater, as provided for in Insurance Code Article 1.10-1, may apply to the department for an exemption from or an extension of time for meeting the continuing education requirements or extending their license renewal. The licensee must request the exemption or extension prior to the end of the reporting period for which it applies and must include:

(1) a copy of the order to active duty status, service in a combat theater, or other positive documentation of military service that shall prevent the licensee from compliance;

(2) a clear request for either an extension or exemption, or both;

(3) the expected duration of the assignment;

(4) and any other information the licensee believes may assist the department or that the department requests on a case by case basis.

(g) Any individual who qualifies as specified in Insurance Code Article 21.07-1 §5B is exempt from the continuing education requirements in this subchapter.

§19.1017.Adjuster Prelicensing Education Course Content and Examination Requirements.

(a) Certified adjuster prelicensing education courses shall provide students with instruction sufficient to take and pass the course's final examination for the adjuster’s license designation as specified in this section. The course must meet the minimum 40-hour prelicensing education requirement to qualify for certification.

(b) All adjuster prelicensing examinations for compliance with Insurance Code Article 21.07-4 §10(4) may be written or computer-based and shall be designed to test applicants on the materials as specified in this section for the appropriate license designation and shall meet the criteria set forth in paragraphs (1) - (7) of this subsection:

(1) All lines adjuster. The student shall complete a 150-question examination in less than 180 minutes over the subjects and in the question percentages as set forth in §19.1018(a) of this title (relating to Adjuster Prelicensing Examination Topics).

(2) Property, casualty, and surety adjuster. The student shall complete a 150-question examination in less than 180 minutes over the subjects and in the question percentages as set forth in §19.1018(b) of this title.

(3) Workers' compensation adjuster. The student shall complete a 60-question examination in less than 90 minutes over the subjects and in the question percentages as set forth in §19.1018(c) of this title.

(4) At least 70% of the examination questions must be based on the application level or higher. The remainder of questions may be based at the knowledge level. Examination questions shall not be the same or substantially the same questions the student previously encountered in the course materials or review examinations and cannot be designed such that the correct answer is obvious by its content. The examination questions shall be multiple choice questions stemming from an inquiry with at least four appropriate potential responses and for which "all of the above" or "none of the above" is not an appropriate option.

(5) The specific examination questions may not be made available to the student until the test is administered. Security measures shall be in place to maintain the integrity of the examination and ensure that the enrolled student is the individual who took the examination.

(6) Providers must include and maintain the examination results in the student's record for four years. Providers and instructors shall not give any person answers to the examination questions at any time before, during, or after the course.

(7) An authorized staff member or a computer program shall grade the examinations.

(c) Students shall be allowed to retake a certified prelicensing examination course at least one time if a score of 70% or higher is not achieved without being required to retake the course. The retest shall consist of an alternate examination consisting of different questions from the original examination.

(d) Final examinations shall consist of at least three complete exams which are distributed alternatively to students and are revised or updated consistent with the course update/revision. The provider may distribute only one examination to any student at any one examination.

(e) A disinterested third party shall monitor the final examination in a visual environment. During the examination, students may not use course materials, personal notes, or any other written or electronic material or media that is not part of the examination, nor engage in communication of any kind with any other person except to receive instructions from the examination monitor. Upon completion of the examination, the person monitoring the examination must mail or deliver the completed examination directly to the provider.

(f) Providers shall issue certificates of completion to students who successfully pass the examination by correctly answering at least 70% of the examination questions. The provider must issue the certificate in a manner which shall ensure that the student receiving the certificate is the student who took the course, issue the certificate within 30 days of passing the examination, and complete the certificate to reflect the dates the student took the course and examination. Providers shall not allow a student, or any person or organization other than the provider giving the course, to prepare, print, or complete a certificate of completion.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 17, 2002.

TRD-200208344

Gene C. Jarmon

Acting General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: January 6, 2003

Proposal publication date: September 13, 2002

For further information, please call: (512) 463-6327

Chapter 19. AGENT'S LICENSING

The Commissioner of Insurance adopts the repeal of §§19.1007 -19.1013 and 19.3006 concerning continuing education for agents, adjusters and full-time home office salaried employees. The repeal is adopted without changes to the proposal as published in the September 13, 2002 issue of the Texas Register (27 TexReg 8720) and will not be republished.

Repeal of these sections is necessary to implement legislation enacted by the 77th Legislature in Senate Bill 414. Simultaneous to this adopted repeal, the Commissioner has adopted new §§19.1007 - 19.1019 and amendments to §§19.1001 - 19.1006, which have been published elsewhere in this issue of the Texas Register.

The purpose of this repeal is to remove sections that are being renumbered, reorganized, and revised to implement Senate Bill 414 and provide the maintenance of a quality continuing education system for agents, adjusters, and full-time home office salaried employees.

No comments were received.

Subchapter K. AGENTS AND ADJUSTERS CONTINUING EDUCATION PROGRAM

28 TAC §§19.1007 - 19.1013

The repeal of the sections is adopted under Insurance Code Articles 21.01; 21.01-1; 21.01-2; 21.07-1; 21.07-2; 21.07-4; 21.11; 21.14; 21.14-2; and §36.001. Insurance Code Article 21.01 §§3(1) and 4 make Insurance Code Chapter 21, Subchapter A, applicable to all agent and adjuster license types and authorizes the commissioner to adopt rules necessary to implement the subchapter. Article 21.01-1 §§1-3 establish examination standards and requirements and a continuing education requirement for license holders and authorizes the commissioner to set by rule extensions of time to complete continuing education, exemptions from continuing education, and standards and fees for certification of courses and providers. Article 21.01-2 establishes prohibited activities, license revocation, agent discipline, and judicial review of department actions. Article 21.07-1 §§5, 5B, and 6 provide for continuing education requirements and exemptions for funeral prearrangement and life insurance not exceeding $15,000 agents. Article 21.07-2 §§9 and 10 apply continuing education requirements to life and health insurance counselors and authorize the commissioner to adopt rules. Article 21.07-4 §§7A, 12, and 24 establish continuing education requirements for adjusters and authorize the commissioner to adopt rules. Article 21.11 §§2 and 5 provide continuing education standards for nonresidents and authorize the commissioner to adopt rules. Article 21.14 §§7, 8 and 9 establish a continuing education requirement for full-time home office salaried employees, insurance service representatives, and county mutual agents. Article 21.14 - 2 §§2 and 5 concern the acceptance of continuing education hours certified under the guidelines of the Federal Crop Insurance Corporation and authorize the commissioner to adopt rules. 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.

This agency hereby certifies that the adoption has been reviewed by legal counsel and found to be a valid exercise of the agency's legal authority.

Filed with the Office of the Secretary of State on December 17, 2002.

TRD-200208343

Gene C. Jarmon

Acting General Counsel and Chief Clerk

Texas Department of Insurance

Effective date: January 6, 2003

Proposal publication date: September 13, 2002