| (a) Application and general requirements. This section
applies to a permit holder that sells or maintains insurance-funded
prepaid funeral benefit contracts (prepaid contracts). Unless the
commissioner grants an exception as provided for in subsections (f)(3)
and (g) of this section, a permit holder must maintain and produce
for examination the records as specified in this section. The permit
holder:
(1) must make the records available to the department
for examination at the physical location in Texas or if approved by
the commissioner, in another state that the permit holder has designated
in written notice to the department on file at the time of the examination;
(2) is required to make all the records specified in
the department's pre-examination records request available to the
department at the beginning of an examination and must produce such
other records that provide additional clarification of required documents
as may be requested during the examination in a manner that does not
impede the efficient completion of the examination; and
(3) must maintain the records either in hard-copy form,
in an electronic database, or on another form of media from which
the record can be retrieved and printed in hard copy in a manner that
does not impede the efficient completion of the examination.
(b) Corporate records. Corporate records of a permit
holder subject to this section and all corporate minutes must be maintained
and made available to the department at each examination.
(c) General files. A permit holder subject to this
section must maintain and produce for department examination general
files regarding its prepaid funeral benefits operations. The files
must contain the original or a copy of the following:
(1) financial statements of the permit holder or the
permit holder's parent or holding company including a balance sheet
and income statement dated not later than the last day of the permit
holder's preceding fiscal year, or the permit holder's most recent
income tax return, or if the permit holder is an insurance company,
the most recent statement filed with the insurance regulatory agency
of the insurance company's state of domicile;
(2) if the permit holder received a uniform risk rating
of 3, 4, or 5 at the last examination or if the last examination was
a limited scope examination, the examination report acknowledgments,
signed by the permit holder's board of directors, for the last examination
report;
(3) the Texas Department of Insurance (TDI) approval
letter and sample copy of policy form for each policy currently being
issued to fund prepaid funeral contracts in the Texas preneed market;
(4) all written complaints received related to insurance-funded
prepaid funeral contracts, documents related to any regulatory action,
and documents evidencing litigation activity since the last examination;
(5) all recordkeeping exceptions and other department
or commissioner approvals or directions upon which the permit holder
relies in connection with its current operations;
(6) if the permit holder is an insurance company or
an entity that controls or is controlled by an insurance company,
a copy of the examination reports of the insurance regulatory agency
of the insurance company's state of domicile for the period since
the last examination, and the responses to the regulatory agency regarding
examination report findings that are pertinent to the prepaid funeral
benefits business, unless the law of the state of domicile prohibits
disclosure of the examination reports and related correspondence to
the department;
(7) for any outstanding prepaid contract with a funeral
provider that has an issue date since the last examination, either:
(A) general, casket, outer burial container, and urn
price lists for the corresponding or contracted funeral provider;
or
(B) alternative documentation that demonstrates compliance
with required casket, outer-burial container and urn merchandise descriptions;
(8) a list of funeral home providers for all outstanding
contracts;
(9) a list of TDI licensed insurance agents currently
selling for the permit holder; and
(10) a list of funeral home providers that are known
to the permit holder to have ceased business since the last examination.
(d) Individual files.
(1) A permit holder subject to this section must maintain
a file for each prepaid funeral contract. The file must either be
maintained separately or be capable of retrieval separately for outstanding
contracts and may be maintained either chronologically, alphabetically
or serially by policy number. Each file must contain all correspondence
pertaining to the contract, including documentation to evidence that
the executed prepaid funeral contract has been issued to the contract
purchaser and the funding policy has been issued to the policy owner
within 30 days of the receipt of the initial down payment and insurance
application.
(2) Each file pertaining to an outstanding prepaid
funeral contract must contain a copy of the executed policy application,
executed prepaid funeral contract, any irrevocable assignments, and
the data face sheet of the insurance policy or annuity contract funding
the prepaid funeral contract.
(3) Each file pertaining to a matured prepaid funeral
contract must be retained for the period since the last examination.
The file must contain copies of all documents required for an outstanding
prepaid funeral contract. In addition:
(A) a matured-contract file for which services were
provided by the contracted funeral provider or were provided under
an assignment, by an agreed to Texas successor provider must contain:
(i) the original or a final copy of the completed at-need
contract or funeral purchase agreement, itemization of services performed
and merchandise delivered, or the interment order if the prepaid contract
relates only to a grave opening and closing fee, outer burial container
or other related merchandise and services. The document must be signed
by the decedent's personal representative and indicate the prepaid
credits and discounts applied and the balance due, if any, from the
family at the time of death;
(ii) documentation to substantiate any upgrades or
downgrades or discounts or credits given and to explain any differences
between the prepaid and the at-need contracts;
(iii) a copy of a Texas certified death certificate
or a death certificate from the state in which death occurred;
(iv) evidence of payment of the policy(s) death benefits
to the servicing funeral provider;
(v) documentation that reflects the balance owing,
if any, on the funding policy(s) and the death benefits available
at the time of claim;
(vi) if applicable, evidence of payment to the decedent's
personal representative of any refund of contract overcharges by the
provider; and
(vii) pre-need to at-need reconciliation, which must
be signed by the funeral provider, if the provider is not also the
seller.
(B) a matured contract file for which services were
provided by a person other than a person listed in subparagraph (A)
of this paragraph must contain:
(i) a signed assignment of benefits statement from
the purchaser or purchaser's representative requesting the delivery
of funds to the servicing funeral provider;
(ii) evidence of payment to the servicing funeral provider;
(iii) a copy of a Texas certified death certificate
or a death certificate from the state in which death occurred; and
(iv) documentation to support the death benefits available
at the time of claim.
(4) Each file pertaining to a canceled prepaid contract
must be retained for the period since the last examination. The file
must contain copies of all documents required for an outstanding contract,
a completed departmental withdrawal form or evidence of departmental
withdrawal approval, documentation to support the available cash surrender
value of the funding policy, and evidence of payment of cancellation
benefit.
(5) Each file pertaining to a prepaid contract whose
funding insurance policy has changed status since the last examination,
for example, to a reduced paid-up, lapsed, or extended term insurance
policy, must be retained for the period since the last examination.
The file must contain:
(A) copies of all documents required for an outstanding
contract;
(B) a copy of the permit holder's letter to the purchaser
which:
(i) informs the purchaser of contract status;
(ii) states the date of the status change and, if applicable,
the reduced death benefit coverage amount;
(iii) states the termination date of such coverage;
and
(iv) informs the purchaser that the prepaid benefits
may not be honored by the funeral provider due to the non-forfeiture
or delinquent status of the funding policy; and
(C) for a reduced paid-up or extended term policy,
copies of an election form indicating the purchaser has chosen reduced
paid-up or extended term status, unless the policy has automatic non-forfeiture
provisions.
(e) Reports. A permit holder subject to this section
must maintain the following records regarding its prepaid funeral
benefits operations for both new and conversion sales:
(1) a report detailing new business issued within the
reporting period sorted by policy type and maintained either chronologically
by date of policy issuance, alphabetically by the insured's name,
or serially by policy number. The new issue report must balance to
the reconciliation report required under paragraph (4) of this subsection.
Information required to be in separate columns includes:
(A) the insured's name;
(B) the policy number or numbers;
(C) the prepaid contract total;
(D) the date of policy issuance; and
(E) the death benefit, or insurance in force, whichever
is applicable.
(2) reports detailing out-of-force and non-forfeiture
policies, sorted by policy type, and subtotaled in count and reduced
coverage amount by status codes for death maturity, canceled, surrendered,
lapsed, reduced paid-up, extended term, voided, not taken, or such
other codes which may be used to designate policies no longer in force,
maintained either chronologically by date of policy issuance, alphabetically
by the insured's name, or serially by policy number. If the reports
cannot be sub-totaled, a separate report must be generated for each
type of termination status or non-forfeiture change. The reports must
balance to the reconciliation report required under paragraph (4)
of this subsection. Information required to be in separate columns
includes:
(A) the insured's name;
(B) the date of policy issuance;
(C) the policy number or numbers;
(D) the date the policy matured, lapsed, or was surrendered
or canceled; and
(E) the death benefit amount that has been paid, reduced,
deleted, or transferred.
(3) an in-force policy report, sorted by policy type
and maintained either chronologically by date of policy issuance,
alphabetically by the insured's name, or serially by policy number.
The in-force report must balance to the reconciliation report required
under paragraph (4) of this subsection. The report must provide the
grand total number of policies or prepaid funeral contracts in force
and the grand total of death benefit or insurance in force. Information
required to be included in separate columns includes:
(A) the insured's name;
(B) the policy number or numbers;
(C) the prepaid contract total;
(D) the date of policy issuance;
(E) the death benefit, or insurance in force, whichever
is applicable; and
(F) growth, e.g., dividends and interest, attributable
to outstanding policies for the reporting period unless maintained
on a separate report.
(4) a reconciliation report that shows the activity
related to each policy that was identified in the new issue report
required under paragraph (1) of this subsection and the out-of-force
and non-forfeiture policy reports required under paragraph (2) of
this subsection. In addition to the required reports detailed above,
the permit holder must provide documentation to support any other
changes to contract/policy count and/or death benefit reported. The
ending totals of the respective reconciliation period for contract/policy
count and death benefit reported, must balance to the totals on the
corresponding in-force policy report required under paragraph (3)
of this subsection. The permit holder may use the department's Annual
Report Recapitulation of Policy Activity format to complete this report.
The report must at a minimum be balanced as of June 30 and December
31 of each year; and
(5) a suspense report of all premiums being held on
paid-up policies and premium paying policies where the premiums in
suspense are equal to or greater than the modal premium amount.
(f) Exceptions.
(1) A permit holder that sells only insurance-funded
contracts is not required to maintain records that are applicable
only to trust-funded contracts.
Cont'd... |
