The Commissioner of Insurance adopts amendments to §§21.102 - 21.104, 21.106 - 21.109, 21.113 - 21.116, 21.119, 21.120, and 21.122, and new §21.121, concerning insurance advertising, certain trade practices, and solicitation. Sections 21.102 - 21.104, 21.106, 21.108, 21.109, 21.113, and 21.120 are adopted with changes to the proposed text as published in the September 28, 2007, issue of the Texas Register (32 TexReg 6730). Sections 21.107, 21.114 - 21.116, 21.119, 21.121, and 21.122 are adopted without changes.

REASONED JUSTIFICATION. The amendments are necessary to implement House Bill (HB) 2251 and HB 2252, as enacted by the 80th Legislature, Regular Session, effective September 1, 2007, and May 17, 2007, respectively. HB 2251 defines institutional advertisements on Internet websites and provides that an insurer must include all appropriate disclosures and information on its website required by applicable advertising rules only if a web page is not classified as an institutional advertisement. HB 2251 also provides that advertisements may be permitted by Commissioner's rule to comply with the applicable rules relating to advertising by including a link to a web page that provides the necessary information to comply with the advertising rules. Additionally, HB 2251 allows insurers to advertise to the general public policies or coverages available only to members of an association; prohibits the use of an advertisement for an insurance product relating to Medicare coverage unless the advertisement includes the prominently displayed language "Not connected with or endorsed by the United States government or the federal Medicare program;" allows the term "PPO plan" to be used in advertisements when referring to a preferred provider benefit plan; requires that an advertisement for a guaranteed renewable accident and health insurance policy include in a prominent place a statement indicating that the rates may change if the advertisement implies that the rates will not change and that the statement must generally identify the manner in which the rates may change; and provides that an advertisement subject to the Department's filing requirements that is the "same as or substantially similar" to an advertisement previously reviewed and accepted by the Department is not required to be filed for review. HB 2252 concerns certain advertising practices that may be used in the marketing of accident and health insurance that are not considered prohibited discrimination or inducement.

The adopted amendments and new §21.121 are also necessary to revise existing rules to promote efficient and effective regulation of current advertising practices in the insurance market. The amendments also update statutory references resulting from the nonsubstantive revision of the Insurance Code and internal cross references. In response to written comments on the published proposal, the Department has changed some of the proposed language in the text of the rule as adopted. The changes, however, do not introduce new subject matter or affect persons in addition to those subject to the proposal as published.

The Department has also made a nonsubstantive change in proposed §21.102(1)(G) in response to a commenter that noted that, while the Department had not proposed any changes to paragraph (1)(G), the reference to subsection (c) in this subparagraph was incorrect because the intended reference was to the definition of the defined term policy that is defined in paragraph (3). The Department agrees with the commenter and has changed the reference in §21.102(1)(G) to read "paragraph (3)."

One commenter questions whether the term "insurance product" referenced in the definition of invitation to inquire means something other than an insurance policy. It is the Department's intent that the definition of invitation to inquire refer to an insurance policy and has accordingly changed "product" to "policy" in §21.102(7) as adopted.

The Department has made a change to §21.103(c) as adopted in response to a comment that the proposed language in §21.103(c) would limit the use of widely-used methods of disclosure such as pop-ups that require consumers to confirm they have read the disclosure. Existing §21.103(c) already prescribes that required disclosures must be presented "conspicuously" and that such disclosures not be "minimized [or] rendered obscure." Further, disclosures invoked by certain content appearing within an advertisement must appear "in close conjunction with the statements to which the [disclosure] information relates." Following these existing standards, the Department has not accepted disclosures placed at the bottom of web pages that are so long that they require the reader to scroll to see the disclosures. However, the Department has accepted a web page that includes a clear and conspicuous statement at or near the top of the web page that clearly directs a reader to footnoted disclosures at the bottom of the page. Required disclosures should be clearly and conspicuously presented. The effectiveness of disclosures is directly related to the proximity of their appearance to the content to which they are related. Disclosures that are not readily presented to the reader do not satisfy these standards. Pop-ups or similar linking mechanisms may be used to satisfy specified disclosure requirements, if the link to the disclosure is conspicuous, clearly labeled and placed near the relevant information to which the disclosure relates. To achieve clarity in the proposed amendment to §21.103(c) regarding pop-ups and similar linking devices, the Department is revising the second sentence in proposed §21.103(c), to delete the phrases "to a web page" and "a web page that prominently displays." The sentence as adopted reads: "Regarding Internet advertising, the disclosures required by the sections referenced in paragraphs (1) - (5) of this subsection may be provided through a conspicuous and clearly labeled link, provided that the link must be placed near the relevant information to which it relates, and must connect directly to the information necessary to comply with the applicable requirements: . . . ."

One commenter suggests that the requirement that the full licensed name of the insurer appear in the advertisement at or before any shortened or substitute name be clarified to state that the full licensed name of the insurer must be used the first time the insurer is mentioned in the text of the advertisement. The Department agrees and accordingly the last sentence in adopted new §21.104(a)(1) has been revised to read, "The full licensed name must appear at or before the first appearance of any shortened or substitute name in the body of the text, which shortened or substitute name may be indicated as representing the insurer thereafter in the advertisement."

In response to a comment recommending striking the word "legally" in §21.106(f) because of redundancy, the Department has deleted "legally" from that subsection. In response to another comment on proposed §21.108(b) requesting clarification on why there was no certification procedure specified in this subsection when an insurer references statistical information that is more than five years old, the Department has added language to that subsection providing for a statement in the transmittal letter that is required to be provided pursuant to §21.120(a) that there is no more recent statistical information available.

Commenters recommended revising proposed §21.109(c) to clarify the Department's intent and maintain safeguards against rebating. They recommended adding the language "or obtain a quote" after the phrase "inquire about a policy" and striking the phrase "the good or service comprising." The Department agrees and has changed the language in §21.109(c) to read: "An advertisement may offer an incentive to inquire about a policy or obtain a quote provided that it includes a clear and conspicuous disclosure that no purchase is required in order to receive the incentive." The Department also agrees with a comment that the reference to "subsection (b)" in proposed §21.109(c) is incorrect, and has revised the reference to read: "...so long as any rate mentioned in any advertisement disseminated under this subsection indicates the age, gender, and geographic location on which that rate is based and. . . ."

One commenter recommends revising the phrase in proposed §21.113(f)(1) "define the applicable pre-existing conditions" to read "define the applicable pre-existing condition exclusion." The Department agrees that some additional clarifying language is appropriate, but that more appropriate phrasing would be, "define the applicable pre-existing condition provisions" and the adopted rule has been revised accordingly.

One commenter recommends that Internet advertisements be added to the listing of applicable media in the parenthetical sentence in existing §21.113(k)(3)(A) that emphasizes that subparagraph (A) "is applicable to all advertising media: i.e., mail, newspaper, radio, television, magazine, and periodical." The Department agrees that for purposes of clarity and internal consistency that "Internet advertisements" need to be included. However, in lieu of the commenter's recommendation, the Department has changed the parenthetical sentence in existing §21.113(k)(3)(A) referenced by the commenter to read: "It is emphasized that this section is applicable to all advertisements as defined in §21.102(1) of this subchapter (relating to Scope)," and has also added the term "electronic media," which includes web pages, e-mails, text messages, etc., to the definition of "advertisements" in current §21.102(1)(A). The Department believes that these two changes are the most efficient and comprehensive means to address the commenter's concern.

In response to a commenter requesting clarification in proposed §21.120(a)(1), on whether the Department will require Internet ads filed for review to include each Internet page and pop-up, the Department has revised that paragraph to add the language "having a distinct URL." The adopted language reads: "(1) the identifying form number of each form submitted, including a separate identifying form number for each Internet page and pop-up having a distinct URL." The Department notes that any Internet page, the content of which addresses the lines of coverage specified in §21.120(e), is an advertisement required to be filed for review with the Department at or prior to use. Any pop-ups which can be invoked from the content related to a "required" line of coverage must also be filed, in order to provide a complete representation of the information provided to consumers regarding such line of coverage. Each web page and pop-up with a distinct URL is considered a separate advertising form, and thus must have a unique identifying form number, to comply with §21.120(a)(1).

In addition, the Department has determined that changes to the proposed text in §21.103(b) are necessary to reflect the current procedure for review of an advertisement by the Department staff as a routine matter with an appeal of the Department's decision to the Commissioner. Therefore, §21.103(b) is revised to clarify that whether an advertisement has a capacity or tendency to mislead or deceive is determined by the Department or the Commissioner on appeal.

The following is a section-by-section summary of the adopted amendments and new §21.121.

§21.102. Definitions. The adoption adds the term electronic media to §21.102(1)(A) for purposes of clarity and internal consistency. The adopted amendments to §21.102(1)(F) change the defined term lead card solicitation to lead solicitation to better reflect the fact that some lead-generating strategies do not rely on reply cards to assemble prospective leads and delete the word hereby which is superfluous. The adopted amendments also revise the definition of policy in §21.102(3) to include viatical or life settlement contracts, premium finance agreements, and any other product offered by an insurer and regulated by the Department. The adoption also amends the definitions of insurer and agent in §21.102(4) and (5), respectively, to reference viatical and life settlement providers and viatical and life settlement brokers and provider representatives, respectively. Section 3.1710 of this title (relating to Prohibited Practices Relating to Advertising and Solicitation; Applications and Contracts) subjects viatical and life settlement contract advertising to the requirements in Chapter 21, Subchapter B of this title (relating to Insurance Advertising, Certain Trade Practices, and Solicitation). Viatical and life settlement providers, brokers and provider representatives are not licensed or registered as insurers or agents, nor is a viatical or a life settlement contract an insurance policy. However, the adopted amendments to the terms insurer and agent clarify how the requirements of Subchapter B are to be applied to parties advertising such contracts.

The adopted amendment to §21.102(6) changes the definition of institutional advertisement to reflect the changes mandated by HB 2251, codified as Insurance Code §541.082(b), (d) and (e). HB 2251, codified as Insurance Code §541.082(e), mandates that a web page or navigational aid within an insurer's website that provides a link to another webpage that includes content referring to a specific insurance policy, certificate of coverage, or evidence of coverage or provides an opportunity for an individual to apply for coverage or request a quote is classified as an institutional advertisement, provided that the webpage or navigational aid containing the link does not itself include such content. The adopted amendments incorporate §541.082(e) into the definition of institutional advertisement, and with the purpose of promoting uniformity in classifying advertisements, apply the standard relating to the absence of the specified content to advertisements appearing in any media. However, advertisements in media other than the Internet that do not refer to a specific insurance policy, certificate of coverage, or evidence of coverage or that do not provide an opportunity for an individual to apply for coverage or to request a quote or other information, are considered to be institutional advertisements. The adopted amendments also correct the reference to the Texas Department of Insurance to reflect its current name and delete a reference to the Insurance Code Chapter 5, which is an obsolete citation as a result of the nonsubstantive Insurance Code revisions enacted by the Texas Legislature. The deletion of the reference to Chapter 5 also clarifies that insurer communications regarding any line of insurance that are used only for the purpose of explaining legislatively mandated or Department-mandated changes, amendments, additions or innovations relative to forms, rules or rates subject to the Insurance Code, are institutional advertisements.

The adopted amendments add new paragraph (7) to §21.102 to include a new definition of the term invitation to inquire that is generally applicable to all advertising. The new definition replaces the existing definitions of invitation to inquire in §21.113(a) and (b) (relating to Rules Pertaining Specifically to Accident and Health Insurance Advertising and Health Maintenance Organization Advertising), which specifically concerns accident and health insurance advertising, and in §21.114(1) (relating to Rules Pertaining Specifically to Life Insurance and Annuity Advertising), which specifically concerns life insurance and annuity advertising.

The adopted amendments further add new paragraph (8) to §21.102 to include a new definition of the term invitation to contract that is generally applicable to all advertising. This new definition replaces the existing definitions of invitation to contract in §21.113(b), which specifically concerns health and accident insurance advertising, and in §21.114(1) and (2), which specifically concerns life insurance and annuity advertising. The definitions of invitation to inquire and invitation to contract adopt a single new definition for each term, harmonize these new definitions with the definition of institutional advertising derived from HB 2251, and make the definitions applicable to the advertising of all products subject to the Department's regulation.

§21.103. Required Form and Content of Advertisements. The adoption clarifies in §21.103(b) that whether an advertisement has a capacity or tendency to mislead or deceive is determined by the Department or the Commissioner on appeal. The adopted amendment to §21.103(c) is necessary to implement the provision of HB 2251, codified as Insurance Code §541.082(c), which allows the Commissioner of Insurance to permit specified disclosures required in Internet advertising to be made through links to web pages containing the required disclosures. The adopted amendment is also necessary to require that such a link be clearly labeled, and conspicuously placed near the relevant information to which it relates. The adopted amendment also identifies the specific disclosures in new §21.103(c)(1) - (5) which may be satisfied through such links.

§21.104. Requirement of Identification of Policy or Insurer. The adopted amendments to §21.104(a) are necessary to provide that an advertisement must reflect the identity of the person or entity responsible for the advertisement. The adoption also requires that the full licensed name appear at or before the first appearance of any shortened or substitute name in the body of the text, and the shortened or substitute name may be indicated as representing the insurer thereafter in the advertisement. The amendments also redefine the current requirement to display an insurer's full name to apply only to invitation to inquire and invitation to contract advertisements, and to apply the requirement uniformly to all lines of insurance. The amendments further require that, in institutional advertisements that address coverages in general and do not describe a specific policy or coverages of a particular insurer, the requirement may be satisfied by stating an agent's licensed name, registered assumed name, or Texas license number.

The adopted amendments to §21.104(d) are necessary to clarify that the requirements for identification of the products advertised include viatical and life settlement contracts. The amendments also permit the requirement to identify the product advertised to be satisfied if the advertised product is identified in the manner in which it is classified or addressed by rule or as filed with the Department. The amendments are also necessary to conform the existing §21.104(d) to provisions of HB 2251, codified as Insurance Code §541.085, by specifically permitting preferred provider benefit plans to be identified in advertisements as PPO plans.

The adopted addition of new §21.104(i) is necessary to regulate advertisements that promote multiple insurers' products, a practice sometimes referred to as co-branding. The adopted subsection requires that such advertising clearly identify which insurer issues each product advertised and that each insurer has sole financial responsibility for the products it issues.