The Texas Department of Insurance (TDI) proposes to amend 28 TAC Chapter 3, concerning life, accident, and health insurance and annuities. This rule proposal updates numerous sections throughout Chapter 3 to reflect Insurance Code §1105.0015 and §425.073, relating to the valuation manual. Insurance Code §1105.0015 specifies that the operative date of the valuation manual is the date on which the valuation manual adopted under Insurance Code Subchapter B, Chapter 425, becomes operative. Insurance Code §425.073 requires that TDI adopt a valuation manual, and specify the operative date of the manual. TDI has adopted the valuation manual and specified its operative date of January 1, 2017, in 28 Texas Administrative Code §3.9901. This proposal makes conforming changes throughout Chapter 3 to reflect the valuation manual and its operative date.

In addition, the proposal makes nonsubstantive amendments to numerous sections throughout subchapters in Chapter 3 to reflect the recodification of the Insurance Code; to update state agency names, websites, and physical addresses; and to correct typographical, punctuational, and grammatical errors.

TDI proposes to amend the following sections in 28 TAC Chapter 3: Subchapter A, §§3.2 - 3.4, 3.6, and 3.7; Subchapter B, §§3.104, 3.105, 3.107, 3.108, 3.114, 3.115, 3.124, and 3.127; Subchapter C, §§3.203 - 3.205; Subchapter D, §§3.301, 3.302, 3.308, 3.310, and 3.311; Subchapter E, §3.408; Subchapter G, §3.601; Subchapter H, §3.702 and §3.704; Subchapter I, §§3.802 - 3.806 and 3.811; Subchapter J, §3.909; Subchapter K, §§3.1001, 3.1002, and 3.1006; Subchapter L, §3.1101; Subchapter N, §§3.1303 - 3.1305; Subchapter O, §3.1403 and §3.1404; Subchapter Q, §§3.1601, 3.1602, 3.1605 - 3.1607; Subchapter R, Division 2, §3.1720; Subchapter R, Division 3, §3.1740 and §3.1742; Subchapter R, Division 4, §3.1760; Subchapter S, §§3.3001, 3.3009, 3.3010, 3.3038, 3.3039, 3.3052, 3.3057, 3.3070, 3.3092, 3.3100, 3.3101, and 3.3110; Subchapter T, §3.3321; Subchapter U, §§3.3401 - 3.3403; Subchapter Y, Division 2, §§3.3829, 3.3832, 3.3837, 3.3842, and 3.3849; Division 4, §§3.3871, 3.3873, and 3.3874; Subchapter Z, §§3.4001, 3.4002, 3.4004, and 3.4005; Subchapter AA, §§3.4101 - 3.4103 and 3.4105; Subchapter CC, §3.4317; Subchapter EE, §3.4503 and §3.4506; Subchapter FF, Division 1, §3.5002; Subchapter FF, Division 2, §3.5103; Subchapter FF, Division 4, §3.5302; Subchapter FF, Division 6, §3.5602 and §3.5610; Subchapter JJ, §§3.9101, 3.9103, 3.9104, and 3.9106; Subchapter KK, §§3.9202, 3.9203, 3.9206, 3.9211, and 3.9212; Subchapter MM, §3.9401 and §3.9403; and Subchapter NN, §3.9503.

EXPLANATION. The proposed amendments update numerous sections throughout Chapter 3 to reflect Insurance Code §1105.0015 and §425.073, relating to TDI's adoption of a valuation manual, and the operative date for that manual. The proposed amendments also correct and update obsolete and incorrect text throughout Chapter 3. Amendments include updates to (1) statutory references to reflect Insurance Code recodification; (2) use the current names of state agencies; (3) specify current mailing and website addresses; and (4) correct punctuational, grammatical, and typographical errors and revise punctuation and capitalization as appropriate for agency style.

Amendments to multiple sections include the deletion of "shall" or replacement of "shall" with "will" (or another context-appropriate word). The purpose of changing the word "shall" is to provide plain language clarification of the rule text, consistent with current agency style and guidance on the TDI website, which provides links to resources on writing in plain language. Resources TDI uses for plain language guidance include plainlanguage.gov, which provides federal plain language guidelines, and the National Archives guidelines for clear legal documents. Both sources advise using alternatives to the word "shall" to provide clarity for readers.

The proposal also replaces "subchapter" or "chapter" with "title" where necessary, and removal of "the" in front of and commas following "Insurance Code" where appropriate. The proposal also replaces gender references to the commissioner with the phrase "the commissioner." These amendments, along with the amendments to correct punctuational, grammatical, and typographical errors and revise punctuation and capitalization for agency style, are made throughout the proposal and are not otherwise noted in the descriptions of amendments that follow, unless it is necessary or appropriate to provide additional context or explanation for a proposed amendment.

Descriptions of the proposed amendments in Subchapter A follow.

Section 3.2. Definitions. The proposal replaces a citation to Chapter 27 with Chapter 1502 and removes the hyphen from the word "non-forfeiture" to align with statutory language.

Section 3.3. Transmittal Information. The proposal updates the name and mailing address for the program area that can provide the checklist and form addressed by §3.3.

Section 3.4. General Submission Requirements. The proposal replaces a citation to Article 3.53 with Chapter 1153, replaces a citation to Article 3.50 §1(1) with §1131.051, replaces a citation to Article 3.50 §1(5) with §1131.053 in two instances, replaces a citation to Article 3.74 §4 with §1652.101, replaces a citation to Article 3.70-12 with Chapter 1651, replaces a citation to Article 3.42 with Chapter 1701, replaces a citation to Article 3.44a with Chapter 1105, replaces a citation to Article 3.44b with Chapter 1107, replaces a citation to Article 3.70-12 with §1651.053(c), replaces a citation to Article 3.50 §1(6) with §1131.064, replaces a citation to Article 3.51-6 §1(a)(6) with §1251.056, and replaces a citation to Article 3.51-6 §1(a)(2)(3) with §1251.053. In subsection (a), the proposal replaces "Filings Intake Division" with "Life and Health Division," to reflect the department's current organization. In subsection (b)(2), the proposal replaces a requirement to provide a fax number, if available, with a requirement to provide an email address, if available, within the list of information an insurer contact person is to provide to the Department upon form transmittal. The proposal replaces the word "Re-filings" with the word "Refilings" in the catchline to subsection (h). The proposal also removes the hyphen from the word "non-forfeiture" in nine instances to align with statutory language, and it inserts the phrase "of this paragraph" in subsection (r)(2) to clarify an internal reference.

Section 3.6. Certifications, Attachments, and Additional Information Requirements. The proposal replaces a citation to Article 3.50 §1(1) with §1131.051, replaces a citation to Article 3.50 §1(5) with §1131.053, replaces a citation to Article 3.50 §1 with Chapter 1131, replaces a citation to Articles 3.51-6 §(1)(a) and (2)(a) with Chapter 1251, replaces a reference to Article 3.50 §1(10) with §1131.060, and replaces a reference to Article 3.51-6 §1(a)(2) with §1251.052. The proposal also updates a reference to the heading of 28 TAC Chapter 26.

Section 3.7. Form Acceptance and Procedures. The proposal replaces a citation to Article 3.50, §1, with Chapter 1131; replaces a citation to Articles 3.51-6, §1(a) and §2(a), with Chapter 1251; and replaces references to Articles 3.42(i), (j), and (k) with §§1701.055(a), 1701.055(d), and 1701.057(a).

Descriptions of the proposed amendments in Subchapter B follow.

Section 3.104. Incontestable Clause. The proposal replaces a citation to Article 3.44(3) with §1101.006.

Section 3.105. Statements of the Insured. The proposal replaces a citation to Article 21.16 with §705.004.

Section 3.107. Policy Loans. The proposal replaces a citation to Article 3.44c with Chapter 1110 in two instances.

Section 3.108. Automatic Nonforfeiture Benefits. The proposal replaces a citation to Article 3.44a with Chapter 1105.

Section 3.114. Dependent Child Riders and Family Term Riders. The proposal replaces a citation to Article 3.44a, §3, with §1105.006 in one instance and §1105.007 in another.

Section 3.115. Requirements for a Package Consisting of a Deferred Life Policy with an Accidental Death Rider Attached. The proposal replaces a citation to Article 3.42 with Chapter 1701.

Section 3.124. Provisions Relating to Dividends, Coupon Benefits, or Other Guaranteed Returns. The proposal replaces a citation to Article 3.11 with §841.253.

Section 3.127. Certain Prohibited Provisions. The proposal replaces "Board of Insurance Commissioners" with "Texas Department of Insurance" and replaces "State Board of Insurance" with "TDI."

Descriptions of the proposed amendments in Subchapter C follow.

Section 3.203. Instructions to Commissioner. The proposal replaces a reference to Article 3.42 with Chapter 1701, and it replaces "the board" with "the department."

Section 3.204. Material and Information for the Commissioner to Consider. The proposal replaces a reference to Article 21.21 with Chapter 541 and replaces a reference to Article 3.42 with Chapter 1701.

Section 3.205. Construction of Rules. The proposal replaces a reference to Article 21.21, §4, (6), with §541.056(c), and replaces a reference to "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter D follow.

Section 3.301. Purpose and Scope. The proposal replaces a reference to Chapter 21 with Chapter 541, and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Section 3.302. Policy Form Submission. The proposal replaces "State Board of Insurance" with "Texas Department of Insurance" and replaces "these sections" with "this subchapter."

Section 3.308. Minimum Nonforfeiture Values. The proposal replaces a reference to Article 3.44a with Chapter 1105, and it replaces the phrase "in the policy" with "by the policy" to align with language in Chapter 1105.

Section 3.310. Artificial Maximum Premiums Prohibited. The proposal replaces a reference to Article 3.44a with Chapter 1105; replaces a reference to Article 3.28 with Chapter 425, Subchapter B; and replaces "State Board of Insurance" with "Texas Department of Insurance."

Section 3.311. General Enforcement. The proposal replaces a reference to Article 21.21 with Chapter 541, and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter E follow:

Section 3.408. Mandatory Policy Provisions. The proposal replaces a reference to Chapter 20 with Chapter 842, replaces three references to the "Texas Department of Human Services" with the "Texas Health and Human Services Commission," and replaces two references to "State Board of Insurance" with "Texas Department of Insurance."

Descriptions of the proposed amendments in Subchapter G follow.

Section 3.601. Purpose and Scope, Applicability, and Definitions Used in This Subchapter. The proposal replaces two references to Article 26.43 with §1501.260, replaces a reference to Chapter 20 with Chapter 842, replaces a reference to Chapter 20A with 843, and replaces a reference to Chapter 22 with Chapter 884. It also clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter H follow.

Section 3.702. Definitions. The proposal replaces three references to Article 3.75 with Chapter 1152, deletes the defined terms "may" and "shall," renumbers defined terms as appropriate to reflect deletion of the defined terms, and clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Section 3.704. Separate Accounts. The proposal replaces a reference to Article 3.75 with Chapter 1152, and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter I follow.

Section 3.802. Definitions. The proposal replaces three references to Article 3.75 with Chapter 1152, removes "may" and "shall" as defined terms, renumbers definitions as appropriate to reflect deletion of the defined terms, and clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Section 3.803. Qualifications of Insurer to Issue Variable Life Insurance. The proposal replaces a reference to Article 3.75 with Chapter 1152 and "State Board of Insurance" with "Texas Department of Insurance," and it clarifies applicability by replacing the phrase "these sections" with "this subchapter." The proposal replaces a reference to "this rule" with "this section."

Section 3.804. Insurance Contract and Filing Requirements. The proposal replaces six references to Article 3.44a with Chapter 1105, replaces "State Board of Insurance" with "Texas Department of Insurance," replaces a reference to Article 3.44c with Chapter 1110, and clarifies applicability by replacing the phrase "these sections" with "this subchapter." The proposal also replaces a reference to the numerical sections of Subchapter A with "Subchapter A."

Section 3.805. Reserve Liabilities for Variable Life Insurance. The proposal replaces a reference to Article 3.28 with Chapter 425, Subchapter B.

Section 3.806. Separate Accounts. The proposal replaces a reference to Article 3.75 with Chapter 1152, replaces a reference to Article 3.44a with Chapter 1105, and replaces "State Board of Insurance" with "Texas Department of Insurance."

Section 3.811. Savings Clause. The proposal replaces "State Board of Insurance" with "Texas Department of Insurance" in two instances, revises the section to remove a reference to applicability of specific sections that are no longer in the Texas Administrative Code, and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter J follow.

Section 3.909. Notification and Disclosure Requirements. The proposal updates the section to remove language that is no longer necessary because the language addresses compliance in regard to actions occurring before the original effective date of Subchapter J.

Descriptions of the proposed amendments in Subchapter K follow.

Section 3.1001. Authority. The proposal replaces a reference to Article 3.25 with §982.303; replaces a reference to Article 3.28 with Chapter 425, Subchapter B; replaces a reference to Article 3.42 with Chapter 1701; replaces a reference to Article 3.55-1 with Chapter 404; and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Section 3.1002. Purpose. The proposal replaces a reference to Article 3.28 with Chapter 425, Subchapter B; and it clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Section 3.1006. Early Warning Requirements. The proposal replaces the word "his" with "commissioner's" when referring to the commissioner's discretion, replaces the phrase "State Board of Insurance" with "Texas Department of Insurance," and clarifies applicability by replacing the phrase "these sections" with "this subchapter."

Descriptions of the proposed amendments in Subchapter L follow.

Section 3.1101. Strengthened Reserves Pursuant to the Insurance Code, Article 3.28, §9. The proposal replaces a reference to Article 3.28, §9, with §425.067 in the section title; and it makes two such replacements in the text. The proposal also replaces a reference to Article 3.28, §3, with §425.053, and replaces "State Board of Insurance" with "Texas Department of Insurance." The proposal replaces an incorrect reference to Exhibit 8A of an annual statement with Exhibit 5A.

Descriptions of the proposed amendments in Subchapter N follow.

§3.1303. Standard. The proposal specifies that for policies issued on or after January 1, 2017, the valuation manual adopted under Insurance Code Chapter 425, Subchapter B provides the tables to be used. The proposal provides additional clarifying information in a reference to an effective date based on a section of the Insurance Code that has been subsequently recodified, by inserting the word "former" and specifying the recodified section in the subsection (a) text, reading, "For any policy of insurance on the life of either a male or female insured, delivered, or issued for delivery in this state after the operative date of the former Insurance Code, Article 3.44a, §8 (recodified in Insurance Code, Chapter 1105, Subchapter B, §§1105.051 - 1105.057), for that policy form, the following tables may be used...". The proposal also updates the mailing address and name of the program area that can provide the table referenced by the section, and it clarifies applicability by replacing the phrase "these sections" with "this section" and "this subchapter."

Section 3.1304. Alternate Rule. The proposal specifies that for policies issued on or after January 1, 2017, the valuation manual adopted under Insurance Code Chapter 425, Subchapter B provides the tables to be used. The proposal provides additional clarifying information in a reference to an effective date based on a section of the Insurance Code that has been subsequently recodified, by inserting the word "former" and specifying the recodified section in the subsection (a) text, reading, "In determining minimum cash surrender value and amounts of paid-up nonforfeiture benefits for any policy of insurance on either a male or a female insured on a form of insurance with separate rates for smokers and nonsmokers delivered or issued for delivery in this state after the operative date of the former Insurance Code, Article 3.44a, §8 (recodified in Insurance Code, Chapter 1105, Subchapter B, §§1105.051 - 1105.057), for that policy form, in addition to the mortality tables that may be used...". The proposal also replaces "State Board of Insurance" with "Texas Department of Insurance" and updates the Life and Health Actuarial program area address.

Section 3.1305. Unfair Discrimination. The proposal replaces a reference to Article 21.21, §4(7)(a), with §541.057.

Descriptions of the proposed amendments in Subchapter O follow.