SCS SB 66 -- INSURANCE

This bill changes the laws regarding insurance company
investments; the Missouri Title Insurance Act; the Department of
Insurance, Financial Institutions, and Professional Registration;
life insurance; discount medical plans; and insurance company
examinations.

INSURANCE COMPANY INVESTMENTS

The bill:

(1)  Exempts insurers organized under Chapter 376, RSMo, from
several requirements in Chapter 375 including the following:

(a)  Insurance companies cannot deal or trade in goods, wares,
merchandise, commodities, or certain real estate purchases,
sales, or trades;

(b)  Domestic insurers must invest in stocks or shares having at
least the second highest designation or quality rating conferred
by the Securities Valuation Office of the National Association of
Insurance Commissioners;

(c)  Insurance companies are permitted to invest in foreign
governments or corporations if the investments are allowed in
United States companies; and

(d)  Insurance companies must follow the provisions of Sections
375.1070 - 375.1075 regarding investments in medium and lower
quality obligations;

(2)  Allows insurers organized under Chapter 376 to engage in
derivative transactions through an investment subsidiary;

(3)  Establishes provisions which apply to investments and
investment practices of domestic insurers organized under
Chapter 376.  Terms relative to these provisions are defined;

(4)  Requires an insurer's board of directors to adopt a plan for
acquiring investments and for engaging in investment practices
appropriate for the business conducted by the insurer, its
liquidity needs, and its capital and surplus needs.  Prohibited
investments are also specified;

(5)  Prohibits insurers, without the prior approval of the
Director of the Department of Insurance, Financial Institutions,
and Professional Registration from:

(a)  Making a loan to or investing in an officer of the insurer
or a person in which the officer has any financial interest;

(b)  Making a guarantee for the benefit of or in favor of an
officer of the insurer or a person in which the officer has any
financial interest; and

(c)  Entering into an agreement for the purchase or sale of
property from or to an officer of the insurer or a person in
which the officer has any financial interest;

(6)  Allows an insurer, without the prior approval of the
department director, to:

(a)  Make policy loans in accordance with the terms of the
contract;

(b)  Advance reasonable expenses expected in the course of
business to the directors or officers;

(c)  Make loans secured by the principal residence of an existing
officer in connection with the officer's relocation at the
insurer's request; and

(d)  Make loans or advances to officers or directors which comply
with state and federal laws pertaining to loans made to a
regulated noninsurance subsidiary or affiliate of the insurer in
the normal course of business;

(7)  Requires investments to be valued based on published
accounting and valuation standards of the National Association of
Insurance Commissioners;

(8)  Prohibits an insurer from investing more than 3% of its
admitted assets in investments issued by a single person or 5% in
investments in the voting securities of an institution.  This
limitation will not apply to amounts insured by a single
financial guaranty insurer having the highest generic rating
issued by a nationally recognized statistical rating organization
or to asset-backed securities.  Requirements are established for
medium-grade, low-grade, and Canadian investments;

(9)  Allows an insurer, subject to certain limitations, to
acquire rated credit instruments assumed, guaranteed, or issued
by the United States, Canada, government-sponsored enterprises of
the United States or Canada, a government or class one money
market mutual fund, a class one bond mutual fund, or general
obligation instruments of the state;

(10)  Allows an insurer to invest in tangible personal property
if the resulting ownership of the property returns to the insurer
the cost of the investment plus a return deemed adequate by the
insurer.  Investments in tangible property cannot exceed 2% of
admitted assets or .5% on any single item;

(11)  Allows insurers to acquire obligations secured by mortgages
on real estate situated within a domestic jurisdiction.  A
mortgage loan secured by other than a first lien cannot be
acquired unless the insurer is the holder of the first lien and
it meets certain requirements.  The real estate must be income
producing or intended for improvement or development to produce
income;

(12)  Allows insurers to enter into securities lending,
repurchase, reverse repurchase, and dollar roll transactions
subject to the board of directors adopting a written plan
detailing how cash received will be invested or used, operational
procedures used to manage investment risks, and the extent an
insurer may engage in these transactions; and

(13)  Establishes conditions and requirements for insurers to
invest in foreign markets.

MISSOURI TITLE INSURANCE ACT

The bill:

(1)  Requires a title insurer or title insurance agent issuing a
lender's title insurance policy, when no owner's policy has been
requested, to give written notice to a purchaser/mortgagor that
the lender's policy does not protect the purchaser;

(2)  Requires a written contract specifying the responsibilities
between a title insurer and a title insurance agent and the title
insurer's supervisory responsibilities regarding title insurance
agents;

(3)  Allows a title insurer or title insurance agent to operate
as an escrow, security, settlement, or closing agent if certain
requirements are met;

(4)  Requires a title insurer to conduct on-site reviews at least
annually on the practices and procedures of title insurance
agencies or agents with which he or she contracts.  Reports will
be maintained for at least four years and made available to the
department director upon request;

(5)  Requires settlement agents to record all deeds and security
instruments within five business days after completion;

(6)  Allows the department director, if it is determined that a
person has engaged or may engage in a violation of title
insurance laws, to issue administrative orders as authorized
under Section 374.046 to suspend or revoke the license of a
producer or the certificate of authority of any title insurer for
the violation, and to bring action in court to enjoin violations
of the Real Estate Settlement Procedures Act;

(7)  Prohibits an insurer that transacts any other class, type,
or kind of business from obtaining a title insurance license,
except that a title insurer can issue closing or settlement
protection;

(8)  Requires a title insurer to maintain at least $800,000 of
paid-in capital and a surplus of at least $800,000;

(9)  Prohibits the net retained liability of a title insurer for
a single risk from exceeding 50% of the surplus of all risks
insured;

(10)  Requires that the general investment provisions of Sections
379.080 - 379.082 will apply when determining the financial
condition of a title insurer except that an investment in a title
plant equal to the cost will be allowed as long as the aggregate
amount of all investments does not exceed 20% of the surplus to
policyholders;

(11)  Prohibits the use of specified title insurance forms unless
they have been approved by the department director;

(12)  Requires all title insurance agents to be licensed and
specifies their responsibilities, obligations for licensure, and
continuing education requirements;

(13)  Allows the department director to inspect the records of
title agencies, insurance agencies, and agents; and

(14)  Requires titled insurers, agencies, or agents to disclose
and provide required information on any affiliated businesses
involved in the transaction prior to commencing the transaction.

DEPARTMENT OF INSURANCE, FINANCIAL INSTITUTIONS, AND PROFESSIONAL
REGISTRATION

The bill:

(1)  Synchronizes the penalties, administrative orders, civil
actions, and other remedies available to the department director;

(2)  Allows the department director, upon determining that a
person has violated or attempted to violate provisions of the
insurance laws, to:

(a)  Issue an order directing the person to cease and desist from
engaging in the act, practice, omission, or course of business;
or

(b)  Issue a curative order or an order directing the person to
take other action necessary to comply with insurance laws;

(c)  Order a civil penalty or forfeiture; or

(d)  Award reasonable costs of the investigation;

(3)  Allows the department director to suspend or revoke a
corporation's or insurer's certificate of authority for violating
insurance laws or for a felony or misdemeanor conviction.  The
department director must provide 30 days' notice and a hearing,
if requested, before revocation;

(4)  Removes the department director's authority to suspend a
prepaid dental corporation's certificate of authority if it
issues a contract without prior approval;

(5)  Allows any applicant who is refused a license to sell
insurance to file a petition with the Administrative Hearing
Commission.  The department director will make the final decision
to refuse or renew a license;

(6)  Authorizes the department director to consult and share
information with other members of the National Association of
Insurance Commissioners, the Commissioner of Securities within
the Office of the Secretary of State, state securities
regulators, the Division of Finance and the Division of Credit
Unions within the department, the Attorney General, federal
banking and securities regulators, the National Association of
Securities Dealers, the United States Department of Justice, the
Commodity Futures Trading Commission, and the Federal Trade
Commission to effectuate greater uniformity in insurance and
financial services regulation among state and federal governments
and self-regulatory organizations.  The cooperation,
coordination, consultation, and sharing of records and
information authorized by the bill include:

(a)  Establishing or employing one or more designees as a central
electronic depository for licensing and rate and form filings
with the department director and for records required or allowed
to be maintained;

(b)  Encouraging insurance companies and producers to implement
electronic filing through a central electronic depository;

(c)  Developing and maintaining uniform forms;

(d)  Performing joint market conduct examinations and other
investigations through collaboration and cooperation with other
insurance regulators;

(e)  Holding joint administrative hearings;

(f)  Instituting and prosecuting joint civil or administrative
enforcement proceedings; and

(g)  Sharing and exchanging personnel;

(7)  Changes the laws regarding falsely testifying in insurance
investigations and prohibits an individual from knowingly making
a false statement under oath or affirmation in any record
submitted to the department director.  Knowingly making false
statements or making false entries on a document will be a class
D felony;

(8)  Allows the department director to seek an order to enforce
compliance if a person refuses to testify, file statements, or
produce records.  Persons are not excused from testifying or
producing records based on the grounds that the testimony or
records may tend to incriminate them.  In this case, the
department director may seek a court order to compel the
testimony or production of records, and the testimony or records
may not be used as evidence in a criminal case; and

(9)  Allows the department director to adopt rules to specify
uniform disclosure of material information on insurance policy
forms.

LIFE INSURANCE

The bill requires insurance producers, beginning January 1, 2008,
to complete 16 hours of continuing education every two years,
instead of the current 10 hours.  Any life insurance policy may
exclude life insurance liability for a death as the result of a
suicide within one year after the issuance of the policy but must
refund all the premiums paid.

DISCOUNT MEDICAL PLANS

The bill:

(1)  Defines "discount medical plan" as a business arrangement in
which a discount medical plan organization (DMPO), in exchange
for compensation, provides access for plan members to medical
service providers at a discount;

(2)  Requires a DMPO to register with the department director and
pay an application fee of $250.  The organization must be a legal
entity organized under the laws of this state or authorized to
transact business in this state;

(3)  Allows the department director to examine the business
affairs of a DMPO;

(4)  Allows a DMPO to charge reasonable fees as long as the fees
are disclosed to the applicant.  A member has a 30-day, free-look
period on a membership;

(5)  Prohibits a DMPO from disseminating information that could
mislead a person to think that the plan is for health insurance;

(6)  Prohibits the restriction of access to providers including
waiting and notification periods.  A DMPO cannot collect or pay
fees for medical services unless it is licensed by the department
director to act as an administrator;

(7)  Requires a DMPO to maintain a net worth of at least
$150,000;

(8)  Requires notification to the department director at least 30
days prior to changing the organization's name or address; and

(9)  Allows the department director to deny or revoke the
registration of an applicant for material misstatements,
misrepresentation, or fraud.  The applicant can request an appeal
hearing.  The department director is authorized to issue
administrative orders and maintain civil actions against a DMPO
that is in violation of these provisions.

INSURANCE COMPANY EXAMINATIONS

The fee schedules are revised for health services corporations,
health maintenance organizations, and insurance companies and for
certain document filing fees paid by these organizations.
Assessments made against insurance companies for examination
purposes will include:

(1)  The cost of compensation, including benefits, for the
examiners, analysts, actuaries, and attorneys contributing to the
examination of the company;

(2)  Reasonable travel, lodging, and meal expenses for an on-site
examination; and

(3)  Other expenses of the examination.

The department director must pay these expenses from the
Insurance Examiners Fund, and the Insurance Dedicated Fund may be
used for the regulation of the business of insurance and the
operation of the Division of Consumer Affairs.

All domestic insurance companies subject to orders of
conservation, rehabilitation, or liquidation must reimburse the
Insurance Dedicated Fund for administrative services rendered by
state employees to the company.

The provisions regarding the Insurance Examiner's Sick Leave Fund
are repealed.

The provisions regarding the Missouri Title Insurance Act become
effective January 1, 2008.

Missouri House of Representatives
94th General Assembly, 1st Regular Session
Last Updated July 25, 2007 at 11:21 am