1. (a) Application. This section applies to a permit holder who sells or maintains insurance-funded prepaid funeral benefit contracts. Unless the Department of Banking (the department) is petitioned for and agrees to a different location under subsection (i) of this section, all specified records must be made available to the department for examination at the physical location in Texas that the permit holder has designated in written notice to the department on file at the time of the examination.

2. (b) General files. A permit holder subject to this section must maintain general files regarding its prepaid funeral benefits operations. Such files may be maintained in hard-copy form or on microfiche or in an electronic database from which they may be expeditiously retrieved in hard-copy form. These files must contain the original or a copy of the following:

   1. (1) the latest approved renewal permit application for the permit holder and its last filed annual report;
   2. (2) the current permit issued to the permit holder by the department;
   3. (3) each contract form approved for sales transacted within the last three years unless no outstanding contracts exist using such form;
   4. (4) all department-approved insurance depository letters received within the last three years and all insurance depository letters pertaining to active contracts;
   5. (5) the most current consolidated financial statement, or the most recent annual statement filed with the insurance regulatory agency of each state in which the permit holder is required to file or, if not available, of the parent corporation;
   6. (6) each department-approved agent appointment made and resignation given within the last three years and all appointments that are still active;
   7. (7) all examination reports made by the department within the last three years;
   8. (8) all Texas Department of Insurance approved insurance policies used in conjunction with the sale of prepaid funeral contracts or the conversion of trust-funded contracts for the last three years and all insurance policies used for such purposes that are funding new contracts or contracts that are outstanding;
   9. (9) a list of insurance conversions performed for the last three years, a copy of each Order approving each such conversion, and a copy of the post-conversion summary provided to the department for each conversion;
   10. (10) all correspondence with the department for the last three years;
   11. (11) if the permit holder is an insurance company or an entity that controls or is controlled by an insurance company, a copy of all state insurance regulatory agency examination reports for the last three years; and

   12. (12) for any contract written in the last three years that does not specify whether a casket or outer-burial container is either sealer/non-sealer or protective/non-protective, then either:

       1. (A) general price lists for the corresponding or contracted funeral provider;
       2. (B) casket and outer burial container price lists for the corresponding or contracted funeral provider; or
       3. (C) alternative documentation that will demonstrate compliance with required casket and outer-burial container descriptions.

3. (c) Individual files.

   1. (1) Each permit holder subject to this section shall maintain a prepaid funeral benefits contract file on each purchaser. These files must be either maintained separately or capable of retrieval separately for outstanding contracts (including reduced paid-up policy contracts), matured contracts, and canceled contracts. Files may be maintained either chronologically or alphabetically in hard-copy form or on microfiche or in an electronic database from which they may be expeditiously retrieved in hard-copy form. Each individual file should contain all correspondence pertaining to the contract for that file including documentation to evidence that the executed preneed contract has been issued to the contract purchaser and the funding policy has been issued to the contract purchaser or policy owner within 30 days of the receipt of the initial down payment and insurance application.
   2. (2) Each file pertaining to an outstanding contract must contain a copy of the prepaid funeral benefits contract, any revocable and irrevocable assignment, and the data face sheet of the insurance policy or annuity contract funding the contract.

   3. (3) Each file pertaining to a matured contract must be retained for three years. Each such file must contain copies of all documents required for an outstanding contract and a completed department withdrawal form, or evidence of department withdrawal approval, or a proof of claim form prepared and completed by the permit holder which contains all the required information included on the department's prescribed withdrawal form. In addition:

      1. (A) a matured-contract file for which services were provided by the contracted funeral provider, a funeral provider related by common ownership to the contracted funeral provider, or a successor provider accepted by all contracting parties must contain:

         1. (i) the original or a copy of the completed at-need contract or funeral purchase agreement, or an itemization of services performed and merchandise transferred signed by the decedent's personal representative; or, if the preneed funeral contract relates only to the opening and closing of a grave, the cemetery interment order and/or other documents signed by the decedent's representative, provided the interment order or other documents must denote the balance, if any, that was due on the preneed contract at the time of death and any preneed discount;
         2. (ii) a certified death certificate or a copy of a certified original death certificate;
         3. (iii) the certificate of performance of contract services executed by the decedent's personal representative;
         4. (iv) evidence of payment to the servicing funeral provider, e.g., a copy of payment check or check stub; and
         5. (v) documentation of premium payment history and death benefits paid.

      2. (B) a matured contract file for which services were provided by a person other than those listed in subparagraph (A) of this paragraph must contain:

         1. (i) a signed statement from the purchaser or purchaser's representative requesting the delivery of funds to the servicing funeral provider;
         2. (ii) evidence of payment to the servicing funeral provider;
         3. (iii) a certified death certificate or a copy of a certified original death certificate; and
         4. (iv) documentation of premium payment history for annuity contracts and death benefits paid.
   4. (4) Each file pertaining to a canceled contract must be retained for three years. Each such file must contain copies of all documents required for an outstanding contract, a completed departmental withdrawal form or evidence of departmental withdrawal approval, documentation of premium payment history to support available cash surrender value, and evidence of payment of cancellation benefit, e.g., a copy of payment check or check stub.
   5. (5) Each file pertaining to a reduced paid-up policy must be retained for three years. Each reduced paid-up policy file must contain copies of all documents required for an outstanding contract and a copy of the permit holder's letter to the purchaser informing the purchaser of contract status. Each reduced paid-up policy file must also include copies of an election form indicating the purchaser has chosen reduced paid-up status, unless the policy has automatic reduced paid-up provisions.
4. (d) Document maintenance. A document or record is considered to be maintained in a file or ledger as required by this section if the specified information can be expeditiously retrieved for examination, whether by hard copy or produced electronically and printed for review.

5. (e) Consolidated records. Each permit holder subject to this section shall maintain the following records regarding its prepaid funeral benefits operations for both new and conversion sales, either in hard copy or stored on microfiche or in an electronic database from which they may be expeditiously retrieved and printed for review:

   1. (1) an historical contract register maintained chronologically or by policy number or by contract number reflecting all prepaid funeral contracts and policies, and a notation of the status of the contracts and policies as outstanding, matured, canceled, or reduced paid-up. Contracts may be removed from the register when three years or more has elapsed from the date of final disposition. The contract register should contain columns indicating:

      1. (A) the contract and corresponding policy number(s);
      2. (B) the contract issue date or purchase date;
      3. (C) the purchaser's name;
      4. (D) the beneficiary's name (if different from the purchaser's name);
      5. (E) the face amount of the contract; and
      6. (F) the final disposition of the contract, including notations as to whether the contract and policy are matured, canceled, surrendered, lapsed, reduced paid-up, extended term, voided, or not taken. The notation must also include the date of withdrawal claim and the amount of funds paid; or, in lieu thereof, a record separate from the register, listing matured, canceled, surrendered, lapsed, reduced paid-up, extended term, voided, or not taken contracts and policies for the examination period and setting out the contract and/or policy number, contract purchaser, date of the withdrawal claim paid, and amount of the withdrawal claim paid;
   2. (2) payment-receipt records which detail individual payment histories indicating payments collected;

   3. (3) an in-force policy register maintained either chronologically by date of policy issuance, alphabetically by the insured's name, or serially by policy number, balanced at least each calendar year-end and at the close of each department examination period to the individual files and insurance company records relating to the active preneed contracts. The reconciliations should be retained in hard-copy form or on microfiche or in an electronic database from which they may be expeditiously retrieved in hard-copy form for review by the examiner for a period of three years. The in-force register must accumulate to grand totals for all policies with respect to the information required under subparagraphs (C), (E), (F), and (G) of this paragraph and contain the following information for each policy or contract at a minimum:

      1. (A) the insured's name;
      2. (B) the policy number or numbers;
      3. (C) the face amount of prepaid funeral contract;
      4. (D) the date of policy issuance;
      5. (E) the death benefit, or insurance in force, whichever is applicable;
      6. (F) growth, e.g., dividends and interest, attributable to outstanding policies for the reporting period; and
      7. (G) cumulative growth totals for each outstanding policy.

   4. (4) out-of-force policy reports identified 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. This report must be prepared at each calendar year-end and at the close of each department examination period. Each of these reports must be retained for a period of three years and contain at a minimum:

      1. (A) the insured's name;
      2. (B) the date of policy issuance;
      3. (C) the policy number or numbers;
      4. (D) the date the policy matured, lapsed, or was surrendered or canceled; and
      5. (E) the amount of in-force coverage or face value of insurance that has been paid, reduced, deleted, or transferred.

   5. (5) individual policy ledgers for each contract purchaser, balanced at least each calendar year-end and at the close of each department examination period to the in-force policy register and to the records of the insurance depository. These ledgers should be retained in hard-copy form, or on microfiche or in an electronic database from which they may be expeditiously retrieved in hard-copy form, for review by the examiner for a period of three years, and should reflect:

      1. (A) the insured's name;
      2. (B) the date of policy issuance;
      3. (C) the policy number(s);
      4. (D) the contract amount;
      5. (E) the policy face amount;
      6. (F) the premium amount;
      7. (G) the premiums collected to date for annuity policies only;
      8. (H) the death benefit, or insurance in force, whichever is applicable; and
      9. (I) cumulative growth, e.g., dividends and interest, attributable to policies.
6. (f) Conversions. A permit holder subject to this section shall maintain a file copy of the original trust-funded prepaid funeral contracts that have been converted to insurance funding and the payment history records for each converted contract prior to conversion.
7. (g) Corporate records. Corporate records of a permit holder subject to this section pertaining to actual or anticipated regulatory action or litigation that could result in the permit holder's insolvency and all corporate minutes must be maintained and made available to the department at each examination.

8. (h) Exceptions.

   1. (1) A permit holder that sells only insurance-funded contracts is not required to maintain records that are applicable only to trust-funded contracts.
   2. (2) With respect to contracts sold prior to the effective date of this section, a permit holder will not violate this section if it cannot produce records required under this section which were not previously required by statute or rule. However, basic reporting of in-force benefit amounts and policy activity from the last examination date to the current examination date will be required of all permit holders for insurance companies that have outstanding insurance policies funding preneed funeral contracts in Texas.
   3. (3) A permit holder may apply to the Commissioner for an exception to the record keeping requirements as provided under this subsection. An exception may be granted for good cause only by prior written approval of the Commissioner.
9. (i) Relocation of records. Prior to changing the location where required records are maintained or where the examination is to be performed pursuant to Section 154.053(a) of the Texas Finance Code, a permit holder must notify the department, specifying the new address in writing, and, if the change in location requires the granting of an exception, comply with subsection (h)(3) of this section before required records are moved to the new location.
10. (j) Maintenance of files. Documents and records required to be maintained under this section must be filed within 30 days of receipt. Cash received must be posted within 30 days of receipt, and cash withdrawn on death maturity must be posted within 30 days of actual withdrawal.

Source Note:The provisions of this §25.10 adopted to be effective November 28, 1995, 20 TexReg 9417; amended to be effective December 3, 2000, 25 TexReg 11930.