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 (g)(3) 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 reasonably retrieved in hard-copy form. These files must contain the original or a copy of the following:

   1. (1) the initial permit application and the latest approved renewal permit application for the permit holder and its last filed annual report, if any;
   2. (2) the current permit issued to the permit holder by the department;
   3. (3) each contract form approved for sales transacted after the effective date of this section for so long as there are outstanding contracts 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 financial statement of the permit holder 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 for the previous 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 such conversions, and a copy of the post-conversion summary provided to the department for each conversion;
   10. (10) all correspondence with the department within the past three years.

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 reasonably retrieved in hard-copy form. Each individual file should contain all correspondence pertaining to the contract for that file.
   2. (2) Each file pertaining to an outstanding contract must contain copies of the prepaid funeral benefits contract, any revocable and irrevocable assignments, 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, where required. Each matured contract file must also contain a copy of:

      1. (A) the at-need contract or itemization of services performed and merchandise transferred; or, if the preneed funeral contract relates only to the opening and closing of a grave, the cemetery internment order;
      2. (B) the certified death certificate;
      3. (C) the certificate of performance of contract services executed by the decedent's personal representative; and
      4. (D) evidence of payment to the servicing funeral home, e.g., a copy of payment check or check stub.

   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 and a completed department withdrawal form or evidence of department withdrawal approval, where required. Each canceled contract file must also contain a copy of:

      1. (A) the purchaser's original notice of cancellation; and
      2. (B) 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) 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 in hard copy form or on microfiche or in an electronic database from which they may be reasonably retrieved in hard-copy form:

   1. (1) an historical contract register 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;
   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 or alphabetically by the insured's name, balanced at least quarterly to the individual files and insurance company records relating to the active preneed contracts. The reconciliations should be retained 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 (D), (E), (G), and (H) of this paragraph and contain the following information for each policy or contract at a minimum:

      1. (A) the insured's name;
      2. (B) policy number or numbers;
      3. (C) age or date of birth of insured;
      4. (D) face amount of prepaid funeral contract;
      5. (E) outstanding balance owed under all provisions of the prepaid funeral contract;
      6. (F) date of policy issuance;
      7. (G) premium amount;
      8. (H) premiums collected to date; and
      9. (I) death benefit, face amount of policy, or insurance in force, whichever is applicable; and

   4. (4) the lapsed policy report, cash surrender policy report, death maturity claim report, and reduced paid-up report, maintained either chronologically by date of policy issuance or alphabetically by the insured's name. 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 cancelled;
      5. (E) the amount of in-force coverage or face value of insurance which has been paid, reduced, deleted, or transferred.
5. (e) 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.
6. (f) 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.

7. (g) 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.
   3. (3) A permit holder may apply to the Commissioner for an exception to the record keeping requirements other than as provided under this subsection. An exception may be granted for good cause only by prior written approval of the Commissioner.
8. (h) Relocation of Records. Prior to changing the location where required records are maintained or where the examination is to be performed, 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 (g)(3) of this section.
9. (i) 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.