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"~rmrr,. October 11, 1954

.’ Hon. Garland A. Smith, Chairman Board of Insurance Commissioners Internat ional Life Building Austin, Texas Opinion Nob 

### S-143 Re: Legality and rffaot 

### of various provlslanr In atarm lift3 insurance policy lesued under the wholesale plan. Dear Mr. Smith:

The pertinent parts of your request 

### for our 

### opinion read as follows:

“Fromtime to time life insurance cdmp~les submit policy forms to this Department for flling which are to be issued under what is known as the Wholesale Life Insurance Plan (sometimes called Employee Life Insuranoe Plan) e This plan has been In use in Texas for some years andwa.6,. evolved to extend administrative expense savingg,

. possible in group coverage, to individual policies issued under individual underwriting standards to groups of employees too small to be ellgible for group coverage under Code Article 3.500.

“In our review of such wholesale life insurance forms submitted to this department for filing, certain questions have .arisen that need to be resolved, and werespectfully request that you give us your opinion on these questions which ‘are set forth as follows: “lo Must an individual term life insurance policy provide coverage for .adefinite time period by specifying a number of years, months weeks or days, or maythe term of the insurance be geared to and measured by the term of the insured’s employment with a specified employer? “2
. If an Individual term life insurance policy mayprovide coverage for an indefinite, term’-

Hon. Garland A. Smith, page 2 

### (S-143)

conditioned upon cessation of employment, should such apolicy provide that the insured’s coverage will terminate at the next premium due date subsequent to termination of employment, or may such a policy provide that coverage will cease immediately upon termination of employment? "3* If an individual term life insurance policy is issued on the one year renewable term plan, or on the one month renewable term plan, may it provide that it is renewable only at the option of the insurance company, or must it be renewable during a specified period of time following its date of issue at the option .of the insured only? "4. Mayan individual term life insurance policy be issued that provides for the payment of premiums only by the employer or some other specified person or firm, or must the policy provide for payment, of premiums without speclfying the person or firm that will make the payments.

II c 0~ ‘ Obviously ourconcern in this matter grows out of our understanding of Article 3.50 of the Texas Insurance Code which was considered by the Court in Board of Insurance Commissioners:~~ Great Southern Life Insurance Company, 239 S,W.2d 803,~ There has been no established ,departmental practice with respect to the inquiries enumerated above, but it does seem that, the intent of Article 3‘50 would be substantially defeated if all the elements of group insurance can be embodied in individual policies’ sold under a @wholesale plan. rll In answering the four specific questions above9we are assuming you are dealing with a “Wholesale Life Insurance Plan” which Is not in violation of any of the provisions of the Texas Insurance Code.

Individual life insurance policies are required to contain certain specific provisions enumerated in Article 3.44 of the Insurance Code, and are also required to exclude certain provisions enumerated in Article 3>45 of the Code, Group life insurance policies are required to conform to certain standardsHon. Garland A. Smith, ,page 3 (S-143)

outlined in Article 3.50. Individual contracts of life insurance may contain provisions and conditions agreed upon between the parties to the contract and which are not in conflict with the law. Hatch v. Ta 145 Tax. 17, 192 S;W.2d 668 (1946); v . Metrooo itan Life mau e omwax 77 S.W.2d cticut Eeneral Li Tex%iv.App. !ex%i;.App. Insurance omuu 1936, eri& ref .I. Our answers to your questions in the four propo- 1 sitions above are not in conflice with Articles 3.44 and 

### 3.45,supra and it is our opinion as an indivjdual life insurance poi therefore, that insofar icy Is concerned under a valid “Wholesale Plan”, the answers are:

1. Ordinarily an individual life insurance policy provides coverage for a definite time period by specifying anumber of years, months, weeks or days, but it may provide a term of insurance geared to and measured by the term of the insured’s employment with a specif led employer. 2. If an individual term life insurance policy provides coverage for an indefinite term conditioned upon cessation of employment, such policy mayprovide either that coverage will terminate at the next premium due date subsequent to termination of employment, z, that coverage wi.11 cease immediately upon termination of employment. 3. Anindividual term life Insurance policy issued on a one year or on a one month renewable term plan mayprovide either that it is renewable only at the option of the insurance company Q& that it is renewable during a specified per od of 1 time following its date of issue at the option of the insured only. 4. Anindividual term life insurance policy maybe issued that provides for the payment of premiums’.only by the employer or some other speclfied person or flrm, or it may provide for payment of premiums without specifying, the person or firm that will make the payments. tde, is titled: and provides:Hon. Garland AaSmith, page 4 

### (S-143)

“Except as maybe provided in this kticle,. it shall be m to make a contract of life insurance covering a group in this State-

. * .@I (Emphasis supplied.) ; .
It is apparent that the Legislature direoted its 1-r< prohibitions against any plan, scheme or system of life insurance which covers a group of persons in any mannerWIder policy provisions not in harmony with Article 

### 3a5Q9as amendedo supra o

Paragraph 

### (3)of Section 1, Article 3.50’ subchap- ’ ter I?, of Senate Bill No. 

### 236,Chapter 

### 491,Acts 0%the 52nd Legislature R. S ture;,. R,S, f953, EL,19513 was amended by Acts .53rd Legisla

### 345,p., 853, and this amendment reduced the ‘number of insureds necessary to be eligible for the
‘“group plan” from a minimum of 25 to a minimum of 

### 15 4 and it also allowed incorporated cities, towns or villages oparticipate in a “group plan.”

In determining whether or not a Wholesale Life Insurance Plan” is not in fact a “Group Plan” as defined in

characteristic of group insurance is the willingnessof the insurance company to waive its right to select who shall be

“.., insured for a “spread of risk” which it receives through a’ guarantee that a certain percentage of one class of persons would be covered,

,

4 Individual life insurance p’olicias may “-,,provide for aterm of insurance to end either at a specified date or at termination of ’ specified employmen$ or at due date of next +~ premium subsequent to termination of such em- .&.iloyment , etc0, and an individual one year ; ‘” ,term life policy may provide for renewal .at “’ option of the insurer, and such policy may specify who is to pay the premiumso In deter-’ mining whether OPnot a Wholesale Life Insupance Plan” is not in fact a “Group Plan” as,

..,

*.

. 

### Hon.GarlandA.Smfth,page5 (S-143)

setoutInArticle3.50,asamended youmay geguidedbytheopIni;;ein Boardohrp;iur

-. nersve atSou- :Insurance 

### Cornoat&150Tex.~58~239S&2d ;.803 (1951.1. APPRbvq: 

### Yoursverytruly, PhillipRobinson Reviewer JOHNBFiNSRFiPPEBD

J.C.Davis,Jr. Bevlewer RobertS.Trotti FirstAssistant BGR:wb