Overall Vote Recommendation

Yes

Principle Criteria

Free Enterprise

Property Rights

Personal Responsibility

Limited Government

Individual Liberty

Digest

HB 4386 amends the Texas Insurance Code to establish clearer and more consumer-friendly procedures for the exchange or surrender of annuity contracts. The bill introduces two new sections—1114.0541 and 1114.0542—that lay out the requirements for insurers during these transactions, including timelines, documentation standards, and penalties for noncompliance.

Under Section 1114.0541, the bill defines an annuity "exchange" as a transaction where the funds from an existing annuity contract are transferred directly into a new annuity contract, with both contracts held by the same owner and annuitant. It requires the replacing insurer to initiate the exchange using a form made available by the existing insurer, which must include basic identifying and authorization information. Once the notice is received, the existing insurer must acknowledge it within five business days and, unless the annuity contract states otherwise, must transfer the funds within 30 business days. Failure to do so requires the existing insurer to pay a 10% annual penalty interest on the delayed amount.

Section 1114.0542 outlines the process for surrendering an annuity contract. The contract owner must submit a surrender request using a form provided by the insurer. That form must also be made available on the insurer’s website or mailed upon request. The insurer has five business days to acknowledge receipt of the form and must transfer the surrender value within 30 business days unless the contract permits a longer deferral period. As with exchanges, penalty interest applies if the insurer fails to meet the deadline.

The bill is designed to protect consumers’ access to their annuity funds, reduce administrative delays, and improve transparency in annuity contract transactions. It balances consumer rights with clear procedural guidance for insurers, strengthening accountability and ensuring more timely access to financial assets.

The originally filed version of HB 4386 differs from the Committee Substitute in several key respects, primarily in structure, clarity of process, and specificity of consumer protections.

The originally filed bill sought to amend existing Section 1114.054 of the Insurance Code by adding subsections (e) through (g). These provisions required insurers to acknowledge notices of replacement or surrender of annuity contracts within 5 business days and to complete the associated transfer or surrender payments within 30 days. Notably, the bill set a high penalty interest rate of 18% per annum for failure to meet these deadlines. However, the originally filed version was relatively brief and did not provide detailed procedural guidance or standardize documentation requirements for initiating replacements or surrenders.

In contrast, the Committee Substitute version repealed the changes to Section 1114.054 and instead introduced two entirely new and more comprehensive sections: 1114.0541 (for exchanges) and 1114.0542 (for surrenders). These sections provide step-by-step processes, including mandatory elements for standardized request forms, required availability of those forms online, detailed disclosure requirements, and clear instructions for both insurers and policyholders. The substitute also establishes a slightly lower penalty interest rate of 10% per annum for untimely transfers, balancing consumer protection with more typical statutory interest expectations.

Overall, the Committee Substitute reflects a more refined, stakeholder-informed approach that promotes transparency, consistency, and ease of compliance while still maintaining strong consumer protections. It transitions from a more enforcement-heavy framework to one that emphasizes clarity, standardization, and procedural fairness.

Author

Trey Wharton

Sponsor

Tan Parker

Contact the Author

Rep. Trey Wharton

Capitol Phone:

(512) 463-0412

Capitol Office:

EXT E1.312

E-Mail:

[email protected]

Visit Official Website

Fiscal Notes

According to the Legislative Budget Board (LBB), HB 4386 would have no significant fiscal implications for the State. This finding is based on the assumption that any administrative costs required to implement the bill’s provisions, such as updating procedures, monitoring compliance, or responding to inquiries, can be managed using the existing resources of the Texas Department of Insurance (TDI).

Similarly, the bill is not expected to impose significant costs on local governments. Since the regulatory scope of the bill primarily affects insurance companies operating under state oversight, rather than local entities, there is no material impact anticipated at the municipal or county level.

In summary, while HB 4386 introduces new procedural requirements for insurers concerning annuity exchanges and surrenders, the administrative burden is not considered substantial enough to necessitate additional funding. The fiscal outlook is thus neutral, with both state and local governments expected to absorb any minor implementation efforts within their current capacities.

Vote Recommendation Notes

Texas Policy Research recommends that lawmakers vote YES on HB 4386 based on its strong alignment with foundational liberty principles: it promotes individual choice, strengthens private property rights, encourages free enterprise, and holds businesses accountable, without expanding government or imposing significant regulatory burdens. The bill creates a clear, consumer-friendly framework for processing annuity contract exchanges and surrenders. By establishing deadlines and requiring insurers to acknowledge and fulfill such requests within specific timeframes, the legislation improves transparency and reduces financial uncertainty for annuity holders.

Importantly, HB 4386 does not grow the size or scope of government, nor does it impose any new burden on taxpayers. The Legislative Budget Board confirmed there are no significant fiscal implications to the state or local governments, and the Texas Department of Insurance can implement the bill using its current resources. This ensures that consumer protections are enhanced without requiring new funding, staff, or regulatory bodies.

While the bill imposes procedural requirements on insurers, such as standardizing request forms and enforcing response deadlines, these are modest, narrowly tailored, and administrative in nature. They do not expand substantive regulation over business operations, pricing, or product design. Additionally, the bill avoids increasing the regulatory burden on consumers, instead improving their ability to exercise control over personal financial decisions. The legislation also includes safeguards to ensure it does not interfere with existing suitability standards for annuity transactions.

Ultimately, HB 4386 enhances market fairness and consumer empowerment within the existing regulatory structure, without expanding government authority or taxpayer obligations.

Individual Liberty: The bill empowers individuals to access, transfer, or cash out their annuity contracts more efficiently. Annuities are private assets, and delays in accessing them can prevent people from exercising control over their own finances. By ensuring timely and transparent processes, the bill upholds the individual's right to make informed, autonomous financial decisions.
Personal Responsibility: By establishing clear expectations for both insurers and contract holders, the bill promotes responsible behavior on both sides. Consumers must complete and submit proper documentation, while insurers must meet response deadlines. This structure encourages transparency and accountability rather than relying on litigation or state enforcement to resolve disputes.
Free Enterprise: The bill removes procedural barriers that may discourage consumers from switching annuity providers, thereby increasing market competition. It makes it easier for individuals to move their funds to a provider offering better terms, which rewards companies that offer better service and pricing. That fosters a more competitive and consumer-driven insurance market.
Private Property Rights: An annuity contract is a financial asset owned by the individual. Delays in processing transfers or payouts effectively restrict access to one’s own property. The bill protects these rights by ensuring timely access to the value of that property and penalizing companies that unreasonably withhold it.
Limited Government: The bill does create new procedural standards for insurers, but it does not expand regulatory agencies or introduce new government programs. It respects the principle of limited government by working within existing frameworks and avoiding taxpayer cost or bureaucratic growth. Its narrowly tailored requirements are aimed at enforcing fairness, not controlling markets or business models.

Related Legislation

SB 1823 (Same As)

View Bill Text and Status