An Audit Report on the Texas Department of Insurance's Annuities Regulation
August 2009
Report Number 09-052
Overall Conclusion
The Texas Department of Insurance (Department) has implemented controls that are generally operating effectively to ensure that companies' annuity form filings comply with applicable laws and regulations. In addition, the Department licenses and regulates individuals who sell annuities according to relevant laws and regulations. However, there are opportunities for the Department to strengthen controls in these areas.
The Department ensured the annuity forms that insurance companies filed comply with laws and regulations by (1) providing training to the specialists who review these forms; (2) developing, using, and periodically updating checklists and actuarial spreadsheets tailored for the different types of forms submitted; (3) conducting random audits of submitted forms that are exempt from preapproval; (4) ensuring that management reviews a sample of forms that have been approved or disapproved by specialists in the Life/Health Division; and (5) developing an implementation plan after each legislative session.
Based on auditor testing of license types that permit the holders to sell annuities, the Department:
- Licensed only individuals who met all statutory requirements for those license types.
- Maintained the proper status in its licensing system for licenses that had been revoked.
- Conducted audits of licensees' continuing education efforts that were generally effective in identifying noncompliance with laws and regulations.
In addition, the Department generally processed and resolved complaints, and it identified, investigated, and resolved enforcement cases involving annuities and individuals who sell annuities, in compliance with relevant laws and regulations. It also routinely opened a concurrent enforcement case when a fraud case against a licensee was initiated.
However, the Department should strengthen its controls by ensuring that:
- It maintains documentation of its legal staff's approvals of changes to checklists that Department staff use when reviewing the forms insurance companies submit.
- Insurance agents are required to make up any deficiencies in statutorily required continuing education hours.
- Complainants receive the statutorily required quarterly updates until their complaints are closed.
- It promptly removes access to automated data for individuals who no longer require such access.
The Department also should:
- Improve its documentation of training provided to the specialists who review annuity form filings.
- Formally document and strengthen some licensing procedures.
- Strengthen procedures for internally reviewing processed complaint files and communicating enforcement case results.
- Investigate whether it can perform market analyses for annuity policy sales.
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