No new group, club, or class may be created and made a part of any company or association unless the company or association applying for such new group, club, or class first receives the approval of the State Board of Insurance; nor shall a new group, club, or class be created unless the same is authorized by the Insurance Code. All applications for the creation of a new group, club, or class shall be made in writing to the State Board of Insurance, only when first authorized by proper action taken by the board of directors of the company or association making the application. Such application shall contain at least the following: (1) A detailed plan for the creation of the proposed new group, club, or class. (2) A statement setting forth the purposes for the creation of a new group, club, or class and the advantages to result to any and all company or association members who may be affected by the creation of the proposed new group, club,
or class. (3) If a new group, club, or class is to be created and formed from the members, or from a part of the members, of an existing group, club, or class, a full and complete statement and explanation must be submitted to the State Board of Insurance to establish that any proposed division of the mortuary fund or any proposed division of the expense funds owned by the members of all groups, clubs and classes to be affected will be made on a just, fair and equitable basis insofar as such proposed division of funds will affect the rights and interests of all policyholders concerned. (4) If a new group, club, or class is to be created, it must be established that the same will inure to the best interests of each group, club, or class as may be affected, and that it will not damage the association. (5) Before the creation of a new group, club, or class is approved, it must first be established: (A) that the
group, club, or class will be able to pay its policy benefits in full within the period of time provided by law; (B) that the group, club, or class will limit its policy benefits on any one policy to an amount not to exceed $500 ($150 for burial associations) to be paid on any such policy issued by it during the period of its organization; except that the group, club, or class may provide for the payment of benefits up to $5,000 (not including burial associations) if it establishes in advance that it has and will continuously maintain adequate funds with which it can lawfully make full and complete payment of all benefits that may become due and payable during the period of organization; (C) that the group, club, or class will obtain at least 500 members within the period of six months following the date of its organization, and will maintain at least 500 members at all times thereafter; and (D) that adequate provision has been
made to make refunds of any and all funds collected from applicants for membership in the event that at least 500 bona fide, premium-paying applicants for membership in the proposed new group, club, or class are not received within the six-month period organization. (6) It must be established that any group, club, or class to be created is authorized by the bylaws of the company or association. (7) It must be established that all policies issued to a member of any such new group, club, or class are alike with respect to the type of benefit or benefits afforded to every other member of the same group, club, or class.
Source Note: The provisions of this §13.1 adopted to be effective February 23, 1983, 8 TexReg 450.