BILL ANALYSIS
C.S.H.B. 1988
By: Duncan
04-05-95
Committee Report (Substituted)
BACKGROUND
Texas has always closely regulated the rates, rules and forms
relating to most types of property/casualty insurance. The
regulation has been described as "one rate - one form". This
shorthand description means that every insurer uses the same rate
and form for similar risks. No other state has such a restrictive
type of regulation.
In 1991, Texas adopted a "pilot program on flexible rating"
when it enacted Article 5.101, Insurance Code. That statute
expires December 31, 1995. During the period of use for the
"flexible rating program" the previous statutes were suspended in
their effect, not repealed. If no legislation is enacted, the
"pilot program on flexible rating" will expire and the previous
laws will be re-activated.
PURPOSE
This bill will continue the use of the flexible rating program
and benchmark rating procedure as to private passenger motor
vehicle insurance but will do so by incorporating the features of
that law into the previously existing statutes. These statutes
subdivide the regulation of property/casualty insurance by line of
insurance. That is, automobile or motor vehicle insurance is
regulated under subchapter A of Chapter 5 of the Insurance Code;
commercial lines of insurance, other than workers compensation,
under subchapter B; residential property insurance (which includes
homeowners and farm and ranch owners insurance) under subchapter C.
Subchapter D relating to workers compensation insurance is not
changed by this bill.
This bill proposes to regulate commercial auto insurance under
the "file and use" procedure in subchapter B.
The Texas Department of Insurance was formerly called the
State Board of Insurance and was formerly administered by a three
member body called the State Board of Insurance. This bill changes
those designations whenever they appear. There are some
modifications which are intended to improve the administration of
the benchmark rating procedures.
RULEMAKING AUTHORITY
It is the committee's opinion that this bill does grant
additional rulemaking authority to
the Insurance Commissioner under SECTION 1 of the bill by amending
Sec. 3, Subsections (e),(k), and (q).
SECTION BY SECTION ANALYSIS
SECTION 1.
This section of the bill amends Article 5.01, Insurance Code.
Sec. 1: Amends the following subsections:
(a) The program on flexible rating is made permanent.
(b) The sunset expiration of the program is deleted.
Sec. 2: Amends the following subsections:
(1) Reference to Board is changed to Commissioner.
(3) Flexibility band is fixed at 30% below to 30% above the
benchmark rates. References to Board are changed to
Commissioner and the authority to set the flexibility
bands at different amounts is deleted.
(6) The definition of statutory rate limitation is deleted.
Sec. 3: Amends the following subsection:
(a) Flexible rating plan is changed to flexible rating
program.
(b) References to the Board are changed to Commissioner.
And the citation to the Administrative Procedures Act
is corrected.
(c) Reference to the flexibility band is deleted and
reference to the Board is changed to Commissioner.
(d) References to the Board changed to Commissioner and the
annual hearing is specified to be conducted on or before
September 1 of each year.
(e) References to Board are changed to Commissioner and
delegates rulemaking authority to the Commissioner.
(f) A new section is added creating a presumption that rate
filings within the flexibility band are valid and in
compliance with the requirements of the subsection and
providing hearing procedures if the Commissioner
disagrees.
(g) References to Board are changed to Commissioner.
(h) References to Board are changed to Commissioner and the
citation to the Administrative Procedure Act is
corrected.
(i) Authority to change the flex bands is deleted and rate
standards are supplied for insurer rate filings outside
the flex band.
(j) A provision is added to govern the effective date of
filings.
(k) References to the Board are changed to Commissioner and
delegates rulemaking authority to the Commissioner.
(l) References to Board are changed to Commissioner. A
reference to the citation to the Administrative
Procedure Act is corrected.
(m) References to the Board are changed to Commissioner and
other minor references are changed.
(n) The 10% limitation on rate changes through the use of
an approved rating manual is increased from 10% to 15%.
(o) Several internal references are deleted as unnecessary
and the references to Board are changed to Commissioner.
(p) Internal references are corrected and reference to the
Board is changed to the Commissioner.
(q) Internal references are corrected and references to the
Board are changed to Commissioner and delegates
rulemaking authority to the Commissioner.
Sec. 4: Amends reference to the "Board" to Commissioner.
Sec. 5: This subsection is deleted.
Sec. 6: Becomes Sec. 5 and is amended by subsection as follows:
(a) Citation to Administrative Procedure Act is corrected.
Reference to Article 1.33B is added.
(b) This new section governs discovery of evidence at a
benchmark rate hearing.
(c) This new section allows any party to present evidence
regarding statistical reporting rules to aid in
presenting a case at future benchmark rate hearings.
(d) If the record of evidence indicates a need to consider
changes to the statistical reporting rules and
statistical plans, the Commissioner is authorized to
institute a rulemaking proceeding for that purpose.
SECTION 2.
Amends Article 5.01(f), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 3.
Amends Article 5.01-2(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 4.
Amends Article 5.03(g), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 5.
Amends Article 5.04(c), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 6.
Amends Article 5.09, Insurance Code, to remove the expiration date
so that the suspension becomes permanent.
SECTION 7.
Amends Article 5.11(c), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 8.
Amends Section 1, Article 5.13-2, Insurance Code, to remove the
expiration date so that the statute on "file and use" rate
administration for commercial coverages other than automobile and
workers compensation becomes permanent.
SECTION 9.
Amends Section 3(2), Article 5.13-2, Insurance Code, to add
reciprocal to the kind of companies to which certain provisions of
the statute do not apply.
SECTION 10.
Amends Section 10, Article 5.13-2, Insurance Code, to correct the
citation to the Administrative Procedure Act.
SECTION 11.
Amends Article 5.14(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 12.
Amends Article 5.15(h), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 13.
Amends Article 5.25(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 14.
Amends Article 5.25A(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
Section 15.
Amends Article 5.26(i), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 16.
Amends Article 5.28(d), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 17.
Amends Article 5.29(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 18.
Amends Article 5.30(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 19.
Amends Article 5.31(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 20.
Amends Article 5.32(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 21.
Amends Article 5.34(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 22.
Amends Article 5.39(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 23.
Amends Article 5.40(d), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 24.
Amends Article 5.41(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 25.
Amends Article 5.96(a-1), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 26.
Amends Article 5.96A(d), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 27.
Amends Article 5.97(n), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 28.
Amends Article 17.22(b), Insurance Code, to remove the expiration
date so that the suspension becomes permanent.
SECTION 29.
Requires the Commissioner of Insurance to conduct a hearing to set
rates to be used by insurers in calendar year 1996 not later than
October 1, 1995.
SECTION 30. Effective Date.
SECTION 31. Emergency Clause.
COMPARISON OF ORIGINAL TO SUBSTITUTE
House Bill 1988 was a comprehensive re-write of subchapters A
and C of Chapter 5 of the Insurance Code. These subchapters
regulate, respectively, automobile insurance and residential
property insurance. House Bill 1988 proposed to repeal several
statutes which were made obsolete by the re-write subchapters A and
C and also would have repealed subchapter M (article 5.101)
governing the "flexible rating program".
The committee substitute continues the use of subchapter M as
the statute regulating rates for motor vehicle insurance and
residential property insurance and some modifications are made to
that statute. These changes include: (1) the flex bands of 30%
above and below the benchmark rate are made permanent, and the
discretion of the Commissioner to narrow those bands is deleted;
(2) the standards governing the Commissioner's prior approval of
rates outside the flex bands are made less restrictive; (3) the
scope of permissible discovery of evidence during a benchmark rate
hearing is prescribed; (4) the standards governing the effective
date of benchmark filings and filings outside the benchmark are
modified; (5) the sunset expirations of articles 5.101 and 5.13-2
are deleted; (6) article 5.13-2 is amended to specify that certain
provisions do not apply to reciprocals; and (7) the suspensions of
applicability of certain statutes are made permanent.
SUMMARY OF COMMITTEE ACTION
In accordance with House rules, H.B. 1988 was heard in a
public hearing on April 5, 1995. The Chair laid out H.B. 1988 and
recognized Representative Duncan who offered a substitute to H.B.
1988. The Chair recognized Representative De La Garza who moved
the Committee adopt the substitute to H.B. 1988. The Chair heard
no objections and substitute to H.B. 1988 was adopted. No one
testified in support of, in opposition to, or neutrally on H.B.
1988.
The Chair recognized Representative De La Garza who moved the
Committee report H.B. 1988 as substitute to the full House with the
recommendation that it do pass and be printed. Representative
Counts seconded the motion and the motion prevailed by the
following vote:
AYES (7); NAYES (0); ABSENT (2); PNV (0).