BILL ANALYSIS Insurance Committee By: Truan (Smithee) 04-26-95 Committee Report (Unamended) BACKGROUND Residential fire safety technology is affordable and available, but not being adequately promoted by state policy. Homeowners get credit on their insurance policies for having alarm systems, but not for having systems to put out the fire. A building can be destroyed or seriously damaged by fire before the fire department can respond to the alarm. PURPOSE As proposed, S.B. 702 entitles a policy holder to an homeowners insurance premium reduction if the person installs an inspector approved sprinkler system. RULEMAKING AUTHORITY It is the committee's opinion that rulemaking authority is granted to the Commission on Fire Protection under SECTION 1 (Section 3(a), Article 5.43-3, Insurance Code) and the commissioner of insurance under SECTION 2 (Section 5, Article 5.33B, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 3(a), Article 5.43-3, Insurance Code, to authorize the Commission on Fire Protection to create a specialized licensing or registration program for fire protection sprinkler system contractors under rules adopted under this section. SECTION 2. Amends Chapter 5C, Insurance Code, by adding Article 5.33B, as follows: Sec. 1: Defines "commission," "commissioner," "fire protection sprinkler system," "homeowners insurance," and "inspector." Sec. 2: Entitles a policyholder to a premium reduction (reduction) for homeowners insurance if the policyholder has installed an inspector approved fire protection sprinkler system (system) on the covered property. Sec. 3: (a) Authorizes a person with a system in the person's residence to contract with an inspector for a reduction certification inspection. (b) Requires the inspector to inspect the property and file a written report in the form prescribed the Texas Department of Insurance (department) stating the inspector's findings and whether or not the system meets applicable standards and qualifies the applicant's property for the reduction. (c) Defines "applicable standards." Sec. 4: (a) Requires the department to issue a reduction certificate entitling the applicant to a reduction on the homeowners insurance if the inspector's report states that the applicant's property qualifies for the reduction. (b) Entitles the policyholder to a reduction on presentation of the certificate to the insurer issuing the policy. Sec. 5: Requires the commissioner of insurance protection to establish, by rule, the amount of reduction applicable to a homeowners policy. SECTION 3. Effective date: September 1, 1995. Makes application of this Act prospective beginning January 1, 1996. SECTION 4. Emergency clause. SUMMARY OF COMMITTEE ACTION In accordance with House rules, S.B. 702 was heard in a public hearing on April 26, 1995. The Chair (Duncan) laid out S.B. 702 and recognized Representative Smithee to explain the bill. The Chair recognized the following persons to testify neutrally on S.B. 702: Lyndon Anderson, Texas Department of Insurance; Jack Woods, Texas Commission on fire Protection. The Chair recognized Representative G. Lewis who moved the Committee report S.B. 702 as engrossed to the full House with the recommendation that it do pass, be printed, and sent to the Committee on Local and Consent. Representative Averitt seconded the motion and the motion prevailed by the following vote: AYES (6); NAYES (0); ABSENT (3); PNV (0).