BILL ANALYSIS S.B. 702 By: Truan Economic Development 03-22-95 Committee Report (Amended) 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: Art. 5.33B. REDUCTION IN HOMEOWNERS INSURANCE PREMIUMS FOR APPROVED SPRINKLER SYSTEMS Sec. 1. DEFINITIONS. Defines "commission," "commissioner," "fire protection sprinkler system," "homeowners insurance," and "inspector." Sec. 2. ELIGIBILITY FOR PREMIUM REDUCTION. 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. APPROVAL PROCEDURE. (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. PREMIUM REDUCTION CERTIFICATE. (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. AMOUNT OF PREMIUM REDUCTION. 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.