BILL ANALYSIS



S.B. 1365
By: Wentworth (Dear)
05-11-95
Committee Report (Amended)


BACKGROUND

     Insurance companies which operate under Articles 5.13 and
5.16, Insurance Code, historically do not offer an indemnity
product.  As a result, it is impossible to produce actuarial data
for the purpose of making rates.

PURPOSE

     S.B. 1365 removes the requirement that certain prepaid legal
service providers be required to produce non-existing actuarial
data for the purpose of establishing rates.

RULEMAKING AUTHORITY

     It is the committee's opinion that this bill does not
expressly grant any additional rulemaking authority to a state
officer, department, agency or institution.

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Article 5.13-1, Insurance Code, by amending
Subsections (a), (b), and (f) and adding Subsection (g), as
follows:

     (a)  Deletes requirement that all rates, rate plans, and
     charges, are to be established in accordance with actuarial
     principles for various categories of insureds; the prohibition
     that the rates and charges not be excessive, inadequate, or
     discriminatory; and that the benefits be reasonable.
     
     (b)  Authorizes the State Board of Insurance (board) to
     require that prepaid legal services contracts have rates that
     are adequate to reasonably provide the benefits under the
     prepaid legal services contracts. 
     
     (f) Provides that this subsection does not apply to a prepaid
     legal services contract that provides only consultation and
     advice on simple legal matters, either alone or in combination
     with the referral service, and that provides fee discounts for
     other matters.
     
     (g)  Prohibits the board from determining, fixing,
     prescribing, setting, or promulgating maximum rates or maximum
     amounts of premium to be charge for a prepaid legal service
     contract issued under this chapter.  Requires the board to
     approve such rates as filed by any insurer unless it finds
     that such filing does not meet the requirements of this
     article.  Deletes the provision that this article shall not be
     construed as to require the board to establish a single or
     uniform rate for each risk or risks or to compel all insurers
     to adhere to such rates previously filed by other insurers,
     and the board's empowerment to approve such different rates
     for different insurers.
     
SECTION 2. Amends Subsection (a), Section 23.01, Insurance Code, as
follows:

     (a)  On an application of any seven or more persons to the
secretary of state for a      corporate charter under the Texas
Non-Profit Corporation ACT a corporation amy be   incorporated for
the sole purpose of establishing, maintaining, and operating non-profit    legal service plans.



SECTION 3. Articles 23.10, 23.14, and 23.15, Insurance Code, as
follows:

     Art. 23.10.  CORPORATIONS NON PROFIT; FUNDS; INVESTMENTS. 
     Requires the claim fund to be composed of at least 70 percent,
     rather than 80 percent, of the regular payments by
     participants, and the application fees.  Makes a conforming
     change.
     
     Art. 23.14.  SUPERVISION.  (a)  Makes conforming changes.
     
     (b)  Prohibits the board from determining, fixing,
       prescribing, setting, or promulgating maximum rates or
       maximum amounts of premium to be charged for a non profit
       legal services plan under this chapter.
       
     Art. 23.15.  New heading: DUTIES OF CONTRACTING ATTORNEYS;
     ADEQUATE FINANCIAL STANDING.  Deletes a requirement that the
     board approve the ratio of benefits to be paid to anticipated
     revenues from the rate schedule proposed to be used if found
     to be actuarially sound.   Deletes a provision prohibiting
     prepaid legal services contract or benefit certificate
     thereunder from being used by corporations complying with this
     chapter without such finding.
     
SECTION 4. Effective date: September 1, 1995.
           Makes application of this Act prospective beginning
January 1, 1996.

SECTION 5. Emergency clause.

EXPLANATION OF AMENDMENTS

     The Committee amendment to S.B. 1365 requires all legal
service contracts and promotional material to be truthful, accurate
and properly describe the coverage offered.  The description of
coverage offered should include as either an indemnity coverage or
a contract that provides only consultation and advice on simple
legal matters, either alone or in combination with a referral
service, and provides for fee discounts for other matters.

SUMMARY OF COMMITTEE ACTION

     In accordance with House rules, S.B. 1365 was heard in a
public hearing on May 10, 1995.  The Chair laid out S.B. 1365 and
recognized the following persons to testify in support of S.B.
1365: Cordell Hull; The Signature Corporation; Richard S. Geiger,
representing himself.
The Chair left S.B. 1365 as pending business before the Committee.

     Pursuant to an announcement filed with the Journal Clerk and
read by the Reading Clerk, the House Committee on Insurance met in
a formal meeting on May 11, 1995 at desk #24 on the House Floor and
was called to order by the Chair, Representative John Smithee.

     The Chair laid out S.B. 1365 as pending business before the
Committee.  The Chair recognized Representative Averitt who offered
an amendment to S.B. 1365.  The Chair recognized G. Lewis who moved
the Committee adopt the amendment to S.B. 1365.  The Chair heard no
objections and the amendment was adopted.

     The Chair recognized Representative Averitt who moved the
Committee report S.B. 1365 as amended to the full House with the
recommendation that it do pass, be printed, and be sent to the
Committee on Local and Consent.  Representative Duncan seconded the
motion and the motion prevailed by the following vote: AYES: (7);
NAYES: (0); PNV: (0); ABSENT: (2).