By Smithee H.B. No. 2637
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to regulation of the business of insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 5.01 (f), Insurance Code, is amended to
1-5 read as follows:
1-6 (f) Notwithstanding Subsections (a) through (d) of this
1-7 article, on and after March 1, 1992, rates for motor vehicle
1-8 insurance in this state are determined as provided by the flexible
1-9 rating program adopted under Subchapter M of this chapter. <This
1-10 subsection expires December 31, 1995.>
1-11 SECTION 2. Article 5.01-2(b), Insurance Code, is amended to
1-12 read as follows:
1-13 (b) On and after March 1, 1992, rates for motor vehicle
1-14 insurance written by a Lloyd's plan insurer or a reciprocal or
1-15 interinsurance exchange are determined as provided by the flexible
1-16 rating program adopted under Subchapter M of this chapter. <This
1-17 subsection expires December 31, 1995.>
1-18 SECTION 3. Article 5.03(g), Insurance Code, is amended to
1-19 read as follows:
1-20 (g) Notwithstanding Sections (a) through (e) of this
1-21 article, on and after March 1, 1992, rates for motor vehicles are
1-22 determined as provided by Subchapter M of this chapter. <This
1-23 subsection expires December 31, 1995.>
2-1 SECTION 4. Article 5.04(c), Insurance Code, is amended to
2-2 read as follows:
2-3 (c) Notwithstanding Subsections (a) and (b) of this article,
2-4 on and after March 1, 1992, rates for motor vehicles are determined
2-5 as provided by Subchapter M of this chapter. <This subsection
2-6 expires December 31, 1995.>
2-7 SECTION 5. Article 5.09, Insurance Code, is amended to read
2-8 as follows:
2-9 Art. 5.09. DISCRIMINATIONS OR DISTINCTIONS. (a) Except as
2-10 provided by Subsection (b) of this article, no insurer coming
2-11 within the terms of this subchapter shall, in its business in this
2-12 State, make or permit any distinction or discrimination in favor of
2-13 the insured having a like hazard, in the matter of the charge of
2-14 premiums for insurance, or in dividends or other benefits payable
2-15 under any policy, nor shall any such insurer or agent make any
2-16 contract of insurance, or agreement as to such insurance, other
2-17 than expressed in the policy, nor shall any such insurer or its
2-18 agents or representatives pay, allow or give, or offer to pay,
2-19 allow or give, directly or indirectly, as an inducement to insured,
2-20 any rebate payable upon the policy or any special favor or
2-21 advantage in dividends or other benefits to accrue, or anything of
2-22 value whatsoever, not specified in the policy; provided that
2-23 nothing in this subchapter shall be construed to prohibit the
2-24 modification of rates by rating plans designed to encourage the
2-25 prevention of accidents, and to take account of the peculiar
3-1 hazards and experience of individual risks, past and prospective,
3-2 within and outside the State, and of all other relevant factors,
3-3 within and outside the State, provided such plan shall have been
3-4 approved by the Board.
3-5 (b) This article does not prohibit an insurer, on approval
3-6 by the Board, from distributing to policyholders who are on active
3-7 duty in the United States Armed Forces any estimated profits
3-8 resulting from service by those policyholders in any foreign
3-9 country in a combat theater of operations at any time after January
3-10 1, 1990. An insurer that elects to make such distributions shall
3-11 file a written description of its distribution program with the
3-12 Board for approval by the Board and shall notify the Board in
3-13 writing of each distribution made under the program. The insurer
3-14 may distribute the estimated profits among those policyholders
3-15 based on the length of time served by a policyholder in a combat
3-16 theater of operations, the location of the military service, the
3-17 duration of the applicable insurance policy, or any other
3-18 reasonable basis. The Board shall act on the insurer's
3-19 distribution program within five business days of receipt of the
3-20 insurer's distribution program, otherwise the distribution program
3-21 shall be deemed approved.
3-22 (c) <(b)> Notwithstanding Subsection (a) of this article, on
3-23 and after March 1, 1992, rates for motor vehicles are determined as
3-24 provided by Subchapter M of this chapter. <This subsection expires
3-25 December 31, 1995.>
4-1 SECTION 6. Article 5.11(c), Insurance Code, is amended to
4-2 read as follows:
4-3 (c) Notwithstanding Subsections (a) and (b) of this article,
4-4 on and after March 1, 1992, rates for motor vehicles are determined
4-5 as provided by Subchapter M of this chapter. <This subsection
4-6 expires December 31, 1995.>
4-7 SECTION 7. Sections 1 and 10, Article 5.13-2, Insurance
4-8 Code, are amended to read as follows:
4-9 Sec. 1. PURPOSE. <(a)> This article governs the regulation
4-10 of general liability, commercial property, all commercial casualty,
4-11 and medical professional liability insurance rates and forms. It
4-12 does not govern automobile, fidelity, surety, or guaranty bonds.
4-13 The purposes of this article are to:
4-14 (1) promote the public welfare by regulating insurance
4-15 rates to prohibit excessive, inadequate, or unfairly discriminatory
4-16 rates;
4-17 (2) promote availability of insurance;
4-18 (3) promote price competition among insurers to
4-19 provide rates and premiums that are responsive to competitive
4-20 market conditions;
4-21 (4) prohibit price-fixing agreements and other
4-22 anticompetitive behavior by insurers;
4-23 (5) regulate the insurance forms used for lines of
4-24 insurance subject to this article to ensure that they are not
4-25 unjust, unfair, inequitable, misleading, or deceptive; and
5-1 (6) provide regulatory procedures for the maintenance
5-2 of appropriate information reporting systems.
5-3 <(b) This article expires December 31, 1995.>
5-4 Sec. 10. ADMINISTRATIVE PROCEDURE <AND TEXAS REGISTER> ACT
5-5 APPLICABLE. Chapter 2001, Government Code <The provisions of the
5-6 Administrative Procedure and Texas Register Act (Article 6252-13a,
5-7 Vernon's Texas Civil Statutes)>, applies <apply> to all rate
5-8 hearings conducted under this article.
5-9 SECTION 8. Article 5.14(b), Insurance Code, is amended to
5-10 read as follows:
5-11 (b) Notwithstanding Subsection (a) of this article, on and
5-12 after October 1, 1991, rates and forms for general liability and
5-13 commercial property insurance coverage subject to this subchapter
5-14 are determined as provided by Article 5.13-2 of this code. <This
5-15 subsection expires December 31, 1995.>
5-16 SECTION 9. Article 5.15(h), Insurance Code, is amended to
5-17 read as follows:
5-18 (h) Notwithstanding Subsections (a)-(g) of this article,
5-19 rates for general liability, commercial property, and all
5-20 commercial casualty insurance coverage under this article are
5-21 determined, and hearings related to those rates are conducted, as
5-22 provided by Article 5.13-2 of this code. <This subsection expires
5-23 December 31, 1995.>
5-24 SECTION 10. Article 5.25(b), Insurance Code, is amended to
5-25 read as follows:
6-1 (b) Notwithstanding Subsection (a) of this article, on and
6-2 after March 1, 1992, rates for homeowners and farm and ranch
6-3 owner's residential fire and residential allied lines insurance
6-4 coverage under this subchapter are determined as provided by
6-5 Subchapter M of this chapter, and rates for other lines of
6-6 insurance subject to this subchapter are determined as provided by
6-7 Article 5.13-2 of this code. This subsection does not affect the
6-8 requirement for the Board to conduct inspections of commercial
6-9 property and prescribe a manual of rules and rating schedules for
6-10 commercial property under this subchapter. <This subsection
6-11 expires December 31, 1995.>
6-12 SECTION 11. Article 5.25A(b), Insurance Code, is amended to
6-13 read as follows:
6-14 (b) Notwithstanding Subsection (a) of this article, on and
6-15 after March 1, 1992, rates for homeowners and farm and ranch
6-16 owner's residential fire and residential allied lines insurance
6-17 coverage under this subchapter are determined as provided by
6-18 Subchapter M of this chapter, and rates for other lines of
6-19 insurance subject to this subchapter are determined as provided by
6-20 Article 5.13-2 of this code. <This subsection expires December 31,
6-21 1995.>
6-22 SECTION 12. Article 5.26(i), Insurance Code, is amended to
6-23 read as follows:
6-24 (i) Notwithstanding Subsections (a)-(h) of this article, on
6-25 and after March 1, 1992, rates for homeowners and farm and ranch
7-1 owner's residential fire and residential allied lines insurance
7-2 coverage under this subchapter are determined as provided by
7-3 Subchapter M of this chapter, and rates for other lines of
7-4 insurance subject to this subchapter are determined as provided by
7-5 Article 5.13-2 of this code. <This subsection expires December 31,
7-6 1995.>
7-7 SECTION 13. Article 5.28(d), Insurance Code, is amended to
7-8 read as follows:
7-9 (d) Notwithstanding Subsection (a) of this article, on and
7-10 after March 1, 1992, rates for homeowners and farm and ranch
7-11 owner's residential fire and residential allied lines insurance
7-12 coverage under this subchapter are determined as provided by
7-13 Subchapter M of this chapter, and rates for other lines of
7-14 insurance subject to this subchapter are determined as provided by
7-15 Article 5.13-2 of this code. <This subsection expires December 31,
7-16 1995.>
7-17 SECTION 14. Article 5.29(b), Insurance Code, is amended to
7-18 read as follows:
7-19 (b) Notwithstanding Subsection (a) of this article, on and
7-20 after March 1, 1992, rates for homeowners and farm and ranch
7-21 owner's residential fire and residential allied lines insurance
7-22 coverage under this subchapter are determined as provided by
7-23 Subchapter M of this chapter, and rates for other lines of
7-24 insurance subject to this subchapter are determined as provided by
7-25 Article 5.13-2 of this code. <This subsection expires December 31,
8-1 1995.>
8-2 SECTION 15. Article 5.30(b), Insurance Code, is amended to
8-3 read as follows:
8-4 (b) Notwithstanding Subsection (a) of this article, on and
8-5 after March 1, 1992, rates for homeowners and farm and ranch
8-6 owner's residential fire and residential allied lines insurance
8-7 coverage under this subchapter are determined as provided by
8-8 Subchapter M of this chapter, and rates for other lines of
8-9 insurance subject to this subchapter are determined as provided by
8-10 Article 5.13-2 of this code. <This subsection expires December 31,
8-11 1995.>
8-12 SECTION 16. Article 5.31(b), Insurance Code, is amended to
8-13 read as follows:
8-14 (b) Notwithstanding Subsection (a) of this article, on and
8-15 after March 1, 1992, rates for homeowners and farm and ranch
8-16 owner's residential fire and residential allied lines insurance
8-17 coverage under this subchapter are determined as provided by
8-18 Subchapter M of this chapter, and rates for other lines of
8-19 insurance subject to this subchapter are determined as provided by
8-20 Article 5.13-2 of this code. <This subsection expires December 31,
8-21 1995.>
8-22 SECTION 17. Article 5.32(b), Insurance Code, is amended to
8-23 read as follows:
8-24 (b) Notwithstanding Subsection (a) of this article, on and
8-25 after March 1, 1992, rates for homeowners and farm and ranch
9-1 owner's residential fire and residential allied lines insurance
9-2 coverage under this subchapter are determined as provided by
9-3 Subchapter M of this chapter, and rates for other lines of
9-4 insurance subject to this subchapter are determined as provided by
9-5 Article 5.13-2 of this code. <This subsection expires December 31,
9-6 1995.>
9-7 SECTION 18. Article 5.34(b), Insurance Code, is amended to
9-8 read as follows:
9-9 (b) Notwithstanding Subsection (a) of this article, on and
9-10 after March 1, 1992, rates for homeowners and farm and ranch
9-11 owner's residential fire and residential allied lines insurance
9-12 coverage under this subchapter are determined as provided by
9-13 Subchapter M of this chapter, and rates for other lines of
9-14 insurance subject to this subchapter are determined as provided by
9-15 Article 5.13-2 of this code. <This subsection expires December 31,
9-16 1995.>
9-17 SECTION 19. Article 5.39(b), Insurance Code, is amended to
9-18 read as follows:
9-19 (b) Notwithstanding Subsection (a) of this article, on and
9-20 after March 1, 1992, rates for homeowners and farm and ranch
9-21 owner's residential fire and residential allied lines insurance
9-22 coverage under this subchapter are determined, and hearings related
9-23 to those rates are conducted, as provided by Subchapter M of this
9-24 chapter, and rates for other lines of insurance subject to this
9-25 subchapter are determined as provided by Article 5.13-2 of this
10-1 code. <This subsection expires December 31, 1995.>
10-2 SECTION 20. Article 5.40(d), Insurance Code, is amended to
10-3 read as follows:
10-4 (d) Notwithstanding Subsections (a)-(c) of this article, on
10-5 and after March 1, 1992, rates for homeowners and farm and ranch
10-6 owner's residential fire and residential allied lines insurance
10-7 coverage under this subchapter are determined, and hearings related
10-8 to those rates are conducted, as provided by Subchapter M of this
10-9 chapter, and rates for other lines of insurance subject to this
10-10 subchapter are determined as provided by Article 5.13-2 of this
10-11 code. <This subsection expires December 31, 1995.>
10-12 SECTION 21. Article 5.41(b), Insurance Code, is amended to
10-13 read as follows:
10-14 (b) Notwithstanding Subsection (a) of this article, on and
10-15 after March 1, 1992, rates for homeowners and farm and ranch
10-16 owner's residential fire and residential allied lines insurance
10-17 coverage under this subchapter are determined as provided by
10-18 Subchapter M of this chapter, and rates for other lines of
10-19 insurance subject to this subchapter are determined as provided by
10-20 Article 5.13-2 of this code. <This subsection expires December 31,
10-21 1995.>
10-22 SECTION 22. Article 5.96(a-1), Insurance Code, is amended to
10-23 read as follows:
10-24 (a-1) This article does not apply to the setting of
10-25 flexibility bands and benchmark rates for motor vehicle insurance
11-1 and fire and allied lines insurance under Subchapter M of this
11-2 chapter. <This subsection expires December 31, 1995.>
11-3 SECTION 23. Article 5.96A(d), Insurance Code, is amended to
11-4 read as follows:
11-5 (d) Notwithstanding Subsections (a) through (c) of this
11-6 article, on or after September 1, 1992, policy or endorsement forms
11-7 for commercial motor vehicle insurance are adopted as provided by
11-8 Article 5.06 of this code. <This subsection expires December 31,
11-9 1995.>
11-10 SECTION 24. Article 5.97(n), Insurance Code, is amended to
11-11 read as follows:
11-12 (n) Notwithstanding Subsections (a) through (l) of this
11-13 article, this article does not apply to a line of insurance subject
11-14 to Article 5.13-2 of this code. <This subsection expires December
11-15 31, 1995.>
11-16 SECTION 25. Article 5.101, Insurance Code, is amended to
11-17 read as follows:
11-18 Art. 5.101. FLEXIBLE RATING PROGRAM FOR CERTAIN INSURANCE
11-19 LINES
11-20 Sec. 1. PURPOSE<; EXPIRATION DATE>. <(a)> The <pilot>
11-21 program on flexible rating is designed <created> to help stabilize
11-22 the rates charged for insurance in all lines of property and
11-23 casualty insurance covered by Subchapters A through L of this
11-24 chapter, except:
11-25 (1) ocean marine insurance;<,>
12-1 (2) inland marine insurance;<,>
12-2 (3) fidelity, surety and guaranty bond insurance;<,>
12-3 (4) errors and omissions insurance;<,>
12-4 (5) directors' and officers' liability insurance;<,>
12-5 (6) general liability insurance;<,>
12-6 (7) commercial property insurance;<,>
12-7 (8) workers' compensation insurance;<,>
12-8 (9) professional liability insurance for physicians
12-9 and health care providers as defined in Article 5.15-1 of this
12-10 code;<,> and
12-11 (10) attorney's professional liability insurance.
12-12 <(b) This article expires December 31, 1995.>
12-13 Sec. 2. DEFINITIONS. In this article:
12-14 (1) "Benchmark rate" means the rate set annually by
12-15 the commissioner <board> by line, relative to which the flexibility
12-16 bands and statutory rate limitations apply.
12-17 (2) "Classification" means a generic application to
12-18 similar risks within the same line.
12-19 (3) "Flexibility band" means a range of rates relative
12-20 to the benchmark rates set by the commissioner <board> by line,
12-21 within which an insurer, during a set period relative to a
12-22 particular line, may increase or decrease rate levels by
12-23 classification without prior approval by the commissioner <board>.
12-24 The commissioner <board> shall set the flexibility band as a
12-25 percentage above and below the benchmark rate, which percentage
13-1 need not be equal above and below that benchmark rate.
13-2 (4) "Line" means each type of insurance made subject
13-3 to this subchapter, other than fidelity, surety, or guaranty bonds.
13-4 (5) "Rate" or "rating plan" means the charge for a
13-5 particular line for each unit of exposure.
13-6 (6) "Statutory rate limitation" means a minimum and
13-7 maximum boundary on insurance rates that is based on a benchmark
13-8 rate set by line by the commissioner <board>.
13-9 Sec. 3. OPERATION OF FLEXIBLE RATING PLAN. (a) Under the
13-10 flexible rating plan prescribed by this article, rates used by
13-11 insurers in writing property or casualty insurance for lines
13-12 subject to this article are determined through the application of
13-13 flexibility bands to a benchmark rate and are implemented on a file
13-14 and use basis.
13-15 (b) The commissioner <board> shall promulgate a benchmark
13-16 rate and a flexibility band for each line subject to this article
13-17 after notice and hearing under Chapter 2001, Government Code
13-18 <pursuant to the Administrative Procedure and Texas Register Act
13-19 (Article 6252-13a, Vernon's Texas Civil Statutes)>. The
13-20 commissioner <board> must set the benchmark rate and the
13-21 flexibility band in a range that promotes stability in that line
13-22 and that will produce rates that are just, reasonable, adequate and
13-23 not excessive for the risks to which they apply, and not
13-24 confiscatory. In promulgating the benchmark rate and the
13-25 flexibility band, the commissioner <board> may give due
14-1 consideration to:
14-2 (1) past and prospective loss experience within the
14-3 state and outside the state if the state data are not credible;
14-4 (2) the peculiar hazards and experience of individual
14-5 risks, past and prospective, within and outside the state;
14-6 (3) a reasonable margin for profit;
14-7 (4) expenses of operation, which may not include
14-8 disallowed expenses under Subsection (l) <(h)> of this section;
14-9 (5) the extent and nature of competition in that
14-10 market;
14-11 (6) the availability or lack of availability in that
14-12 market;
14-13 (7) the level and range of rates and rate changes
14-14 among insurers;
14-15 (8) investment and underwriting experience of
14-16 insurers;
14-17 (9) reinsurance availability;
14-18 (10) consumer complaints;
14-19 (11) extent of denials and restrictions of coverage;
14-20 (12) the volume of cancellations and nonrenewals;
14-21 (13) any other factor considered appropriate by the
14-22 commissioner <board>.
14-23 (c) Each initial flexibility band is based on a benchmark
14-24 rate promulgated by the commissioner <board>. The commissioner <On
14-25 or before January 1, 1992, and annually thereafter, the board>
15-1 shall conduct annual hearings to determine the benchmark rates and
15-2 flexibility bands by line. The determination of the rate shall not
15-3 include disallowed expenses under Subsection (l) <(h)> of this
15-4 section. An insurer, the public insurance counsel, and any other
15-5 interested person may present testimony at the hearing and may file
15-6 information for consideration by the commissioner <board>. An
15-7 advisory organization which collects ratemaking data shall not be a
15-8 party to the hearing. A trade association that does not collect
15-9 historical data and that does not provide statistical plans,
15-10 prospective loss costs, or supplementary rating information to its
15-11 members may, on behalf of its members that are small or
15-12 medium-sized insurers, as defined by the commissioner, present rate
15-13 making data and make recommendations to the commissioner <board> at
15-14 the hearing. There is no immunity from antitrust liability for a
15-15 trade association that presents rate making data or makes
15-16 recommendations to the commissioner <board> at the hearing. The
15-17 definition of "small and medium-sized insurers" shall be a
15-18 limitation upon the scope of the presentation to be made by a trade
15-19 association, but may not limit the participation of a trade
15-20 association because its membership includes other sized insurers.
15-21 An insurer shall use that benchmark rate and the flexibility band
15-22 to develop rates used for the line for the year following the
15-23 setting of the benchmark rate and the flexibility band.
15-24 (d) An insurer may use any rate by classification within the
15-25 applicable flexibility band without prior <board> approval by the
16-1 commissioner. The rate may not include expenses disallowed under
16-2 Subsection (l) <(h)> of this section. Within 30 days of the
16-3 effective date of the benchmark rate for a particular line, each
16-4 insurer which proposes to write that line of insurance in the state
16-5 during the effective period of the benchmark rate shall file with
16-6 the commissioner <board> its proposed rate by line, and by
16-7 classification and territory under the <board-promulgated> rating
16-8 manual promulgated by the commissioner, unless the insurer has
16-9 obtained approval from the commissioner <board> under Subsection
16-10 (i)<(g)(2)> of this section to use its own rating manual. The
16-11 insurer shall include in the filing any statistics to support the
16-12 rates to be used by the insurer as required by <board> rule of the
16-13 commissioner, including information necessary to evidence that the
16-14 calculation of the rate does not include disallowed expenses.
16-15 Rates proposed in filings made under this subsection must be just,
16-16 reasonable, adequate and not excessive for the risks to which they
16-17 apply. The rate takes effect on the filing of the rate with the
16-18 commissioner <board>. For the purpose of this section, the date
16-19 the rate is received by the commissioner <board> is the date of
16-20 filing. From and after the effective date of the benchmark rate
16-21 and prior to the insurer's filing of a new rate, the insurer's
16-22 previously filed rate shall remain in effect.
16-23 (e) <(1)> An insurer may not use a rate outside the upper
16-24 and lower limits of the flexibility band without the prior approval
16-25 of the commissioner <board>. A filing made by an insurer subject
17-1 to the <board> approval of the commissioner is considered approved
17-2 by the commissioner <board> unless the commissioner <board>
17-3 disapproves the filing not later than the 60th day after the date
17-4 of the filing. Any such filing must produce rates which are just,
17-5 reasonable, adequate and not excessive for the risks to which they
17-6 apply, or the commissioner <board> shall disapprove the filing. If
17-7 the commissioner <board> requests additional information regarding
17-8 the filing, the commissioner <it> shall act within 60 days after
17-9 the response to that request. The rate may not include expenses
17-10 disallowed under this section. The rate takes effect on the
17-11 expiration of that time period or on the date the commissioner
17-12 <board> affirmatively approves the rate.
17-13 (f) <(2)> An insurer, the public insurance counsel, and any
17-14 other interested person may request, within 30 days of the filing,
17-15 that the commissioner <board> hold a hearing on an insurer's prior
17-16 approval filing. Upon such request, the commissioner <board> shall
17-17 conduct a hearing under Chapter 2001, Government Code <pursuant to
17-18 the Administrative Procedure and Texas Register Act (Article
17-19 6252-13a, Vernon's Texas Civil Statutes)>, after which hearing, the
17-20 commissioner <board> shall have 60 days to disapprove the filing,
17-21 or it is deemed approved.
17-22 (g) <(f)> For the purposes of this article, the statutory
17-23 rate limitations are plus or minus 30 percent of the benchmark
17-24 rate. Rates used under this subchapter, including rates used under
17-25 flexibility bands, may not exceed or be lower than the statutory
18-1 rate limitations unless those rates are approved by the
18-2 commissioner <board>, after notice and hearing under Chapter 2001,
18-3 Government Code <pursuant to the Administrative Procedure and Texas
18-4 Register Act (Article 6252-13a, Vernon's Texas Civil Statutes)>,
18-5 before implementation. The rate may not include expenses
18-6 disallowed under Subsection (l) <(h)> of this section. In
18-7 approving an insurer's filing for rates outside the statutory band,
18-8 the burden of proof is on the insurer making the filing to show, by
18-9 clear and convincing evidence, that failure to approve the filing
18-10 will:
18-11 (1) cause the marketplace to be inadequately served;
18-12 (2) cause a lack of availability in the line or lines
18-13 that are the subject of the filing; and
18-14 (3) be confiscatory to the insurer making the filing.
18-15 (h) <(g)(1)> The commissioner <board>, by rule, shall adopt
18-16 a rating manual of classifications and territories for each line
18-17 subject to this subchapter and shall spread the benchmark rate
18-18 among those classifications and territories. The
18-19 <board-promulgated> rating manual promulgated by the commissioner
18-20 shall be used by all insurers unless they receive approval to use
18-21 their own manual under Subsection (i) <Subdivision (2)> of this
18-22 section <subsection>.
18-23 (i) <(2)> Following written application and board approval,
18-24 an insurer may use a rating manual relative to classifications and
18-25 territories of risks, different from that promulgated by the
19-1 commissioner <board>, to calculate the rate used by that insurer
19-2 for an individual risk. The calculation of the rate may not
19-3 include disallowed expenses under Subsection (l) <(h)> of this
19-4 section. The commissioner <board> shall approve the use of only
19-5 such additions or refinements in its classification plan as will
19-6 produce subclassifications, which, when combined, will enable
19-7 consideration of the insurer's experience under both the
19-8 commissioner's <board> rating manual and its own rating manual.
19-9 Such application shall be approved by the commissioner <board>,
19-10 after notice and hearing under Chapter 2001, Government Code
19-11 <pursuant to the Administrative Procedure and Texas Register Act
19-12 (Article 6252-13a, Vernon's Texas Civil Statutes)>, in whole or in
19-13 part, provided the commissioner <board> finds that the resulting
19-14 premiums will be just, adequate, reasonable, not excessive, and not
19-15 unfairly discriminatory, taking into consideration the following:
19-16 (1) <(A)> the financial condition of the insurer;
19-17 (2) <(B)> the method of operation and expenses of such
19-18 insurer;
19-19 (3) <(C)> the actual paid and incurred loss experience
19-20 of the insurer;
19-21 (4) <(D)> investment income of the insurer; and
19-22 (5) <(E)> that the application meets the reasonable
19-23 conditions, limitations, and restrictions deemed necessary by the
19-24 commissioner <board>.
19-25 (j) <(3)> In considering all matters set forth in an <such>
20-1 application under Subsection (i) of this section, the commissioner
20-2 <board> shall give consideration to the composite effect of
20-3 Subsections (i)(2), (3), and (4) <Subdivisions (2)(B), (C), and
20-4 (D)> of this section <subsection> and the commissioner <board>
20-5 shall deny the application if it finds that the resulting premiums
20-6 would be inadequate, excessive, or unfairly discriminatory.
20-7 (k) <(4)> The effect on the rate charged an individual risk
20-8 through surcharges and discounts under any such approved rating
20-9 manual shall not be greater than plus or minus 10 percent, as a
20-10 deviation from the insurer's filed rate within the flexibility band
20-11 or approved rate outside the flexibility band.
20-12 (l) <(h)> For the purposes of <Subsections (b), (c), (d),
20-13 (e), (f), and (g) of> this section, "disallowed expenses" include:
20-14 (1) administrative expenses, not including acquisition
20-15 expenses, not including acquisition, loss control and safety
20-16 engineering expenses, that exceed 110 percent of the industry
20-17 median for those expenses;
20-18 (2) lobbying expenses;
20-19 (3) advertising expenses, other than advertising that
20-20 is directly related to the services or products provided by the
20-21 insurer, advertising designed and directed at loss prevention, or
20-22 advertising the promotion of organizations exempt from federal
20-23 taxation under Section 501(c)(3) of the Internal Revenue Code;
20-24 (4) amounts paid by an insurer as damages in a suit
20-25 against the insurer for bad faith or as fines or penalties for
21-1 violation of law;
21-2 (5) contributions to organizations engaged in
21-3 legislative advocacy;
21-4 (6) fees and penalties imposed on the insurer for
21-5 civil or criminal violations of law;
21-6 (7) contributions to social, religious, political, or
21-7 fraternal organizations;
21-8 (8) fees and assessments paid to advisory
21-9 organizations; and
21-10 (9) any unreasonably incurred expenses, as determined
21-11 by the commissioner <board>.
21-12 (m) <(i)> An insurer may change a rate adopted under
21-13 Subsection (d) of this section on a file and use basis not more
21-14 than twice during a 12-month period. Additional changes require
21-15 the prior approval of the commissioner <board>.
21-16 (n) <(j)> An insurer who writes insurance in any line
21-17 subject to this subchapter is required to make rate filings under
21-18 Subsection (d), (e), (f), <or> (g), (h), (i), (j), or (k) of this
21-19 section, using its own historical premium and loss data, as well as
21-20 its own data for expenses and for profit and contingency factors.
21-21 The commissioner <board> may require an audit of the insurer's
21-22 historical premium and loss data. The insurer may separately
21-23 supplement its own historical premium and loss data with historical
21-24 premium and loss data as necessary. The commissioner <board> may,
21-25 by rule, establish requirements for reporting historical premium
22-1 and loss data under this subsection.
22-2 Sec. 4. EFFECT OF ENDORSEMENTS. An insurer that provides
22-3 additional coverage through an endorsement to a policy subject to
22-4 this article may assess an additional charge for coverage under the
22-5 endorsement only with the prior approval of the commissioner
22-6 <board>.
22-7 Sec. 5. COMMISSIONER <BOARD> POWERS AND DUTIES. If the
22-8 commissioner <board> determines at any time that the implementation
22-9 of this subchapter or any part thereof is contrary to the public
22-10 interest, and has resulted or may result in imminent peril to the
22-11 insurance consumers of this state, the commissioner <board> may
22-12 issue an order stating the harm to the public and shall thereafter
22-13 rely upon Subchapters A through L of this chapter, or parts
22-14 thereof, in regulation of property and casualty insurance.
22-15 Sec. 6. ADMINISTRATIVE PROCEDURE <AND TEXAS REGISTER> ACT
22-16 APPLICABLE. Chapter 2001, Government Code <The provisions of the
22-17 Administrative Procedure and Texas Register Act (Article 6252-13a,
22-18 Vernon's Texas Civil Statutes)>, applies <apply> to all rate
22-19 hearings conducted under this article.
22-20 SECTION 26. Article 17.22(b), Insurance Code, is amended to
22-21 read as follows:
22-22 (b) The flexible rating program created under Subchapter M,
22-23 Chapter 5, of this code does not apply to county mutual insurance
22-24 companies. <This subsection expires December 31, 1995.>
22-25 SECTION 27. The importance of this legislation and the
23-1 crowded condition of the calendars in both houses create an
23-2 emergency and an imperative public necessity that the
23-3 constitutional rule requiring bills to be read on three several
23-4 days in each house be suspended, and this rule is hereby suspended,
23-5 and that this Act take effect and be in force from and after its
23-6 passage, and it is so enacted.