RS C.S.H.B. 1662 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 1662 By: Counts 5-5-97 Committee Report (Substituted) BACKGROUND County mutual insurance companies are not subject to rate regulation for automobile insurance. Insurers that are subject to rate regulation under the benchmark rate and flexibility program have transferred business from the rate regulated company to a affiliated county mutual insurance company thereby removing rate regulation for automobile insurance and eliminating assignments from the assigned risk plan (TAIPA). County mutual insurance companies are not subject to assignments from TAIPA. PURPOSE This bill eliminates the circumvention of the flexible rating program by prohibiting any county mutual insurance company from using a rate for an insured on a private passenger automobile after application of all discounts, that is lower than the highest flexibility band for automobile insurance (+30%). This prohibition only applies to a county mutual insurance company that is directly or indirectly controlled by a holding company that also controls another insurance company writing private passenger automobile insurance in Texas. A regulated insurer that also has an affiliated county mutual insurance company within a holding company arrangement cannot transfer all of its automobile insurance to the county mutual solely to remove itself from rate regulation of automobile insurance. 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 5.101, Section 3, Insurance Code, by adding subsection (r) as follows: (r) Prevents the circumvention of the flexible rating program by prohibiting a county mutual insurance company from using a rate on a private passenger automobile policy, other than insurance on mobile homes and single interest insurance, that after the application of all discounts and policy fees, is lower than the highest rate allowed under the flexibility band for that line. Applies to county mutuals directly or indirectly controlled by a holding company which may directly or indirectly control an another insurance including lloyds or reciprocal exchanges. SECTION 2. - This act applies to policies delivered, issued for delivery, or renewed on or after September 1, 1997. SECTION 3. - Effective Date, September 1, 1997. SECTION 4. - Emergency Clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1. The substitute clarifies that the rate provisions of the amendatory language apply only to a county mutual insurance company on rates for an insured on private passenger automobile insurance, other than insurance on mobile homes and single interest insurance, that, after the application of all discounts and policy fees, is lower than the highest rate allowed under the flexibility band for that line, if the county mutual insurance company is directly or indirectly controlled by a holding company, as that term is defined by Article 21.49-1 of this code, that also directly or indirectly controls another insurance company, including a lloyds or reciprocal exchange, which writes private passenger automobile insurance in Texas. SECTION 2. The original provided that this act applies only to a rate applicable to an insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 1998. The original also provided that a rate applicable to an insurance policy that is delivered, issued for delivery, or renewed before January 1, 1998, is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for this purpose. The substitute provides that this act applies only to a rate applicable to an insurance policy that is delivered, issued for delivery, or renewed on or after September 1, 1997. The substitute also provides that a rate applicable to an insurance policy that is delivered, issued for delivery, or renewed before September 1, 1997, is governed by the law as it existed immediately before the effective date of this Act, and that law is continued in effect for this purpose.