RS H.B. 1789 75(R) BILL ANALYSIS INSURANCE H.B. 1789 By: Lewis, Glenn 4-18-97 Committee Report (Unamended) BACKGROUND When an insurance company decides to quit writing in a particular area, policyholders may have difficulty getting their claims paid or finding coverage with another company. Many states require insurers to notify regulators of their plans to withdraw in advance and to provide for an orderly transition for their policyholders. Under current Texas law an insurer is required to file a withdrawal plan only when it plans to reduce its writings 75% across the entire state. Occasionally insurers withdraw from a specific geographic area within the state but continue to write in the majority of the state. For example, in recent months, in response to severe hail storms in the Dallas/Fort Worth area, several insurers cut back their writings in that area by curtailing the writing of new policies and/or nonrenewing current policyholders. Many former policyholders of these companies had a difficult time finding coverage in the standard market, and numerous complaints were filed. PURPOSE This bills broadens the circumstances under which an insurer must file a withdrawal plan to include situations where an insurer is leaving one rating territory but continuing to write in other areas of the state. This bill also, expands the definition of reduced writings to include reductions of 25% or more instead of the current 75% or more. The increased reporting applies only to insurers writing private passenger auto or residential property 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. The bill does renumber a section of previously granted rulemaking authority in SECTION 1 of bill (Article 21.49-2C, subsection (h) of Insurance Code). SECTION BY SECTION ANALYSIS SECTION 1: Amends Article 21.49-2C, Insurance Code, by amending Subsection (a), adding new subsection (g) and relettering the following subsection: (a) Adds a requirement that an insurer writing personal auto or residential property insurance file a withdrawal plan with the commissioner if it proposes to: 1)reduce its annual premium volume in a rating territory by 25% or more; or 2)restrict significantly its agents ability to sell policies in a rating territory. Continues the requirement that insurers proposing to reduce state-wide annual premium volume by 75% or more file a withdrawal plan. This requirement applies to personal lines as well as other lines. (g) Allows the Commissioner to delay approval of a withdrawal plan for up to 2 years upon finding in a public hearing that a catastrophe occurred, and as result, insurance is not reasonably available. The delay can be continued if the Commissioner determines annually that it is still necessary. (h) Renumbers a previously enacted section authorizing rules to be adopted for the implementation of this section. SECTION 2: Effective Date, September 1, 1997 and applies only to a reduction or restriction by an insurer on or after effective date. SECTION 3: Emergency Clause.