RS C.S.H.B. 3536 75(R) BILL ANALYSIS INSURANCE C.S.H.B. 3536 By: Burnam 5-9-97 Committee Report (Substituted) BACKGROUND Although the Texas Insurance Code requires an insurance company writing personal lines property and casualty insurance to charge rates according to a benchmark rating system established and regulated by the Insurance Commissioner, many insurance companies are currently exempt from these rate regulations. The exempt companies are county mutuals, Lloyds, and interinsurance exchanges. Unlike standard rate-regulated companies, they set their own rates with no regulatory restrictions and often create a tiered rating system within a single company. Since it is not necessary for these companies to nonrenew a policy in order to move it to a higher tier, they can raise rates more easily than the rate regulated companies. Additionally, insurance groups often own county mutuals and Lloyds and move policyholders into these companies from their rate-regulated companies. The market share for these non-rate regulated companies has increased in recent years. County mutuals currently write approximately 25% of the auto insurance market. Lloyd's plans write approximately 70% of the homeowners and property insurance market. PURPOSE C.S.H.B. 3536 will bring the rate filing requirements for Lloyds and Reciprocal insurers in line with the requirements for County Mutual insurers. In addition, the bill will give the Commissioner of Insurance rulemaking authority to implent these filing requirements. RULEMAKING AUTHORITY It is the committee's opinion that there is express rulemaking authority to be found in SECTION 1 (Section 6(b), Article 17.25, Insurance Code), SECTION 2 (Article 18.26, Insurance Code), SECTION 3 (Article 19.15, Insurance Code). SECTION BY SECTION ANALYSIS SECTION 1. Amends Section 6, Article 17.25, Insurance Code, as follows: Sec. 6. (a) Changes to subsection (a). Updates language to reflect Commissioner of Insurance instead of board. (b) Adds subsection. The commissioner may adopt rules necessary to carry out this article. SECTION 2. Amends Chapter 18, Insurance Code, by adding Article 18.25 and 18.26 as follows: Art. 18.25 FILE OF SCHEDULE OF CHARGES. Such companies shall file a schedule of rates, amount of policy fee, inspection fee, membership fee, or initial charge by whatever name it is called, with the commissioner. Art. 18.26 RULEMAKING. The commissioner may adopt rules necessary to carry out these provisions. SECTION 3. Amends Chapter 19, Insurance Code, by adding Article 19.14 and Article 19.15 as follows: Art. 19.14 FILE SCHEDULE OF CHARGES. Such companies shall file a schedule of rates, amount of policy fee, inspection fee, membership fee, or initial charge by whatever name it is called, with the commissioner. Art. 19.15 RULEMAKING The commissioner may adopt rules as necessary to implement this article. SECTION 4. Effective Date September 1, 1997 SECTION 5. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE SECTION 1. Changes Article being amended from Article 17.22, Insurance Code, to Article 17.25, Insurance Code. Keeps all language to be deleted under original. Changes from "board" to "commissioner" in substitute, and adds rulemaking subsection. SECTION 2. Changes from amending Article 18.23, Insurance Code to adding Article 18.25, and Article 18.26 to Chapter 18, Insurance Code. Keeps all language to be deleted under original bill. Article 18.25 requires such companies to file a schedule of charges. Article 18.26 adds rulemaking authority. SECTION 3. Changes from adding new Section 6, Article 5.101 to adding Article 19.14 and 19.15 to Chapter 19, Insurance Code. Keeps language to be deleted in original bill. New sections relate to filing a schedule of charges and Rulemaking authority.