By Smithee                                            H.B. No. 3028

                                A BILL TO BE ENTITLED

 1-1                                   AN ACT

 1-2     relating to the collection of insurance data.

 1-3           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

 1-4           SECTION 1.  Article 5.73, Insurance Code, is amended to read

 1-5     as follows:

 1-6           Sec. 1.  Every insurer transacting business in the state may,

 1-7     but is not required to, subscribe to an advisory organization and

 1-8     is permitted to submit to and receive from any advisory

 1-9     organization statistical plans, historical data, prospective loss

1-10     costs, supplementary rating information, policy forms and

1-11     endorsements, research and performance of inspections except final

1-12     rates or recommendations regarding profit or expense provisions,

1-13     other than loss adjustment expenses.

1-14           Sec. 2.  No advisory organization shall compile or

1-15     distribute, and no insurer may accept from an advisory

1-16     organization, recommendations for rates or for profit and expenses

1-17     other than loss adjustment expenses.

1-18           Sec. 3.  (a)  An insurer or advisory organization may not:

1-19                 (1)  attempt to monopolize, combine, or conspire with

1-20     any other person to monopolize an insurance market; or

1-21                 (2)  engage in a boycott, on a concerted basis, of an

1-22     insurance market.

1-23           (b)  An insurer or advisory organization may not make an

1-24     agreement with any other insurer, advisory organization, or other

 2-1     person if the agreement has the purpose or effect of restraining

 2-2     trade unreasonably or of substantially lessening competition in the

 2-3     business of insurance.

 2-4           (c)  If, after a hearing, the Board finds that the furnishing

 2-5     of specified services by an advisory organization involves any act

 2-6     or practice which is unfair or unreasonable or otherwise

 2-7     inconsistent with the provisions of this subchapter or with the

 2-8     applicable laws of this State, it may issue a written order

 2-9     specifying in what respects such act or practice is unfair or

2-10     unreasonable or otherwise inconsistent with the provisions of law

2-11     and requiring the discontinuance of such act or practice. In

2-12     addition to any other remedies available at law, the Board may

2-13     impose any sanction authorized under Article 1.10 of this code.

2-14           Sec. 4.  (a)  The Board shall annually require an audit of

2-15     any advisory organization that provides statistics or other

2-16     information to the Board in a proceeding to set rates.  The audit

2-17     shall be conducted under rules adopted by the Board, at the expense

2-18     of the advisory organization.  The audit must examine the advisory

2-19     organization's method of collecting, analyzing, and reporting data

2-20     to assure the accuracy of data.  The audit may examine source

2-21     documents within individual companies.  Except for individual

2-22     company information, an audit is public information.

2-23           (b)  An advisory organization is subject to examination under

2-24     Article 5.74 of this code.

2-25           (c)  Notwithstanding any provision to the contrary, reporting

2-26     of data by an insurer under this article does not relieve the

2-27     insurer of responsibility of reporting that data directly to the

 3-1     Board at the Board's request.

 3-2           Sec. 4A.  (a)  An advisory organization may not receive from

 3-3     or supply to insurers transacting insurance in this state the

 3-4     information described in Section 1 of this article unless the

 3-5     advisory organization establishes a subsidiary that:

 3-6                 (1)  is domiciled in this state;

 3-7                 (2)  has an office in this state; and

 3-8                 (3)  has a governing board composed of:

 3-9                       (A)  an ex officio member appointed by the

3-10     commissioner; and

3-11                       (B)  five representatives of property and

3-12     casualty insurers licensed in this state who subscribe to or

3-13     purchase products from the advisory organization.

3-14           (b)  Each advisory organization shall file with the

3-15     commissioner a copy of its constitution and bylaws, article of

3-16     agreement or association, or certificate of incorporation and a

3-17     copy of the rules governing its activities.

3-18           (c)  Each advisory organization shall file with the

3-19     commissioner a list showing each subscriber company doing business

3-20     in this state and the products or information the subscriber

3-21     company purchases.  The filing required by this subsection shall be

3-22     made at least quarterly.

3-23           (d)  On request by the commissioner, each advisory

3-24     organization shall report to the department a summary of the

3-25     actuarial assumptions, trend factors, economic factors, and other

3-26     criteria used in trending data for companies doing business in this

3-27     state.

 4-1           Sec. 4B.  Each insurer relying on prospective loss costs

 4-2     provided by an advisory organization must justify, by expert

 4-3     evidence, its need for that information on the grounds of

 4-4     insufficiency of that insurer's data and experience.  Such

 4-5     justification may be made by affidavit by a qualified actuary or

 4-6     after notice and opportunity for a hearing.  An insurer unable to

 4-7     demonstrate its need for prospective loss costs provided by an

 4-8     advisory organization may not file or use that information.

 4-9           Sec. 4C.  An insurer may not receive from an advisory

4-10     organization prospective loss costs for personal automobile,

4-11     homeowners', or dwelling fire insurance.

4-12           [Sec. 4D.  The select committee on rate and form regulation

4-13     created under Article 1.50 of this code shall appoint an

4-14     independent consulting firm to evaluate the activities of advisory

4-15     organizations in this state, including their impact on competition

4-16     in the insurance market, their use by insurers, and their impact on

4-17     availability and affordability of coverage, and any other matters

4-18     relevant to determining their continued authorization.  The

4-19     committee shall include in its report to the legislature a

4-20     recommendation for the future role of advisory organizations in

4-21     this state.]

4-22           Sec. 5.  The authority granted under this article [expires

4-23     September 1, 1997] shall be reviewed during the normal Sunset cycle

4-24     of the Texas Department of Insurance.

4-25           Sec. 6.  To the extent that this article conflicts with the

4-26     provisions of Articles 5.55, 5.58, and 5.58A of this code with

4-27     respect to the setting of rates for workers' compensation

 5-1     insurance, the provisions of those articles control.

 5-2           SECTION 2.  The importance of this legislation and the

 5-3     crowded condition of the calendars in both houses create an

 5-4     emergency and an imperative public necessity that the

 5-5     constitutional rule requiring bills to be read on three several

 5-6     days in each house be suspended, and this rule is hereby suspended.