HBA-ATS C.S.H.B. 2500 76(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 2500 By: Moreno, Joe Insurance 4/29/1999 Committee Report (Substituted) BACKGROUND AND PURPOSE Until recently, a Texas Department of Insurance regulation prohibited the practice of blacklisting (rejecting or limiting insurance coverage based solely on whether an applicant for insurance has had prior motor vehicle insurance coverage canceled by an insurer) a prospective motor vehicle insurance customer. Because the regulation was overturned, motor vehicle insurers are again permitted to blacklist potential customers. C.S.H.B. 2500 prohibits a motor vehicle insurer from using an underwriting guideline that rejects or limits insurance coverage based solely on whether an applicant for insurance has had prior motor vehicle insurance coverage declined, nonrenewed, or canceled by an insurer. An insurer who disregards this prohibition commits an unfair practice in the business of insurance. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. SECTION BY SECTION ANALYSIS SECTION 1. Amends Subchapter B, Chapter 21, Insurance Code, by adding Article 21.21-13, as follows: ARTICLE 21.21-13. PROHIBITION ON USE IN MOTOR VEHICLE INSURANCE OF UNDERWRITING GUIDELINES BASED ON DECLINATION, NONRENEWAL, OR CANCELLATION OF CERTAIN PREVIOUS COVERAGE Sec. 1. DEFINITIONS. Defines "insurer" and "underwriting guideline." Sec. 2. APPLICATION. Sets forth that this article applies to a personal automobile insurance policy. Sec. 3. PROHIBITION; EXEMPTION. Prohibits an insurer from using an underwriting guideline that rejects or limits insurance coverage based solely on whether an applicant for insurance has had prior motor vehicle insurance coverage declines, nonrenewed, or canceled by an insurer. Sec. 4. PENALTY. Provides that an insurer who violates this article commits an unfair practice in violation of Article 21.21 (Unfair Competition and Unfair Practices) and is subject to the penalties imposed under that article. SECTION 2. Makes application of this Act prospective for an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2000. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 2500 differs from the original bill in SECTION 1 by changing the title of proposed Article 21.21-13, Insurance Code, to "Prohibition on Use in Motor Vehicle Insurance of Underwriting Guidelines Based on Declination, Nonrenewal, or Cancellation of Certain Previous Coverage" from "Prohibition on Use in Motor Vehicle Insurance of Underwriting Guidelines Based on Cancellation of Certain Previous Coverage." In Section 1 of proposed Article 21.21-13, Insurance Code, the substitute differs from the original by redefining "underwriting guideline" to expand its meaning. Under the substitute, "underwriting guideline" means a rule, standard, marketing decision, or practice, whether written, oral, or electronic, that is used by an insurer or its agent to: examine, bind, accept, reject, renew, nonrenew, cancel or limit insurance coverage made available to groups of consumers of insurance; classify risks for insurance coverage; or charge different rates for the same insurance coverage. Under the original, "underwriting guideline" means a rule, standard, marketing decision, or practice that is used by an insurer or its agent to examine, bind, accept, reject, cancel or limit insurance coverage to groups of consumers of insurance. In Section 3 of proposed Article 21.21-13, Insurance Code, the substitute differs from the original by including declination and nonrenewal, in addition to cancellation, of prior motor vehicle insurance coverage as actions which a motor vehicle insurer is prohibited from using as the basis of an underwriting guideline to reject or limit insurance coverage.