By Dutton H.B. No. 1637
76R5940 AJA-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of automobile insurance rates.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Article 5.01, Insurance Code, is amended to read
1-5 as follows:
1-6 Art. 5.01. FILING SCHEDULES FOR [FIXING RATE OF] AUTOMOBILE
1-7 INSURANCE. (a) Every insurance company, corporation,
1-8 interinsurance exchange, mutual, reciprocal, association, Lloyd's
1-9 or other insurer, hereinafter called insurer, writing any form of
1-10 motor vehicle insurance in this State, shall [annually] file with
1-11 the department a schedule of premium rates charged for motor
1-12 vehicle insurance and the amount of the policy fee, membership fee,
1-13 or initial charge, by whatever name called, to be charged to a
1-14 policyholder or a person applying for a policy [State Board of
1-15 Insurance, hereinafter called Board, on forms prescribed by the
1-16 Board, a report showing its premiums and losses on each
1-17 classification of motor vehicle risks written in this State].
1-18 (b) [The Board shall have the sole and exclusive power and
1-19 authority, and it shall be its duty to determine, fix, prescribe,
1-20 and promulgate just, reasonable and adequate rates of premiums to
1-21 be charged and collected by all insurers writing any form of
1-22 insurance on motor vehicles in this State, including fleet or other
1-23 rating plans designed to discourage losses from fire and theft and
1-24 similar hazards and any rating plans designed to encourage the
2-1 prevention of accidents. In promulgating any such rating plans the
2-2 Board shall give due consideration to the peculiar hazards and
2-3 experience of individual risks, past and prospective, within and
2-4 outside the State and to all other relevant factors, within and
2-5 outside the State. The Board shall have the authority also to
2-6 alter or amend any and all of such rates of premiums so fixed and
2-7 determined and adopted by it, and to raise or lower the same or any
2-8 part thereof.]
2-9 [(c) At least annually, the Board shall conduct a hearing to
2-10 review the reports of premiums earned and losses incurred in the
2-11 writing of motor vehicle insurance in this State and may fix,
2-12 determine, and adopt new rates in whole or in part or may alter or
2-13 amend rates previously fixed, determined, and adopted by the Board
2-14 to assure that those rates comply with the requirements of this
2-15 subchapter.]
2-16 [(d) Said Board shall have authority to employ clerical
2-17 help, inspectors, experts, and other assistants, and to incur such
2-18 other expenses as may be necessary in carrying out the provisions
2-19 of this law; provided, however, that the number of employees and
2-20 salary of each shall be fixed in the General Appropriation Bill
2-21 passed by the Legislature. The Board shall ascertain as soon as
2-22 practicable the annual insurance losses incurred under all policies
2-23 on motor vehicles in this State, make and maintain a record
2-24 thereof, and collect such data as will enable said Board to
2-25 classify the various motor vehicles of the State according to the
2-26 risk and usage made thereof, and to classify and assign the losses
2-27 according to the various classes of risks to which they are
3-1 applicable; the Board shall also ascertain the amount of premiums
3-2 on all such policies for each class of risks, and maintain a
3-3 permanent record thereof in such manner as will aid in determining
3-4 just, reasonable and adequate rates of premiums.]
3-5 [(e)] Motor vehicle or automobile insurance as referred to
3-6 in this subchapter shall be taken and construed to mean every form
3-7 of insurance on any automobile or other vehicle hereinafter
3-8 enumerated and its operating equipment or necessitated by reason of
3-9 the liability imposed by law for damages arising out of the
3-10 ownership, operation, maintenance, or use in this State of any
3-11 automobile, motorcycle, motorbicycle, truck, truck-tractor,
3-12 tractor, traction engine, or any other self-propelled vehicle, and
3-13 including also every vehicle, trailer or semi-trailer pulled or
3-14 towed by a motor vehicle, but excluding every motor vehicle running
3-15 only upon fixed rails or tracks. Workers' Compensation Insurance
3-16 is excluded from the foregoing definition.
3-17 [(f) Notwithstanding Subsections (a) through (d) of this
3-18 article, on and after March 1, 1992, rates for motor vehicle
3-19 insurance in this state are determined as provided by the flexible
3-20 rating program adopted under Subchapter M of this chapter.]
3-21 SECTION 2. Sections 2(b) and (c), Article 5.03-2, Insurance
3-22 Code, are amended to read as follows:
3-23 (b) An insurer shall, on receipt of written verification
3-24 from the insured that the insured motorbicycle is equipped with a
3-25 qualifying antitheft device, grant a discount in the premiums
3-26 charged for comprehensive insurance for a motorcycle or
3-27 motorbicycle [in an amount greater than a Category I or Category II
4-1 discount if the State Board of Insurance, by rule, authorizes
4-2 additional discounts based on the installation of additional
4-3 antitheft devices that are designed for use on motorcycles or
4-4 motorbicycles].
4-5 (c) An insurer may set the amount of the [The] discounts
4-6 under this article [shall be set by the State Board of Insurance].
4-7 SECTION 3. Section 2(c), Article 5.03-3, Insurance Code, is
4-8 amended to read as follows:
4-9 (c) An insurer may [The commissioner by rule shall] set the
4-10 amount of the discounts [applicable] under this article [and may
4-11 adopt other rules necessary for the implementation of this
4-12 article].
4-13 SECTION 4. Section 2(f), Article 5.03-5, Insurance Code, is
4-14 amended to read as follows:
4-15 (f) An insurer may [The commissioner by rule shall] set the
4-16 amount of the discount [applicable] under this article. The
4-17 commissioner [and] may adopt [other] rules necessary for the
4-18 implementation of this article, including rules identifying youth
4-19 groups whose members are eligible for a discount under this
4-20 article.
4-21 SECTION 5. Article 5.05, Insurance Code, is amended to read
4-22 as follows:
4-23 Art. 5.05. REPORTS ON EXPERIENCE. (a) Recording and
4-24 Reporting of Loss Experience and Other Data. The commissioner
4-25 [Board] shall, after due consideration, promulgate reasonable rules
4-26 and statistical plans, which may be modified from time to time and
4-27 which shall be used thereafter by each insurer in the recording and
5-1 reporting of its loss experience and such other data as may be
5-2 required, in order that the total loss and expense experience of
5-3 all insurers may be made available at least annually in such form
5-4 and detail as may be necessary to aid in determining whether rates
5-5 and rating systems in use under this subchapter comply with the
5-6 standards adopted under this subchapter. In promulgating such
5-7 rules, the commissioner [Board] shall provide that rules be as
5-8 uniform as is practicable to the rules and to the form of the
5-9 statistical plans used in other states.
5-10 (b) Interchange of Rating Plan Data. Reasonable rules may be
5-11 promulgated by the commissioner [Board] after due consideration to
5-12 allow the interchange of loss experience information as necessary
5-13 for the application of rating plans.
5-14 (c) Consultation with Other States. In order to further
5-15 uniform administration of rating laws, the commissioner [Board] and
5-16 every insurer and rating organization may exchange information and
5-17 experience data with insurance supervisory officials, insurers and
5-18 rating organizations in other states and may consult and cooperate
5-19 with them with respect to rate-making and the application of rating
5-20 systems.
5-21 (d) The commissioner [Board] is hereby authorized and
5-22 empowered to require sworn statements from any insurer affected by
5-23 this article, showing its experience on any classification or
5-24 classifications of risks and such other information which may be
5-25 necessary or helpful in performing duties or authority imposed by
5-26 law. The commissioner [Board] shall prescribe the necessary forms
5-27 for such statements and reports, having due regard to the rules,
6-1 methods and forms in use in other states for similar purposes in
6-2 order that uniformity of statistics may not be disturbed.
6-3 SECTION 6. Subsections (1) through (8), Article 5.06,
6-4 Insurance Code, are amended to read as follows:
6-5 (1) The commissioner [Board] shall adopt a policy form and
6-6 endorsements for each type of motor vehicle insurance subject to
6-7 this subchapter. The coverage provided by a policy form adopted
6-8 under this subsection is the minimum coverage that may be provided
6-9 under an insurance policy for that type of insurance in this State.
6-10 Each policy form must provide the coverages mandated under Articles
6-11 5.06-1 and 5.06-3 of this code, except that the coverages may be
6-12 rejected by the named insured as provided by those articles.
6-13 (2) Except as provided by Subsections (3) and (4) of this
6-14 article, an insurer may only use a form adopted by the commissioner
6-15 [Board] under this section in writing motor vehicle insurance
6-16 delivered, issued for delivery, or renewed in this State. A
6-17 contract or agreement not written into the application and policy
6-18 is void and of no effect and in violation of the provisions of this
6-19 subchapter, and is sufficient cause for revocation of license of
6-20 such insurer to write automobile insurance within this State.
6-21 (3) The commissioner [Board] may approve the use of a policy
6-22 form adopted by a national organization of insurance companies, or
6-23 similar organization, if the form, with any endorsement to the form
6-24 required and approved by the commissioner [Board], provides
6-25 coverage equivalent to the coverage provided by the form adopted by
6-26 the commissioner [Board] under Subsection (1) of this section.
6-27 (4) An insurer may use an endorsement to the policy form
7-1 adopted or approved by the commissioner [Board] under this article
7-2 if the endorsement is approved by the commissioner [Board].
7-3 (5) An insurer, if in compliance with applicable
7-4 requirements and conditions, may issue and deliver a certificate of
7-5 insurance as a substitute for the entire policy of insurance. The
7-6 certificate of insurance shall make reference to and identify the
7-7 policy form adopted or approved by the commissioner [Board] for
7-8 which the substitution of certificate is made. The certificate
7-9 shall be in such form as is prescribed by the commissioner [Board].
7-10 The certificate will represent the policy of insurance, and when
7-11 issued, shall be evidence that the certificate holder is insured
7-12 under the identified policy form. The certificate is subject to
7-13 the same limitations, conditions, coverages, selection of options,
7-14 and other provisions of the policy as are provided in the policy,
7-15 and that insurance policy information is to be shown on and
7-16 adequately referenced by the certificate of insurance issued by the
7-17 insurer to the insured. Reference shall be made in the
7-18 certificate, or in subsequent attachments, to all endorsements to
7-19 the policy of insurance. The certificate shall be executed in the
7-20 same manner as though a policy were issued. When the certificate
7-21 is substituted for the policy of insurance by an insurer, the
7-22 insurer shall simultaneously furnish to the insured receiving the
7-23 certificate an "outline of coverages", the form and content of
7-24 which has been approved by the commissioner [Board]. At the
7-25 request of an insured at any time, an insurer which has substituted
7-26 a certificate for a policy of insurance shall provide a copy of
7-27 the policy.
8-1 (6) The commissioner [Board] may promulgate such rules as
8-2 are necessary to implement the certificate in lieu of policy
8-3 provision herein, including a rule limiting the application thereof
8-4 to private passenger automobile policies.
8-5 (7) The commissioner [Board] may not adopt or approve a
8-6 policy form for private passenger automobile insurance or any
8-7 endorsement to the policy if the policy or endorsement is not in
8-8 plain language. For the purposes of this subsection, a policy or
8-9 endorsement is written in plain language if it achieves the minimum
8-10 score established by the commissioner on the Flesch reading ease
8-11 test or an equivalent test selected by the commissioner, or, at the
8-12 option of the commissioner, if it conforms to the language
8-13 requirements in a National Association of Insurance Commissioners
8-14 model act relating to plain language. This subsection does not
8-15 apply to policy language that is mandated by state or federal law.
8-16 (8) The commissioner [Board] may withdraw its approval of a
8-17 policy or endorsement form at any time, after notice and hearing.
8-18 SECTION 7. Article 5.09, Insurance Code, is amended to read
8-19 as follows:
8-20 Art. 5.09. DISCRIMINATIONS OR DISTINCTIONS. (a) Except as
8-21 provided by Subsection (b) of this article, no insurer coming
8-22 within the terms of this subchapter shall, in its business in this
8-23 State, make or permit any distinction or discrimination in favor of
8-24 the insured having a like hazard, in the matter of the charge of
8-25 premiums for insurance, or in dividends or other benefits payable
8-26 under any policy, nor shall any such insurer or agent make any
8-27 contract of insurance, or agreement as to such insurance, other
9-1 than expressed in the policy, nor shall any such insurer or its
9-2 agents or representatives pay, allow or give, or offer to pay,
9-3 allow or give, directly or indirectly, as an inducement to insured,
9-4 any rebate payable upon the policy or any special favor or
9-5 advantage in dividends or other benefits to accrue, or anything of
9-6 value whatsoever, not specified in the policy; provided that
9-7 nothing in this subchapter shall be construed to prohibit the
9-8 modification of rates by rating plans designed to encourage the
9-9 prevention of accidents, and to take account of the peculiar
9-10 hazards and experience of individual risks, past and prospective,
9-11 within and outside the State, and of all other relevant factors,
9-12 within and outside the State[, provided such plan shall have been
9-13 approved by the Board].
9-14 (b) This article does not prohibit an insurer, on approval
9-15 by the commissioner [Board], from distributing to policyholders who
9-16 are on active duty in the United States Armed Forces any estimated
9-17 profits resulting from service by those policyholders in any
9-18 foreign country in a combat theater of operations at any time after
9-19 January 1, 1990. An insurer that elects to make such distributions
9-20 shall file a written description of its distribution program with
9-21 the commissioner [Board] for approval by the commissioner [Board]
9-22 and shall notify the commissioner [Board] in writing of each
9-23 distribution made under the program. The insurer may distribute
9-24 the estimated profits among those policyholders based on the length
9-25 of time served by a policyholder in a combat theater of operations,
9-26 the location of the military service, the duration of the
9-27 applicable insurance policy, or any other reasonable basis. The
10-1 commissioner [Board] shall act on the insurer's distribution
10-2 program within five business days of receipt of the insurer's
10-3 distribution program, otherwise the distribution program shall be
10-4 deemed approved.
10-5 [(c) Notwithstanding Subsection (a) of this article, on and
10-6 after March 1, 1992, rates for motor vehicles are determined as
10-7 provided by Subchapter M of this chapter.]
10-8 SECTION 8. Article 5.11, Insurance Code, is amended to read
10-9 as follows:
10-10 Art. 5.11. Hearing on Grievances. (a) Any policyholder or
10-11 insurer shall have the right to a hearing before the commissioner
10-12 [Board] on any grievance occasioned by the approval or disapproval
10-13 by the commissioner [Board] of any [classification, rate, rating
10-14 plan,] endorsement or policy form, or any rule or regulation
10-15 established under the terms hereof, such hearing to be held in
10-16 conformity with rules prescribed by the commissioner [Board]. Upon
10-17 receipt of request that such hearing is desired, the commissioner
10-18 [Board] shall forthwith set a date for the hearing, at the same
10-19 time notifying all interested parties in writing of the place and
10-20 date thereof, which date, unless otherwise agreed to by the parties
10-21 at interest, shall not be less than ten (10) nor more than thirty
10-22 (30) days after the date of said notice. Any party aggrieved shall
10-23 have the right to apply to any court of competent jurisdiction to
10-24 obtain redress.
10-25 (b) No hearing shall suspend the operation of any
10-26 [classification, rate, rating plan or] policy form unless the
10-27 commissioner [Board] shall so order.
11-1 [(c) Notwithstanding Subsections (a) and (b) of this
11-2 article, on and after March 1, 1992, rates for motor vehicles are
11-3 determined as provided by Subchapter M of this chapter.]
11-4 SECTION 9. Section 1, Article 5.101, Insurance Code, is
11-5 amended to read as follows:
11-6 Sec. 1. PURPOSE. The program on flexible rating is designed
11-7 to help stabilize the rates charged for insurance in lines of
11-8 property and casualty insurance covered by Subchapter [Subchapters
11-9 A and] C of this chapter. This article does not apply to:
11-10 (1) ocean marine insurance;
11-11 (2) inland marine insurance;
11-12 (3) fidelity, surety and guaranty bond insurance;
11-13 (4) errors and omissions insurance;
11-14 (5) directors' and officers' liability insurance;
11-15 (6) general liability insurance;
11-16 (7) commercial property insurance;
11-17 (8) workers' compensation insurance;
11-18 (9) professional liability insurance for physicians
11-19 and health care providers as defined in Article 5.15-1 of this
11-20 code; [or]
11-21 (10) attorney's professional liability insurance; or
11-22 (11) motor vehicle or automobile insurance.
11-23 SECTION 10. Articles 5.01B, 5.01-1, 5.01-2, 5.01-3, 5.02,
11-24 5.03, 5.03-1, 5.04, and 5.04-1, Insurance Code, are repealed.
11-25 SECTION 11. This Act takes effect September 1, 1999, and
11-26 applies only to an insurance policy that is delivered, issued for
11-27 delivery, or renewed on or after January 1, 2000. A policy
12-1 delivered, issued for delivery, or renewed before January 1, 2000,
12-2 is governed by the law as it existed immediately before the
12-3 effective date of this Act, and that law is continued in effect for
12-4 that purpose.
12-5 SECTION 12. The importance of this legislation and the
12-6 crowded condition of the calendars in both houses create an
12-7 emergency and an imperative public necessity that the
12-8 constitutional rule requiring bills to be read on three several
12-9 days in each house be suspended, and this rule is hereby suspended.