By Lucio S.B. No. 121
76R2988 PB-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the use and approval of certain underwriting guidelines
1-3 affecting homeowners insurance; providing a penalty.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Subchapter C, Chapter 5, Insurance Code, is
1-6 amended by adding Article 5.36 to read as follows:
1-7 Art. 5.36. USE AND APPROVAL OF CERTAIN UNDERWRITING
1-8 GUIDELINES
1-9 Sec. 1. DEFINITIONS. In this article:
1-10 (1) "Insurer" means an insurer authorized to write
1-11 property and casualty insurance in this state, including:
1-12 (A) a county mutual insurance company;
1-13 (B) an underwriter at a Lloyd's;
1-14 (C) a reciprocal or interinsurance exchange; and
1-15 (D) a farm mutual company.
1-16 (2) "Underwriting guideline" means a rule, standard,
1-17 marketing decision, or practice that is used by an insurer or an
1-18 agent of an insurer to examine, bind, accept, reject, cancel, or
1-19 limit insurance coverage to groups of consumers of insurance.
1-20 Sec. 2. APPLICATION. This article applies to:
1-21 (1) a homeowners or farm and ranch owners policy; and
1-22 (2) a standard fire policy insuring a one-family
1-23 dwelling, a duplex, or the contents of a one-family dwelling, a
1-24 duplex, or an apartment.
2-1 Sec. 3. STANDARDIZATION AND APPROVAL OF UNDERWRITING
2-2 GUIDELINES. (a) Each insurer shall develop standard underwriting
2-3 guidelines for use in writing insurance policies subject to this
2-4 article.
2-5 (b) Each insurer shall submit its standardized guidelines to
2-6 the department, in the form prescribed by the department, for
2-7 analysis and approval.
2-8 Sec. 4. SUBMISSION TO OFFICE OF PUBLIC INSURANCE COUNSEL AND
2-9 COMMISSION ON HUMAN RIGHTS. (a) Not later than the 10th day after
2-10 the date the department receives underwriting guidelines submitted
2-11 under Section 3 of this article, the department shall provide
2-12 copies of the guidelines to the office of public insurance counsel
2-13 and the Commission on Human Rights for review by those agencies.
2-14 (b) The department, the office of public insurance counsel,
2-15 and the Commission on Human Rights shall review each underwriting
2-16 guideline to ensure that:
2-17 (1) all underwriting criteria are risk-based; and
2-18 (2) the use of the guideline does not result in
2-19 discrimination prohibited under Chapter 301, Property Code, or
2-20 under Article 21.21-6 of this code, as added by Chapter 415, Acts
2-21 of the 74th Legislature, Regular Session, 1995.
2-22 (c) Not later than the 30th day after the date the
2-23 department receives an underwriting guideline under Section 3 of
2-24 this article:
2-25 (1) the department, the office of public insurance
2-26 counsel, and the Commission on Human Rights shall approve or
2-27 disapprove the guideline; and
3-1 (2) the office of public insurance counsel and the
3-2 Commission on Human Rights shall report that decision to the
3-3 commissioner.
3-4 (d) For purposes of this article, an underwriting guideline
3-5 is approved only if the department, the office of public insurance
3-6 counsel, and the Commission on Human Rights accept the guideline as
3-7 meeting the requirements imposed under Subsection (b) of this
3-8 section.
3-9 (e) The commissioner shall notify the affected insurer of
3-10 the approval or disapproval of the guideline not later than the
3-11 fifth day after the first date the commissioner has received all of
3-12 the required decisions. If an underwriting guideline is
3-13 disapproved, the commissioner shall specify in what respects the
3-14 guideline fails to meet the requirements of this article.
3-15 (f) The commissioner, the public insurance counsel, and the
3-16 Commission on Human Rights shall enter into memoranda of
3-17 understanding as necessary to implement this article.
3-18 Sec. 5. USE OF GUIDELINE BY INSURER; EFFECT OF DISAPPROVAL.
3-19 (a) An insurer may use an underwriting guideline approved under
3-20 Section 4 of this article on receipt of the commissioner's approval
3-21 notice under Section 4(e) of this article.
3-22 (b) An insurer who submits an underwriting guideline that is
3-23 disapproved is entitled to a hearing on written request made to the
3-24 commissioner not later than the 30th day after the effective date
3-25 of the disapproval order.
3-26 Sec. 6. PROHIBITION; VIOLATION. (a) An insurer may not use
3-27 an underwriting guideline that is not approved under this article.
4-1 (b) An insurer who violates this article commits an unfair
4-2 practice in the business of insurance in violation of Article 21.21
4-3 of this code and is subject to the procedures and penalties imposed
4-4 under that article.
4-5 Sec. 7. RULES. The commissioner may adopt rules as
4-6 necessary to implement this article.
4-7 SECTION 2. This Act takes effect September 1, 1999, and
4-8 applies only to an underwriting guideline used to write an
4-9 insurance policy that is delivered, issued for delivery, or renewed
4-10 on or after January 1, 2000. A policy that is delivered, issued
4-11 for delivery, or renewed before January 1, 2000, is governed by the
4-12 law as it existed immediately before the effective date of this
4-13 Act, and that law is continued in effect for that purpose.
4-14 SECTION 3. The importance of this legislation and the
4-15 crowded condition of the calendars in both houses create an
4-16 emergency and an imperative public necessity that the
4-17 constitutional rule requiring bills to be read on three several
4-18 days in each house be suspended, and this rule is hereby suspended.