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.