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.