HBA-NRS H.B. 45 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 45 By: McClendon Insurance 2/11/2001 Introduced BACKGROUND AND PURPOSE Current law requires an insurer of motor vehicle insurance coverage to offer a time-based rating plan to its customers. However, certain customers such as the elderly and families with more than one motor vehicle could benefit from a mile-based rating plan for motor vehicle insurance coverage in savings from insurance premiums. House Bill 45 requires an insurer of motor vehicle insurance coverage to offer a choice between a mile-based rating plan and a time-based rating plan for motor vehicle insurance coverage. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1 (Section 5, Article 5.01-4, Insurance Code) and SECTION 4 of this bill. ANALYSIS House Bill 45 amends the Insurance Code relating to time-based and mile-based rating plans for motor vehicle insurance. The bill requires an insurer that, on or after January 1, 2004, delivers, issues for delivery, or renews a policy of motor vehicle insurance in this state to offer each person who purchases motor vehicle insurance coverage a choice between a mile-based rating plan and a time-based rating plan for coverage for losses caused by collision or other driving-related accidents. The bill authorizes the insurer to require a person purchasing coverage to use the same rating plan for all vehicles covered under the person's motor vehicle insurance policy. The bill establishes a phase-in period by authorizing an insurer that delivers, issues for delivery, or renews a policy of motor vehicle insurance before January 1, 2004, to offer a choice of a mile-based rating plan to people who purchase motor vehicle insurance coverage from that insurer. The bill authorizes the insurer to implement the use of the mile-based rating plan on a county-by-county basis. For each county selected by the insurer for participation in the mile-based rating plan, the bill requires the insurer to offer the choice of that plan to each of the insurer's policyholders and applicants for insurance residing in that county. The phase-in period expires January 1, 2004. The bill requires each insurer that offers the mile-based rating plan to annually file with the commissioner of insurance a schedule of that insurer's premium rates for motor vehicle insurance based on the time-based and mile-based rating plans, and a statement of any fee to be charged to policyholders or applicants for insurance for participation in the mile-based rating plan. Premium rates used by an insurer under the milebased rating plan are exempt from rate regulation established under provisions regarding motor vehicle or automobile insurance and the benchmark rates established under provisions regarding the flexible rating program for certain insurance lines. The bill requires an insurer to separately report experience based on use of the mile-based and time-based rating plans, when reporting incurred losses and earned premiums as required by provisions related to motor vehicle or automobile insurance, the flexible rating program for certain insurance lines, or county mutual insurance companies. The classifications used by an insurer for motor vehicles insured under the mile-based rating plan are exempt from provisions related to motor vehicle or automobile insurance, except for time-based and mile-based rating plans, and the flexible rating program for certain insurance lines. The bill requires the commissioner of insurance to adopt rules to govern the use of a mile-based rating plan, including rules regarding prepayment arrangements, proof of financial responsibility, auditing of the odometer of a vehicle for the purpose of determining whether coverage is in force, and policy forms. The bill prohibits the use of an insurance policy or other document evidencing proof of purchase of a personal automobile insurance policy written for less than 1,000 miles if the policy premium is computed using a mile-based rating plan, to obtain an original or renewal driver's license, an automobile registration or license plates, or a motor vehicle inspection certificate. Before an agent or insurer accepts premiums or fees for such a policy or binder, the bill provides that the agent or insurer make written disclosure that the policy or binder may not be used to obtain an inspection certificate, driver's license, registration, or license plates. The bill provides that the flexible rating program for certain insurance lines does not apply to premium rates for motor vehicle insurance using the mile-based rating plan. This bill provides that the time-based and mile-based rating plans apply only to a motor vehicle insurance policy delivered, issued for delivery, or renewed on or after January 1, 2002. The bill requires the commissioner of insurance to adopt all rules necessary to implement time-based and mile-based rating plans not later than December 31, 2001. EFFECTIVE DATE September 1, 2001.