HBA-NRS H.B. 304 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 304 By: Burnam Insurance 2/9/2001 Introduced BACKGROUND AND PURPOSE Currently, the benchmark with flex band system provides insurers with substantial pricing flexibility. The benchmark rate is the rate set annually by the commissioner of insurance (commissioner) for particular types of insurance and the flexibility band (flex band) is the range of rates, plus or minus 30 percent of the benchmark, within which an insurer may offer rates. The limits on rate increases protect consumers because insurers have in the past reacted to catastrophic events by increasing rates. The limits imposed by the flex band provide the commissioner with the ability to maintain orderly markets. At the same time, most insurers will not be affected by the flex band limitations. The benchmark ratemaking hearings provide the public an opportunity to present testimony and file information concerning auto and property rates each year. House Bill 304 requires the commissioner of insurance to set separate benchmark rates for county mutual insurance companies and authorizes a county mutual insurance company to use multiple rating tiers or rating programs. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that this bill does not expressly delegate any additional rulemaking authority to a state officer, department, agency, or institution. ANALYSIS House Bill 304 amends the Insurance Code to provide that a county mutual insurance company, an underwriter at a Lloyd's, and a reciprocal or interinsurance exchange are subject to the flexible rating program for certain insurance lines. The bill requires the commissioner of insurance to establish separate benchmark rates for county mutual insurance companies and consider, in promulgating such rates, the factors that may be used in promulgating benchmark rates based only on the experience of county mutual insurance companies. The bill authorizes a county mutual insurance company to use multiple rating tiers or rating programs within that company, but provides that such a company must make a separate filing for each rating tier or rating program. The bill provides that county mutual insurance companies are subject to certain sanctions and inquiries in relation to an issued or existing authorization. Except for the aforementioned provisions regarding benchmark rates, the bill provides that each county mutual insurance company, underwriter at a Lloyd's, and reciprocal or interinsurance exchange is subject to the rate and rating manual filing requirements related to the operation of the flexible rating program. EFFECTIVE DATE September 1, 2001, and applies only to rates for an insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2002.