SRC-CTC H.B. 1408 77(R)   BILL ANALYSIS


Senate Research Center   H.B. 1408
77R9744 AJA-DBy: Junell (Duncan)
Business & Commerce
5/10/2001
Engrossed


DIGEST AND PURPOSE 

When a person who purchases insurance pays the premium on a quarterly
basis, the person runs the risk of paying for coverage that will not be
used if the person cancels the policy prior to the end of the prepaid,
four-month period.  The premium payments made for the months that are not
covered are usually not automatically reimbursed by an insurer, as an
insurance company has the discretion to either keep those premium payments
or reimburse the insured.  Presently,  the state of Texas does not have any
laws that require the insurer to reimburse the insured for unearned premium
payments.  H.B. 1408 requires all insurance companies to promptly reimburse
to the insured all unearned premium payments.    

RULEMAKING AUTHORITY

Rulemaking authority is expressly granted to the commissioner of insurance
in SECTION 1 (Article 21.29, Insurance Code) of this bill. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Chapter 21E, Insurance Code, by adding Article 21.29, as
follows: 

Sec. 21.29.  REFUND OF UNEARNED PREMIUM REQUIRED.  Defines "insurer."
Requires an insurer, if the insurer issues a policy of insurance that
requires the insurer to maintain an unearned premium reserve for the
portion of written policy premium applicable to the unexpired or unused
part of the policy period for which the premium has been paid and the
policy is canceled or terminated by the insured or insurer before the end
of the policy term with a remaining unearned premium reserve on the policy,
to promptly refund to the policyholder the appropriate portion of the
unearned premium.  Requires a guarantee association to promptly refund an
unearned premium to the special assigned deputy receiver on receipt of
applicable information.  Requires the commissioner of insurance to adopt
rules necessary to implement this article and provide appropriate
guidelines for determining the portion of an unearned premium that must be
refunded to a policyholder under this article.  Provides that nothing in
this article affects the obligations of an insurer to pay an unearned
premium to a premium finance company in accordance with Article 24.17(f) of
this code. 

SECTION 2.  (a) Effective date: September 1, 2001.

 (b) Makes application of this Act prospective to January 1, 2002.