HBA-DMH H.B. 2159 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2159 By: Thompson Insurance 8/7/2001 Enrolled BACKGROUND AND PURPOSE Credit life insurance and credit accident and health insurance products are sold in conjunction with credit transactions. Generally, such products are made available to a consumer who purchases an item of substantial cost and intends to make payments on that purchase. The purpose of the insurance product is to protect the debtor during the term of the contract by ensuring the loan will be repaid if the debtor is unable to pay because of serious illness or death. Currently, the commissioner of insurance (commissioner) sets the applicable rates for this product. House Bill 2159 authorizes an insurer to establish rates if the rates comply with certain conditions determined by the commissioner. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority expressly delegated to the commissioner of insurance in SECTION 2 (Section 8, Article 3.53, Insurance Code) of this bill. ANALYSIS House Bill 2159 amends the Insurance Code to authorize the commissioner of insurance (commissioner) by rule to adopt after notice and hearing a presumptive premium rate for various classes of business and terms of coverage for credit life insurance and credit accident and health insurance (insurance). The bill requires an insurer that does not file a different presumptive premium rate to file the presumptive rate adopted by the commissioner. The commissioner is required to set forth in the order adopting a presumptive findings and conclusions on all material issues presented at a hearing. The bill requires an insurer electing to deviate from the presumptive rate to file with the commissioner the insurer's proposed rate for credit life and credit accident and health insurance. On filing the rate with the commissioner, the bill authorizes an insurer to use the filed rate until the insurer elects to file a different rate. The bill prohibits an insurer from using a rate that is more than 30 percent higher or more than 30 percent lower than the presumptive rate. A rate that complies with this provision is valid and in compliance with the requirements of applicable law. The bill authorizes an insurer to file with the commissioner a proposed rate for insurance that is more than 30 percent higher than or more than 30 percent lower than the presumptive rate adopted by the commissioner. The bill authorizes the commissioner to disapprove a rate filed on the ground that the rate is not in compliance. If the commissioner does not disapprove the rate within a specified time period, the rate is considered approved. The bill provides that a rate is not excessive unless the rate is unreasonably high for the coverage provided and a reasonable degree of competition does not exist with respect to the classification to which the rate is applicable. A rate filed is not inadequate unless either the rate is insufficient to sustain projected losses and expenses, or the rate substantially impairs, or is likely to substantially impair, competition with respect to the sale of the product. The bill provides that the minimum reserve requirements applicable to a credit life policy issued under provisions regarding credit life and credit health and accident insurance are met if, in aggregate, the reserves are maintained at 100 percent of the 1980 Commissioner's Standard Ordinary Mortality Table, with interest not to exceed 5.5 percent. This provision expires September 1, 2013. EFFECTIVE DATE September 1, 2001.