By McClendon, et al. H.B. No. 45
77R10505 PB-D
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to a mile-based rating plan for motor vehicle insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Subchapter A, Chapter 5, Insurance Code, is
1-5 amended by adding Article 5.01-4 to read as follows:
1-6 Art. 5.01-4. TIME-BASED AND MILE-BASED RATING PLANS
1-7 Sec. 1. DEFINITIONS. In this article:
1-8 (1) "Insurer" means an insurance company,
1-9 interinsurance exchange, mutual, capital stock company, fraternal
1-10 benefit society, local mutual aid association, county mutual,
1-11 reciprocal, association, Lloyd's plan, or other entity writing
1-12 motor vehicle insurance in this state. The term includes a company
1-13 affiliated with an insurer.
1-14 (2) "Mile-based rating plan" means a rating plan for
1-15 which a unit of exposure is one mile traveled by the insured motor
1-16 vehicle.
1-17 (3) "Time-based rating plan" means a rating plan for
1-18 which a unit of exposure is a unit of time.
1-19 Sec. 2. ALTERNATIVE RATING PLAN PILOT PROGRAM. (a) An
1-20 insurer that delivers, issues for delivery, or renews a policy of
1-21 motor vehicle insurance in this state may offer each person who
1-22 purchases motor vehicle insurance coverage from that insurer a
1-23 choice between a mile-based rating plan and a time-based rating
1-24 plan for coverage for losses caused by collision or other
2-1 driving-related accidents.
2-2 (b) The insurer may require a person purchasing coverage to
2-3 use the same rating plan for all vehicles covered under the
2-4 person's motor vehicle insurance policy.
2-5 (c) A motor vehicle insurance policy that uses a mile-based
2-6 rating plan must provide coverage for a specified period and may
2-7 not terminate coverage after a specified number of miles have been
2-8 driven.
2-9 Sec. 3. FILING REQUIRED; RATE REGULATION. (a) Each insurer
2-10 that offers the mile-based rating plan under this article shall
2-11 annually file with the commissioner for the commissioner's approval
2-12 a schedule of the insurer's premium rates for motor vehicle
2-13 insurance based on the mile-based rating plan and the time-based
2-14 rating plan used by that insurer. The insurer shall file with the
2-15 rate schedule a statement of any fee to be charged to policyholders
2-16 or applicants for insurance for participation in the mile-based
2-17 rating plan.
2-18 (b) The commissioner shall analyze the premium rates filed
2-19 by an insurer under Subsection (a) of this section. If the
2-20 commissioner determines that the filed rates are excessive in
2-21 comparison to the premium rates charged for similar coverage under
2-22 a time-based rating plan used by the insurer, the commissioner
2-23 shall reject the rates after notice to the insurer and an
2-24 opportunity for a hearing. The commissioner must notify the
2-25 insurer that the rates are rejected not later than the 60th day
2-26 after the date on which the rates are filed under Subsection (a) of
2-27 this section. An insurer may not use rates rejected by the
3-1 commissioner under this subsection.
3-2 (c) Premium rates used by an insurer under the mile-based
3-3 rating plan adopted under this article are exempt from other rate
3-4 regulation under this subchapter and the benchmark rates
3-5 established under Subchapter M of this chapter.
3-6 Sec. 4. APPLICABILITY OF CERTAIN LAWS. (a) In reporting
3-7 incurred losses and earned premiums as required under this
3-8 subchapter, Subchapter M of this chapter, or Chapter 17 of this
3-9 code, an insurer shall separately report experience based on use of
3-10 the mile-based rating plan and the time-based rating plan.
3-11 (b) The classifications used by an insurer for motor
3-12 vehicles insured under the mile-based rating plan are exempt from
3-13 the provisions of this subchapter other than this article and
3-14 Subchapter M of this chapter.
3-15 Sec. 5. COMMISSIONER POWERS AND DUTIES; RULES. (a) The
3-16 commissioner shall:
3-17 (1) compile information regarding:
3-18 (A) the number of insurers writing motor vehicle
3-19 insurance based on mile-based rating plans;
3-20 (B) the geographic areas of this state in which
3-21 mile-based rating plans are used; and
3-22 (C) the premium rates for mile-based rating
3-23 plans compared to standard time-based rating plans; and
3-24 (2) analyze the effect of mile-based rating plans on:
3-25 (A) premium rates offered for motor vehicle
3-26 insurance based on time-based rating plans; and
3-27 (B) the number of uninsured motorists in this
4-1 state.
4-2 (b) The commissioner shall adopt rules as necessary or
4-3 appropriate to govern the use of a mile-based rating plan under
4-4 this article, including rules regarding:
4-5 (1) prepayment arrangements;
4-6 (2) proof of financial responsibility;
4-7 (3) auditing of the odometer of a vehicle for the
4-8 purpose of determining whether coverage is in force; and
4-9 (4) policy forms.
4-10 Sec. 6. EXPIRATION. This article expires September 1, 2005.
4-11 SECTION 2. Article 5.06, Insurance Code, is amended by
4-12 amending Sections (9) and (10) and adding Section (11) to read as
4-13 follows:
4-14 (9) An insurance policy or other document evidencing proof
4-15 of purchase of a personal automobile insurance policy written for a
4-16 term of less than 30 days if the policy premium is computed using a
4-17 time-based rating plan, or written for less than 1,000 miles if the
4-18 policy premium is computed using a mile-based rating plan, may not
4-19 be used to obtain an original or renewal driver's license, an
4-20 automobile registration or license plates, or a motor vehicle
4-21 inspection certificate and must contain a statement as follows:
4-22 "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR
4-23 VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S
4-24 LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
4-25 (10) Before accepting any premium or fee for a personal
4-26 automobile insurance policy or binder for a term of less than 30
4-27 days if the policy premium is computed using a time-based rating
5-1 plan, or written for less than 1,000 miles if the policy premium is
5-2 computed using a mile-based rating plan, an agent or insurer must
5-3 make the following written disclosure to the applicant or insured:
5-4 "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A
5-5 MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL
5-6 DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
5-7 (11) In this article, the terms "time-based rating plan" and
5-8 "mile-based rating plan" have the meanings assigned by Article
5-9 5.01-4 of this code.
5-10 SECTION 3. Section 1, Article 5.101, Insurance Code, is
5-11 amended to read as follows:
5-12 Sec. 1. PURPOSE; APPLICABILITY. (a) The program on flexible
5-13 rating is designed to help stabilize the rates charged for
5-14 insurance in lines of property and casualty insurance covered by
5-15 Subchapters A and C of this chapter.
5-16 (b) This article does not apply to:
5-17 (1) ocean marine insurance;
5-18 (2) inland marine insurance;
5-19 (3) fidelity, surety and guaranty bond insurance;
5-20 (4) errors and omissions insurance;
5-21 (5) directors' and officers' liability insurance;
5-22 (6) general liability insurance;
5-23 (7) commercial property insurance;
5-24 (8) workers' compensation insurance;
5-25 (9) professional liability insurance for physicians
5-26 and health care providers as defined in Article 5.15-1 of this
5-27 code; or
6-1 (10) attorney's professional liability insurance.
6-2 (c) Notwithstanding Subsection (a) of this section, this
6-3 article does not apply to premium rates for motor vehicle insurance
6-4 computed using a mile-based rating plan under Article 5.01-4 of
6-5 this code.
6-6 SECTION 4. (a) Article 5.01-4, Insurance Code, as added by
6-7 this Act, applies only to a motor vehicle insurance policy
6-8 delivered, issued for delivery, or renewed on or after January 1,
6-9 2002. A policy delivered, issued for delivery, or renewed before
6-10 January 1, 2002, is governed by the law as it existed immediately
6-11 before the effective date of this Act, and that law is continued in
6-12 effect for that purpose.
6-13 (b) The commissioner of insurance shall adopt all rules
6-14 necessary to implement Article 5.01-4, Insurance Code, as added by
6-15 this Act, not later than December 31, 2001.
6-16 SECTION 5. This Act takes effect September 1, 2001.