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 Sec. 3. FILING REQUIRED; RATE REGULATION. (a) Each insurer 2-6 that offers the mile-based rating plan under this article shall 2-7 annually file with the commissioner for the commissioner's approval 2-8 a schedule of the insurer's premium rates for motor vehicle 2-9 insurance based on the mile-based rating plan and the time-based 2-10 rating plan used by that insurer. The insurer shall file with the 2-11 rate schedule a statement of any fee to be charged to policyholders 2-12 or applicants for insurance for participation in the mile-based 2-13 rating plan. 2-14 (b) The commissioner shall analyze the premium rates filed 2-15 by an insurer under Subsection (a) of this section. If the 2-16 commissioner determines that the filed rates are excessive in 2-17 comparison to the premium rates charged for similar coverage under 2-18 a time-based rating plan used by the insurer, the commissioner 2-19 shall reject the rates after notice to the insurer and an 2-20 opportunity for a hearing. The commissioner must notify the 2-21 insurer that the rates are rejected not later than the 60th day 2-22 after the date on which the rates are filed under Subsection (a) of 2-23 this section. An insurer may not use rates rejected by the 2-24 commissioner under this subsection. 2-25 (c) Premium rates used by an insurer under the mile-based 2-26 rating plan adopted under this article are exempt from other rate 2-27 regulation under this subchapter and the benchmark rates 3-1 established under Subchapter M of this chapter. 3-2 Sec. 4. APPLICABILITY OF CERTAIN LAWS. (a) In reporting 3-3 incurred losses and earned premiums as required under this 3-4 subchapter, Subchapter M of this chapter, or Chapter 17 of this 3-5 code, an insurer shall separately report experience based on use of 3-6 the mile-based rating plan and the time-based rating plan. 3-7 (b) The classifications used by an insurer for motor 3-8 vehicles insured under the mile-based rating plan are exempt from 3-9 the provisions of this subchapter other than this article and 3-10 Subchapter M of this chapter. 3-11 Sec. 5. COMMISSIONER POWERS AND DUTIES; RULES. (a) The 3-12 commissioner shall: 3-13 (1) compile information regarding: 3-14 (A) the number of insurers writing motor vehicle 3-15 insurance based on mile-based rating plans; 3-16 (B) the geographic areas of this state in which 3-17 mile-based rating plans are used; and 3-18 (C) the premium rates for mile-based rating 3-19 plans compared to standard time-based rating plans; and 3-20 (2) analyze the effect of mile-based rating plans on: 3-21 (A) premium rates offered for motor vehicle 3-22 insurance based on time-based rating plans; and 3-23 (B) the number of uninsured motorists in this 3-24 state. 3-25 (b) The commissioner shall adopt rules as necessary or 3-26 appropriate to govern the use of a mile-based rating plan under 3-27 this article, including rules regarding: 4-1 (1) prepayment arrangements; 4-2 (2) proof of financial responsibility; 4-3 (3) auditing of the odometer of a vehicle for the 4-4 purpose of determining whether coverage is in force; and 4-5 (4) policy forms. 4-6 Sec. 6. EXPIRATION. This article expires September 1, 2005. 4-7 SECTION 2. Article 5.06, Insurance Code, is amended by 4-8 amending Sections (9) and (10) and adding Section (11) to read as 4-9 follows: 4-10 (9) An insurance policy or other document evidencing proof 4-11 of purchase of a personal automobile insurance policy written for a 4-12 term of less than 30 days if the policy premium is computed using a 4-13 time-based rating plan, or written for less than 1,000 miles if the 4-14 policy premium is computed using a mile-based rating plan, may not 4-15 be used to obtain an original or renewal driver's license, an 4-16 automobile registration or license plates, or a motor vehicle 4-17 inspection certificate and must contain a statement as follows: 4-18 "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR 4-19 VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S 4-20 LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES." 4-21 (10) Before accepting any premium or fee for a personal 4-22 automobile insurance policy or binder for a term of less than 30 4-23 days if the policy premium is computed using a time-based rating 4-24 plan, or written for less than 1,000 miles if the policy premium is 4-25 computed using a mile-based rating plan, an agent or insurer must 4-26 make the following written disclosure to the applicant or insured: 4-27 "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A 5-1 MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL 5-2 DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES." 5-3 (11) In this article, the terms "time-based rating plan" and 5-4 "mile-based rating plan" have the meanings assigned by Article 5-5 5.01-4 of this code. 5-6 SECTION 3. Section 1, Article 5.101, Insurance Code, is 5-7 amended to read as follows: 5-8 Sec. 1. PURPOSE; APPLICABILITY. (a) The program on flexible 5-9 rating is designed to help stabilize the rates charged for 5-10 insurance in lines of property and casualty insurance covered by 5-11 Subchapters A and C of this chapter. 5-12 (b) This article does not apply to: 5-13 (1) ocean marine insurance; 5-14 (2) inland marine insurance; 5-15 (3) fidelity, surety and guaranty bond insurance; 5-16 (4) errors and omissions insurance; 5-17 (5) directors' and officers' liability insurance; 5-18 (6) general liability insurance; 5-19 (7) commercial property insurance; 5-20 (8) workers' compensation insurance; 5-21 (9) professional liability insurance for physicians 5-22 and health care providers as defined in Article 5.15-1 of this 5-23 code; or 5-24 (10) attorney's professional liability insurance. 5-25 (c) Notwithstanding Subsection (a) of this section, this 5-26 article does not apply to premium rates for motor vehicle insurance 5-27 computed using a mile-based rating plan under Article 5.01-4 of 6-1 this code. 6-2 SECTION 4. (a) Article 5.01-4, Insurance Code, as added by 6-3 this Act, applies only to a motor vehicle insurance policy 6-4 delivered, issued for delivery, or renewed on or after January 1, 6-5 2002. A policy delivered, issued for delivery, or renewed before 6-6 January 1, 2002, is governed by the law as it existed immediately 6-7 before the effective date of this Act, and that law is continued in 6-8 effect for that purpose. 6-9 (b) The commissioner of insurance shall adopt all rules 6-10 necessary to implement Article 5.01-4, Insurance Code, as added by 6-11 this Act, not later than December 31, 2001. 6-12 SECTION 5. This Act takes effect September 1, 2001. _______________________________ _______________________________ President of the Senate Speaker of the House I certify that H.B. No. 45 was passed by the House on May 8, 2001, by a non-record vote; and that the House concurred in Senate amendments to H.B. No. 45 on May 25, 2001, by a non-record vote. _______________________________ Chief Clerk of the House I certify that H.B. No. 45 was passed by the Senate, with amendments, on May 23, 2001, by a viva-voce vote. _______________________________ Secretary of the Senate APPROVED: __________________________ Date __________________________ Governor