By McClendon H.B. No. 45 77R1145 PB-F 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 REQUIRED 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 REQUIRED. (a) An insurer 1-20 that, on or after January 1, 2004, delivers, issues for delivery, 1-21 or renews a policy of motor vehicle insurance in this state shall 1-22 offer each person who purchases motor vehicle insurance coverage 1-23 from that insurer a choice between a mile-based rating plan and a 1-24 time-based rating plan for coverage for losses caused by collision 2-1 or other 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. 2A. PHASE-IN PERIOD. (a) An insurer that delivers, 2-6 issues for delivery, or renews a policy of motor vehicle insurance 2-7 in this state before January 1, 2004, may offer a choice of a 2-8 mile-based rating plan as described by Section 2 of this article to 2-9 persons who purchase motor vehicle insurance coverage from that 2-10 insurer. 2-11 (b) The insurer may implement the use of the mile-based 2-12 rating plan on a county-by-county basis. For each county selected 2-13 by the insurer for participation in the mile-based rating plan, the 2-14 insurer shall offer the choice of that plan to each of the 2-15 insurer's policyholders and applicants for insurance residing in 2-16 that county. 2-17 (c) This section expires January 1, 2004. 2-18 Sec. 3. FILING REQUIRED; EXEMPTION FROM RATE REGULATION. (a) 2-19 Each insurer that offers the mile-based rating plan under this 2-20 article shall annually file with the commissioner: 2-21 (1) a schedule of the insurer's premium rates for 2-22 motor vehicle insurance based on the mile-based rating plan and the 2-23 time-based rating plan used by that insurer; and 2-24 (2) a statement of any fee to be charged to 2-25 policyholders or applicants for insurance for participation in the 2-26 mile-based rating plan. 2-27 (b) Premium rates used by an insurer under the mile-based 3-1 rating plan adopted under this article are exempt from rate 3-2 regulation under this subchapter and the benchmark rates 3-3 established under Subchapter M of this chapter. 3-4 Sec. 4. APPLICABILITY OF CERTAIN LAWS. (a) In reporting 3-5 incurred losses and earned premiums as required under this 3-6 subchapter, Subchapter M of this chapter, or Chapter 17 of this 3-7 code, an insurer shall separately report experience based on use of 3-8 the mile-based rating plan and the time-based rating plan. 3-9 (b) The classifications used by an insurer for motor 3-10 vehicles insured under the mile-based rating plan are exempt from 3-11 the provisions of this subchapter other than this article and 3-12 Subchapter M of this chapter. 3-13 Sec. 5. RULES. The commissioner shall adopt rules as 3-14 necessary or appropriate to govern the use of a mile-based rating 3-15 plan under this article, including rules regarding: 3-16 (1) prepayment arrangements; 3-17 (2) proof of financial responsibility; 3-18 (3) auditing of the odometer of a vehicle for the 3-19 purpose of determining whether coverage is in force; and 3-20 (4) policy forms. 3-21 SECTION 2. Article 5.06, Insurance Code, is amended by 3-22 amending Sections (9) and (10) and adding Section (11) to read as 3-23 follows: 3-24 (9) An insurance policy or other document evidencing proof 3-25 of purchase of a personal automobile insurance policy written for a 3-26 term of less than 30 days if the policy premium is computed using a 3-27 time-based rating plan, or written for less than 1,000 miles if the 4-1 policy premium is computed using a mile-based rating plan, may not 4-2 be used to obtain an original or renewal driver's license, an 4-3 automobile registration or license plates, or a motor vehicle 4-4 inspection certificate and must contain a statement as follows: 4-5 "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR 4-6 VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S 4-7 LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES." 4-8 (10) Before accepting any premium or fee for a personal 4-9 automobile insurance policy or binder for a term of less than 30 4-10 days if the policy premium is computed using a time-based rating 4-11 plan, or written for less than 1,000 miles if the policy premium is 4-12 computed using a mile-based rating plan, an agent or insurer must 4-13 make the following written disclosure to the applicant or insured: 4-14 "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A 4-15 MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL 4-16 DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES." 4-17 (11) In this article, the terms "time-based rating plan" and 4-18 "mile-based rating plan" have the meanings assigned by Article 4-19 5.01-4 of this code. 4-20 SECTION 3. Section 1, Article 5.101, Insurance Code, is 4-21 amended to read as follows: 4-22 Sec. 1. PURPOSE; APPLICABILITY. (a) The program on flexible 4-23 rating is designed to help stabilize the rates charged for 4-24 insurance in lines of property and casualty insurance covered by 4-25 Subchapters A and C of this chapter. 4-26 (b) This article does not apply to: 4-27 (1) ocean marine insurance; 5-1 (2) inland marine insurance; 5-2 (3) fidelity, surety and guaranty bond insurance; 5-3 (4) errors and omissions insurance; 5-4 (5) directors' and officers' liability insurance; 5-5 (6) general liability insurance; 5-6 (7) commercial property insurance; 5-7 (8) workers' compensation insurance; 5-8 (9) professional liability insurance for physicians 5-9 and health care providers as defined in Article 5.15-1 of this 5-10 code; or 5-11 (10) attorney's professional liability insurance. 5-12 (c) Notwithstanding Subsection (a) of this section, this 5-13 article does not apply to premium rates for motor vehicle insurance 5-14 computed using a mile-based rating plan under Article 5.01-4 of 5-15 this code. 5-16 SECTION 4. (a) Article 5.01-4, Insurance Code, as added by 5-17 this Act, applies only to a motor vehicle insurance policy 5-18 delivered, issued for delivery, or renewed on or after January 1, 5-19 2002. A policy delivered, issued for delivery, or renewed before 5-20 January 1, 2002, is governed by the law as it existed immediately 5-21 before the effective date of this Act, and that law is continued in 5-22 effect for that purpose. 5-23 (b) The commissioner of insurance shall adopt all rules 5-24 necessary to implement Article 5.01-4, Insurance Code, as added by 5-25 this Act, not later than December 31, 2001. 5-26 SECTION 5. This Act takes effect September 1, 2001.