1-1     By:  McClendon, et al. (Senate Sponsor - Shapleigh)     H.B. No. 45
 1-2           (In the Senate - Received from the House May 9, 2001;
 1-3     May 10, 2001, read first time and referred to Committee on Business
 1-4     and Commerce; May 11, 2001, reported favorably by the following
 1-5     vote:  Yeas 5, Nays 0; May 11, 2001, sent to printer.)
 1-6                            A BILL TO BE ENTITLED
 1-7                                   AN ACT
 1-8     relating to a mile-based rating plan for motor vehicle insurance.
 1-9           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-10           SECTION 1. Subchapter A, Chapter 5, Insurance Code, is
1-11     amended by adding Article 5.01-4 to read as follows:
1-12           Art. 5.01-4.  TIME-BASED AND MILE-BASED RATING PLANS
1-13           Sec. 1.  DEFINITIONS. In this article:
1-14                 (1)  "Insurer" means an insurance company,
1-15     interinsurance exchange, mutual, capital stock company, fraternal
1-16     benefit society, local mutual aid association, county mutual,
1-17     reciprocal, association, Lloyd's plan, or other entity writing
1-18     motor vehicle insurance in this state.  The term includes a company
1-19     affiliated with an insurer.
1-20                 (2)  "Mile-based rating plan" means a rating plan for
1-21     which a unit of exposure is one mile traveled by the insured motor
1-22     vehicle.
1-23                 (3)  "Time-based rating plan" means a rating plan for
1-24     which a unit of exposure is a unit of time.
1-25           Sec. 2.  ALTERNATIVE RATING PLAN PILOT PROGRAM. (a)  An
1-26     insurer that delivers, issues for delivery, or renews a policy of
1-27     motor vehicle insurance in this state may offer each person who
1-28     purchases motor vehicle insurance coverage from that insurer a
1-29     choice between a mile-based rating plan and a time-based rating
1-30     plan for coverage for losses caused by collision or other
1-31     driving-related accidents.
1-32           (b)  The insurer may require a person purchasing coverage to
1-33     use the same rating plan for all vehicles covered under the
1-34     person's  motor vehicle insurance policy.
1-35           (c)  A motor vehicle insurance policy that uses a mile-based
1-36     rating plan must provide coverage for a specified period and may
1-37     not terminate coverage after a specified number of miles have been
1-38     driven.
1-39           Sec. 3.  FILING REQUIRED; RATE REGULATION. (a)  Each insurer
1-40     that  offers the mile-based rating plan under this article shall
1-41     annually file with the commissioner for the commissioner's approval
1-42     a schedule of the insurer's premium rates for motor vehicle
1-43     insurance based on the mile-based rating plan and the time-based
1-44     rating plan used by that insurer.  The insurer shall file with the
1-45     rate schedule a statement of any fee to be charged to policyholders
1-46     or applicants for insurance for participation in the mile-based
1-47     rating plan.
1-48           (b)  The commissioner shall analyze the premium rates filed
1-49     by an insurer under Subsection (a) of this section.  If the
1-50     commissioner determines that the filed rates are excessive in
1-51     comparison to the premium rates charged for similar coverage under
1-52     a time-based rating plan used by the insurer, the commissioner
1-53     shall reject the rates after notice to the insurer and an
1-54     opportunity for a hearing.  The commissioner must notify the
1-55     insurer that the rates are rejected not later than the 60th day
1-56     after the date on which the rates are filed under Subsection (a) of
1-57     this section.  An insurer may not use rates rejected by the
1-58     commissioner under this subsection.
1-59           (c)  Premium rates used by an insurer under the mile-based
1-60     rating plan adopted under this article are exempt from other rate
1-61     regulation under this subchapter and the benchmark rates
1-62     established under Subchapter M of this chapter.
1-63           Sec. 4.  APPLICABILITY OF CERTAIN LAWS. (a)  In reporting
1-64     incurred losses and earned premiums as required under this
 2-1     subchapter, Subchapter M of this chapter, or Chapter 17 of this
 2-2     code, an insurer shall separately report experience based on use of
 2-3     the mile-based rating plan and the time-based rating plan.
 2-4           (b)  The classifications used by an insurer for motor
 2-5     vehicles insured under the mile-based rating plan are exempt from
 2-6     the provisions of this subchapter other than this article and
 2-7     Subchapter M of this chapter.
 2-8           Sec. 5.  COMMISSIONER POWERS AND DUTIES; RULES. (a)  The
 2-9     commissioner shall:
2-10                 (1)  compile information regarding:
2-11                       (A)  the number of insurers writing motor vehicle
2-12     insurance based on mile-based rating plans;
2-13                       (B)  the geographic areas of this state in which
2-14     mile-based rating plans are used; and
2-15                       (C)  the premium rates for mile-based rating
2-16     plans compared to standard time-based rating plans; and
2-17                 (2)  analyze the effect of mile-based rating plans on:
2-18                       (A)  premium rates offered for motor vehicle
2-19     insurance based on time-based rating plans; and
2-20                       (B)  the number of uninsured motorists in this
2-21     state.
2-22           (b)  The commissioner shall adopt rules as necessary or
2-23     appropriate to govern the use of a mile-based rating plan under
2-24     this article, including rules regarding:
2-25                 (1)  prepayment arrangements;
2-26                 (2)  proof of financial responsibility;
2-27                 (3)  auditing of the odometer of a vehicle for the
2-28     purpose of determining whether coverage is in force; and
2-29                 (4)  policy forms.
2-30           Sec. 6.  EXPIRATION. This article expires September 1, 2005.
2-31           SECTION 2. Article 5.06, Insurance Code, is amended by
2-32     amending Sections (9) and (10) and adding Section (11) to read as
2-33     follows:
2-34           (9)  An insurance policy or other document evidencing proof
2-35     of purchase of a personal automobile insurance policy written for a
2-36     term of less than 30 days if the policy premium is computed using a
2-37     time-based rating plan, or written for less than 1,000 miles if the
2-38     policy premium is computed using a mile-based rating plan, may not
2-39     be used to obtain an original or renewal driver's license, an
2-40     automobile registration or license plates, or a motor vehicle
2-41     inspection certificate and must contain a statement as follows:
2-42           "TEXAS LAW PROHIBITS USE OF THIS DOCUMENT TO OBTAIN A MOTOR
2-43     VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL DRIVER'S
2-44     LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
2-45           (10)  Before accepting any premium or fee for a personal
2-46     automobile insurance policy or binder for a term of less than 30
2-47     days if the policy premium is computed using a time-based rating
2-48     plan, or written for less than 1,000 miles if the policy premium is
2-49     computed using a mile-based rating plan, an agent or insurer must
2-50     make the following written disclosure to the applicant or insured:
2-51           "TEXAS LAW PROHIBITS USE OF THIS POLICY OR BINDER TO OBTAIN A
2-52     MOTOR VEHICLE INSPECTION CERTIFICATE, AN ORIGINAL OR RENEWAL
2-53     DRIVER'S LICENSE, OR AN AUTOMOBILE REGISTRATION OR LICENSE PLATES."
2-54           (11)  In this article, the terms "time-based rating plan" and
2-55     "mile-based rating plan" have the meanings assigned by Article
2-56     5.01-4 of this code.
2-57           SECTION 3. Section 1, Article 5.101, Insurance Code, is
2-58     amended to read as follows:
2-59           Sec. 1.  PURPOSE; APPLICABILITY. (a) The program on flexible
2-60     rating is designed to help stabilize the rates charged for
2-61     insurance in lines of property and casualty insurance covered by
2-62     Subchapters A and C of this chapter.
2-63           (b)  This article does not apply to:
2-64                 (1)  ocean marine insurance;
2-65                 (2)  inland marine insurance;
2-66                 (3)  fidelity, surety and guaranty bond insurance;
2-67                 (4)  errors and omissions insurance;
2-68                 (5)  directors' and officers' liability insurance;
2-69                 (6)  general liability insurance;
 3-1                 (7)  commercial property insurance;
 3-2                 (8)  workers' compensation insurance;
 3-3                 (9)  professional liability insurance for physicians
 3-4     and health care providers as defined in Article 5.15-1 of this
 3-5     code; or
 3-6                 (10)  attorney's professional liability insurance.
 3-7           (c)  Notwithstanding Subsection (a) of this section, this
 3-8     article does not apply to premium rates for motor vehicle insurance
 3-9     computed using a mile-based rating plan under Article 5.01-4 of
3-10     this code.
3-11           SECTION 4. (a)  Article 5.01-4, Insurance Code, as added by
3-12     this Act, applies only to a motor vehicle insurance policy
3-13     delivered, issued for delivery, or renewed on or after January 1,
3-14     2002.  A policy delivered, issued for delivery, or renewed before
3-15     January 1, 2002, is governed by the law as it existed immediately
3-16     before the effective date of this Act, and that law is continued in
3-17     effect for that purpose.
3-18           (b)  The commissioner of insurance shall adopt all rules
3-19     necessary to implement Article 5.01-4, Insurance Code, as added by
3-20     this Act, not later than December 31, 2001.
3-21           SECTION 5. This Act takes effect September 1, 2001.
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