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. 3-22 * * * * *