By Thompson, Moreno of Harris, et al. H.B. No. 2159
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to premium rates and minimum reserves for credit life and
1-3 accident and health insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 3, Article 3.28, Insurance Code, is
1-6 amended to read as follows:
1-7 Sec. 3. Computation of Minimum Standard. The minimum
1-8 standard for the valuation of all such policies and contracts
1-9 issued prior to the operative date of Article 3.44a (the Standard
1-10 Nonforfeiture Law for Life Insurance) shall be that provided in
1-11 Section 12 of this article. Except as otherwise provided in
1-12 Sections 4 and 5 of this article, the minimum standard for the
1-13 valuation of all such policies and contracts issued on or after the
1-14 operative date of Article 3.44a (the Standard Nonforfeiture Law for
1-15 Life Insurance) shall be the commissioners reserve valuation
1-16 methods defined in Sections 6, 7, and 10 of this article, three and
1-17 one-half per cent (3 1/2%) interest; in the case of policies and
1-18 contracts, other than annuity and pure endowment contracts, issued
1-19 on or after June 14, 1973, four per cent (4%) interest for such
1-20 policies issued prior to August 29, 1977; or five and one-half per
1-21 cent (5 1/2%) interest for single premium life insurance policies
1-22 and four and one-half per cent (4 1/2%) interest for all other such
1-23 policies issued on and after August 29, 1977, and the following
1-24 tables:
2-1 (a) For all ordinary policies of life insurance issued on
2-2 the standard basis, excluding any disability and accidental death
2-3 benefits in such policies, the Commissioners 1941 Standard Ordinary
2-4 Mortality Table for such policies issued prior to the operative
2-5 date of Section 6 of the Standard Nonforfeiture Law for Life
2-6 Insurance, as amended, the Commissioners 1958 Standard Ordinary
2-7 Mortality Table for such policies issued on or after the operative
2-8 date of Section 6 of the Standard Nonforfeiture Law for Life
2-9 Insurance, as amended, and prior to the operative date of Section 8
2-10 of the Standard Nonforfeiture Law for Life Insurance, as amended,
2-11 provided that for any category of such policies issued on female
2-12 risks, all modified net premiums and present values referred to in
2-13 this Act may be calculated according to an age not more than three
2-14 years younger than the actual age of the insured for policies
2-15 issued prior to August 29, 1977 and not more than six years younger
2-16 than the actual age of the insured for policies issued on and after
2-17 August 29, 1977; and for such policies issued on or after the
2-18 operative date of Section 8 of the Standard Nonforfeiture Law for
2-19 Life Insurance, as amended, (i) the Commissioners 1980 Standard
2-20 Ordinary Mortality Table, or (ii) at the election of the company
2-21 for any one or more specified plans of life insurance, the
2-22 Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year
2-23 Select Mortality Factors, or (iii) any ordinary mortality table
2-24 adopted after 1980 by the National Association of Insurance
2-25 Commissioners that is approved by regulation promulgated by the
2-26 State Board of Insurance for use in determining the minimum
2-27 standard valuation for such policies.
3-1 (b) For all industrial life insurance policies issued on the
3-2 standard basis, excluding any disability and accidental death
3-3 benefits in such policies, the 1941 Standard Industrial Mortality
3-4 Table for such policies issued prior to the operative date of
3-5 Section 7 of the Standard Nonforfeiture Law for Life Insurance, as
3-6 amended, and for such policies issued on or after such operative
3-7 date, the Commissioners 1961 Standard Industrial Mortality Table or
3-8 any industrial mortality table adopted after 1980 by the National
3-9 Association of Insurance Commissioners that is approved by
3-10 regulation promulgated by the State Board of Insurance for use in
3-11 determining the minimum standard of valuation for such policies.
3-12 (c) For individual annuity and pure endowment contracts,
3-13 excluding any disability and accidental death benefits in such
3-14 policies, the 1937 Standard Annuity Mortality Table, or, at the
3-15 option of the company, the Annuity Mortality Table for 1949,
3-16 Ultimate, or any modification of either of these tables approved by
3-17 the State Board of Insurance.
3-18 (d) For group annuity and pure endowment contracts,
3-19 excluding any disability and accidental death benefits in such
3-20 policies, the Group Annuity Mortality Table for 1951, any
3-21 modification of such table approved by the State Board of
3-22 Insurance, or, at the option of the company, any of the tables or
3-23 modifications of tables specified for individual annuity and pure
3-24 endowment contracts.
3-25 (e) For total and permanent disability benefits in or
3-26 supplementary to ordinary policies or contracts, for policies or
3-27 contracts issued on or after January 1, 1966, the tables of Period
4-1 2 disablement rates and the 1930 to 1950 termination rates of the
4-2 1952 Disability Study of the Society of Actuaries, with due regard
4-3 to the type of benefit, or any tables of disablement rates and
4-4 termination rates adopted after 1980 by the National Association of
4-5 Insurance Commissioners that are approved by regulation promulgated
4-6 by the State Board of Insurance for use in determining the minimum
4-7 standard of valuation for such policies; for policies or contracts
4-8 issued on or after January 1, 1961, and prior to January 1, 1966,
4-9 either such tables or, at the option of the company, the Class (3)
4-10 Disability Table (1926); and for policies issued prior to January
4-11 1, 1961, the Class (3) Disability Table (1926). Any such table
4-12 shall, for active lives, be combined with a mortality table
4-13 permitted for calculating the reserves for life insurance policies.
4-14 (f) For accidental death benefits in or supplementary to
4-15 policies, for policies issued on or after January 1, 1966, the 1959
4-16 Accidental Death Benefits Table or any accidental death benefits
4-17 table adopted after 1980 by the National Association of Insurance
4-18 Commissioners that is approved by regulation promulgated by the
4-19 State Board of Insurance for use in determining the minimum
4-20 standard of valuation for such policies; for policies issued on or
4-21 after January 1, 1961, and prior to January 1, 1966, either such
4-22 table or, at the option of the company, the Inter-Company Double
4-23 Indemnity Mortality Table; and for policies issued prior to January
4-24 1, 1961, the Inter-Company Double Indemnity Mortality Table.
4-25 Either table shall be combined with a mortality table permitted for
4-26 calculating the reserves for life insurance policies.
4-27 (g) For group life insurance, life insurance issued on the
5-1 substandard basis and other special benefits, such tables as may be
5-2 approved by the State Board of Insurance.
5-3 (h) Notwithstanding any other law, the minimum reserve
5-4 requirements applicable to a credit life policy issued under
5-5 Article 3.53 of this code are met if, in aggregate, the reserves
5-6 are maintained at 100 percent of the 1980 Commissioner's Standard
5-7 Ordinary Mortality Table, with interest not to exceed 5.5 percent,
5-8 but in no event shall the reserves be less than the unearned
5-9 premium reserve required for such policies. The Commissioner may
5-10 use another mortality table adopted after 1980 by the National
5-11 Association of Insurance Commissioners provided the Commissioner
5-12 approves such mortality table by rule. This subsection expires
5-13 September 1, 2013.
5-14 SECTION 2. (a) Subsection A, Section 8, Article 3.53,
5-15 Insurance Code, is amended to read as follows:
5-16 A. (1) Any insurer may revise its schedules of premium rates
5-17 for various classes of business from time to time, and shall file
5-18 such revised schedules and classes of business with the
5-19 commissioner [Commissioner]. No insurer shall issue any credit
5-20 life insurance policy or credit accident and health insurance
5-21 policy for which the premium rate exceeds that determined by the
5-22 schedules and classes of business of such insurer as then on file
5-23 with the commissioner [Commissioner].
5-24 (2) The commissioner [State Board of Insurance] may,
5-25 after notice and hearing, by rule adopt [and promulgate] a
5-26 presumptive premium rate for various classes of business and terms
5-27 of coverage [which shall be presumed, subject to a rebuttal of such
6-1 presumption, to be just, reasonable, adequate, and not excessive].
6-2 An insurer that does not adopt a different rate under Subdivision
6-3 (5) of this subsection shall adopt the presumptive rate adopted by
6-4 the commissioner. Except as provided in this article, any [Any]
6-5 hearing conducted or order adopting a presumptive rate pursuant to
6-6 this section shall be held in accordance with the rulemaking
6-7 [contested case] provisions of Chapter 2001, Government Code [the
6-8 Administrative Procedure and Texas Register Act (Article 6252-13a,
6-9 Vernon's Texas Civil Statutes)]. The commissioner shall set forth
6-10 in his order adopting a presumptive rate findings and conclusions
6-11 on all material issues presented at the hearing.
6-12 (3) In determining the presumptive premium rate, the
6-13 commissioner [board] shall consider reasonable acquisition costs,
6-14 loss ratios, and administrative expenses, reserves, loss settlement
6-15 expenses, the type or class of business, the duration of various
6-16 credit transactions, reasonable and adequate profits to the
6-17 insurers, and other relevant data. The commissioner [board] may
6-18 not set a presumptive premium rate that is unjust, unreasonable,
6-19 inadequate, confiscatory, or excessive to the insurers, the
6-20 insureds, or agents. The commissioner [board] may not fix or limit
6-21 the amount of compensation actually paid by a company to an agent.
6-22 The commissioner [board] may request information from any insurer
6-23 or agent with respect to compensation paid for the sale of credit
6-24 insurance, expenses, losses, profits, and any other relevant data
6-25 relating to the presumptive premium rate and it is the duty of each
6-26 insurer or agent to provide such information to the commissioner
6-27 [board] in a timely manner.
7-1 (4) Any person aggrieved by the action of the
7-2 commissioner [board] in the setting of a presumptive rate or any
7-3 other action taken with regard to the setting of such presumptive
7-4 rate may, not later than the 30th day after [within 30 days from]
7-5 the date the commissioner adopts a presumptive rate order, file a
7-6 petition for judicial review in a district court in Travis County.
7-7 The scope of judicial review shall be pursuant to Section 2001.174,
7-8 Government Code [board took the action complained of appeal in
7-9 accordance with Article 1.04 of this code].
7-10 (5) An insurer electing to deviate from the benchmark
7-11 rate shall file with the commissioner the insurer's proposed rate
7-12 for credit life and credit health and accident insurance, including
7-13 commission rates and how those rates are paid or charged. If the
7-14 proposed rate represents a rate increase, the insurer shall specify
7-15 the amount of and the reason for the increase. The commissioner
7-16 may reject any rate increase if the commissioner finds that the
7-17 increase is not actuarially justified. Except as provided by
7-18 Subdivision (6) of this subsection, an insurer may not use a rate
7-19 that is more than 30 percent higher or more than 30 percent lower
7-20 than the presumptive rate. Except as provided by this section, a
7-21 rate that complies with this subdivision is valid and in compliance
7-22 with the requirements of this section and other applicable law.
7-23 (6) An insurer may file with the commissioner a
7-24 proposed rate for credit life and credit accident and health
7-25 insurance that is more than 30 percent higher than or more than 30
7-26 percent lower than the presumptive rate adopted by the commissioner
7-27 under this section. The commissioner may disapprove a rate filed
8-1 under this subdivision on the ground that the rate does not comply
8-2 with the terms of this section. A rate filed under this
8-3 subdivision is considered approved and the insurer may use the rate
8-4 if the rate is not disapproved by the commissioner before the 60th
8-5 day after the date the insurer filed the rate.
8-6 (7) A rate filed under this section is not excessive
8-7 unless the rate is unreasonably high for the coverage provided and
8-8 a reasonable degree of competition does not exist with respect to
8-9 the classification to which the rate is applicable. A rate filed
8-10 under this section is not inadequate unless either the rate is
8-11 insufficient to sustain projected losses and expenses, or the rate
8-12 substantially impairs, or is likely to impair substantially,
8-13 competition with respect to the sale of the product.
8-14 (8) A hearing under Subdivision (6) shall be a
8-15 contested case hearing conducted under Chapter 2001, Government
8-16 Code. Judicial review of any action of the commissioner under
8-17 Subdivision (6) shall be governed by Subchapter D, Chapter 36, of
8-18 this code.
8-19 (b) The changes made by this Act to Subsection A, Section 8,
8-20 Article 3.53, Insurance Code, expire September 1, 2005.
8-21 SECTION 3. (a) Section 40.003(c), Insurance Code, is amended
8-22 to read as follows:
8-23 (c) This chapter does not apply to a proceeding conducted
8-24 under Article 1.04D or to a proceeding relating to:
8-25 (1) approving or reviewing rates or rating manuals
8-26 filed by an individual company, unless the rates or manuals are
8-27 contested;
9-1 (2) adopting a rule;
9-2 (3) adopting or approving a policy form or policy form
9-3 endorsement; [or]
9-4 (4) adopting or approving a plan of operation for an
9-5 organization subject to the jurisdiction of the department; or
9-6 (5) adopting a presumptive rate under Article 3.53.
9-7 (b) The changes made by this Act to Section 40.003(c),
9-8 Insurance Code, expire September 1, 2005.
9-9 SECTION 4. Before January 31, 2005, the commissioner of
9-10 insurance, in consultation with the office of public insurance
9-11 counsel, shall submit a report to the 79th Legislature regarding
9-12 the effect of the changes made by this Act to Article 3.53,
9-13 Insurance Code, on rates for credit life and accident and health
9-14 insurance in this state.
9-15 SECTION 5. This Act takes effect immediately if it receives
9-16 a vote of two-thirds of all the members elected to each house, as
9-17 provided by Section 39, Article III, Texas Constitution. If this
9-18 Act does not receive the vote necessary for immediate effect, this
9-19 Act takes effect September 1, 2001.