1-1 By: Thompson, et al. (Senate Sponsor - Carona) H.B. No. 2159
1-2 (In the Senate - Received from the House April 26, 2001;
1-3 April 27, 2001, read first time and referred to Committee on
1-4 Business and Commerce; May 10, 2001, reported adversely, with
1-5 favorable Committee Substitute by the following vote: Yeas 7, Nays
1-6 0; May 10, 2001, sent to printer.)
1-7 COMMITTEE SUBSTITUTE FOR H.B. No. 2159 By: Carona
1-8 A BILL TO BE ENTITLED
1-9 AN ACT
1-10 relating to premium rates and minimum reserves for credit life and
1-11 accident and health insurance.
1-12 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-13 SECTION 1. Section 3, Article 3.28, Insurance Code, is
1-14 amended to read as follows:
1-15 Sec. 3. Computation of Minimum Standard. The minimum
1-16 standard for the valuation of all such policies and contracts
1-17 issued prior to the operative date of Article 3.44a (the Standard
1-18 Nonforfeiture Law for Life Insurance) shall be that provided in
1-19 Section 12 of this article. Except as otherwise provided in
1-20 Sections 4 and 5 of this article, the minimum standard for the
1-21 valuation of all such policies and contracts issued on or after the
1-22 operative date of Article 3.44a (the Standard Nonforfeiture Law for
1-23 Life Insurance) shall be the commissioners reserve valuation
1-24 methods defined in Sections 6, 7, and 10 of this article, three and
1-25 one-half per cent (3 1/2%) interest; in the case of policies and
1-26 contracts, other than annuity and pure endowment contracts, issued
1-27 on or after June 14, 1973, four per cent (4%) interest for such
1-28 policies issued prior to August 29, 1977; or five and one-half per
1-29 cent (5 1/2%) interest for single premium life insurance policies
1-30 and four and one-half per cent (4 1/2%) interest for all other such
1-31 policies issued on and after August 29, 1977, and the following
1-32 tables:
1-33 (a) For all ordinary policies of life insurance issued on
1-34 the standard basis, excluding any disability and accidental death
1-35 benefits in such policies, the Commissioners 1941 Standard Ordinary
1-36 Mortality Table for such policies issued prior to the operative
1-37 date of Section 6 of the Standard Nonforfeiture Law for Life
1-38 Insurance, as amended, the Commissioners 1958 Standard Ordinary
1-39 Mortality Table for such policies issued on or after the operative
1-40 date of Section 6 of the Standard Nonforfeiture Law for Life
1-41 Insurance, as amended, and prior to the operative date of Section 8
1-42 of the Standard Nonforfeiture Law for Life Insurance, as amended,
1-43 provided that for any category of such policies issued on female
1-44 risks, all modified net premiums and present values referred to in
1-45 this Act may be calculated according to an age not more than three
1-46 years younger than the actual age of the insured for policies
1-47 issued prior to August 29, 1977 and not more than six years younger
1-48 than the actual age of the insured for policies issued on and after
1-49 August 29, 1977; and for such policies issued on or after the
1-50 operative date of Section 8 of the Standard Nonforfeiture Law for
1-51 Life Insurance, as amended, (i) the Commissioners 1980 Standard
1-52 Ordinary Mortality Table, or (ii) at the election of the company
1-53 for any one or more specified plans of life insurance, the
1-54 Commissioners 1980 Standard Ordinary Mortality Table with Ten-Year
1-55 Select Mortality Factors, or (iii) any ordinary mortality table
1-56 adopted after 1980 by the National Association of Insurance
1-57 Commissioners that is approved by regulation promulgated by the
1-58 State Board of Insurance for use in determining the minimum
1-59 standard valuation for such policies.
1-60 (b) For all industrial life insurance policies issued on the
1-61 standard basis, excluding any disability and accidental death
1-62 benefits in such policies, the 1941 Standard Industrial Mortality
1-63 Table for such policies issued prior to the operative date of
1-64 Section 7 of the Standard Nonforfeiture Law for Life Insurance, as
2-1 amended, and for such policies issued on or after such operative
2-2 date, the Commissioners 1961 Standard Industrial Mortality Table or
2-3 any industrial mortality table adopted after 1980 by the National
2-4 Association of Insurance Commissioners that is approved by
2-5 regulation promulgated by the State Board of Insurance for use in
2-6 determining the minimum standard of valuation for such policies.
2-7 (c) For individual annuity and pure endowment contracts,
2-8 excluding any disability and accidental death benefits in such
2-9 policies, the 1937 Standard Annuity Mortality Table, or, at the
2-10 option of the company, the Annuity Mortality Table for 1949,
2-11 Ultimate, or any modification of either of these tables approved by
2-12 the State Board of Insurance.
2-13 (d) For group annuity and pure endowment contracts,
2-14 excluding any disability and accidental death benefits in such
2-15 policies, the Group Annuity Mortality Table for 1951, any
2-16 modification of such table approved by the State Board of
2-17 Insurance, or, at the option of the company, any of the tables or
2-18 modifications of tables specified for individual annuity and pure
2-19 endowment contracts.
2-20 (e) For total and permanent disability benefits in or
2-21 supplementary to ordinary policies or contracts, for policies or
2-22 contracts issued on or after January 1, 1966, the tables of Period
2-23 2 disablement rates and the 1930 to 1950 termination rates of the
2-24 1952 Disability Study of the Society of Actuaries, with due regard
2-25 to the type of benefit, or any tables of disablement rates and
2-26 termination rates adopted after 1980 by the National Association of
2-27 Insurance Commissioners that are approved by regulation promulgated
2-28 by the State Board of Insurance for use in determining the minimum
2-29 standard of valuation for such policies; for policies or contracts
2-30 issued on or after January 1, 1961, and prior to January 1, 1966,
2-31 either such tables or, at the option of the company, the Class (3)
2-32 Disability Table (1926); and for policies issued prior to January
2-33 1, 1961, the Class (3) Disability Table (1926). Any such table
2-34 shall, for active lives, be combined with a mortality table
2-35 permitted for calculating the reserves for life insurance policies.
2-36 (f) For accidental death benefits in or supplementary to
2-37 policies, for policies issued on or after January 1, 1966, the 1959
2-38 Accidental Death Benefits Table or any accidental death benefits
2-39 table adopted after 1980 by the National Association of Insurance
2-40 Commissioners that is approved by regulation promulgated by the
2-41 State Board of Insurance for use in determining the minimum
2-42 standard of valuation for such policies; for policies issued on or
2-43 after January 1, 1961, and prior to January 1, 1966, either such
2-44 table or, at the option of the company, the Inter-Company Double
2-45 Indemnity Mortality Table; and for policies issued prior to January
2-46 1, 1961, the Inter-Company Double Indemnity Mortality Table.
2-47 Either table shall be combined with a mortality table permitted for
2-48 calculating the reserves for life insurance policies.
2-49 (g) For group life insurance, life insurance issued on the
2-50 substandard basis and other special benefits, such tables as may be
2-51 approved by the State Board of Insurance.
2-52 (h) Notwithstanding any other law, the minimum reserve
2-53 requirements applicable to a policy issued under Article 3.53 of
2-54 this code are met if, in aggregate, the reserves are maintained at
2-55 100 percent of the 1980 Commissioner's Standard Ordinary Mortality
2-56 Table, with interest not to exceed 5.5 percent. This subsection
2-57 expires September 1, 2013.
2-58 SECTION 2. Subsection A, Section 8, Article 3.53, Insurance
2-59 Code, is amended to read as follows:
2-60 A. (1) Any insurer may revise its schedules of premium rates
2-61 for various classes of business from time to time, and shall file
2-62 such revised schedules and classes of business with the
2-63 commissioner [Commissioner]. No insurer shall issue any credit
2-64 life insurance policy or credit accident and health insurance
2-65 policy for which the premium rate exceeds that determined by the
2-66 schedules and classes of business of such insurer as then on file
2-67 with the commissioner [Commissioner].
2-68 (2) The commissioner [State Board of Insurance] may,
2-69 after notice and hearing, by rule adopt [and promulgate] a
3-1 presumptive premium rate for various classes of business and terms
3-2 of coverage [which shall be presumed, subject to a rebuttal of such
3-3 presumption, to be just, reasonable, adequate, and not excessive].
3-4 An insurer that does not file a different rate under Subdivision
3-5 (5) of this subsection shall file the presumptive rate adopted by
3-6 the commissioner. Except as provided in this article, any [Any]
3-7 hearing conducted or order adopting a presumptive rate pursuant to
3-8 this section shall be held in accordance with the rulemaking
3-9 [contested case] provisions of Chapter 2001, Government Code [the
3-10 Administrative Procedure and Texas Register Act (Article 6252-13a,
3-11 Vernon's Texas Civil Statutes)]. In the commissioner's order
3-12 adopting a presumptive rate, the commissioner shall set forth
3-13 findings and conclusions on all material issues presented at the
3-14 hearing.
3-15 (3) In determining the presumptive premium rate, the
3-16 commissioner [board] shall consider reasonable acquisition costs,
3-17 loss ratios, and administrative expenses, reserves, loss settlement
3-18 expenses, the type or class of business, the duration of various
3-19 credit transactions, reasonable and adequate profits to the
3-20 insurers, and other relevant data. The commissioner [board] may
3-21 not set a presumptive premium rate that is unjust, unreasonable,
3-22 inadequate, confiscatory, or excessive to the insurers, the
3-23 insureds, or agents. The commissioner [board] may not fix or limit
3-24 the amount of compensation actually paid by a company to an agent.
3-25 The commissioner [board] may request information from any insurer
3-26 or agent with respect to compensation paid for the sale of credit
3-27 insurance, expenses, losses, profits, and any other relevant data
3-28 relating to the presumptive premium rate and it is the duty of each
3-29 insurer or agent to provide such information to the commissioner
3-30 [board] in a timely manner.
3-31 (4) Any person aggrieved by the action of the
3-32 commissioner [board] in the setting of a presumptive rate or any
3-33 other action taken with regard to the setting of such presumptive
3-34 rate may, not later than the 30th day after [within 30 days from]
3-35 the date the commissioner adopts a presumptive rate order, file a
3-36 petition for judicial review in a district court in Travis County.
3-37 Judicial review under this subdivision is governed by Subchapter B,
3-38 Chapter 2001, Government Code [board took the action complained of
3-39 appeal in accordance with Article 1.04 of this code].
3-40 (5) An insurer electing to deviate from the
3-41 presumptive rate shall file with the commissioner the insurer's
3-42 proposed rate for credit life and credit accident and health
3-43 insurance. On filing the rate with the commissioner, the insurer
3-44 may use the filed rate until the insurer elects to file a different
3-45 rate. Except as provided by Subdivision (6) of this subsection, an
3-46 insurer may not use a rate that is more than 30 percent higher or
3-47 more than 30 percent lower than the presumptive rate. Except as
3-48 provided by this section, a rate that complies with this
3-49 subdivision is valid and in compliance with the requirements of
3-50 this section and other applicable law.
3-51 (6) An insurer may file with the commissioner a
3-52 proposed rate for credit life and credit accident and health
3-53 insurance that is more than 30 percent higher than or more than 30
3-54 percent lower than the presumptive rate adopted by the commissioner
3-55 under this section. The commissioner may disapprove a rate filed
3-56 under this subdivision on the ground that the rate is not
3-57 actuarially justified. A rate filed under this subdivision is
3-58 considered approved and the insurer may use the rate if the rate is
3-59 not disapproved by the commissioner before the 60th day after the
3-60 date the insurer filed the rate.
3-61 (7) A rate filed under this section is not excessive
3-62 unless the rate is unreasonably high for the coverage provided and
3-63 a reasonable degree of competition does not exist with respect to
3-64 the classification to which the rate is applicable. A rate filed
3-65 under this section is not inadequate unless either the rate is
3-66 insufficient to sustain projected losses and expenses, or the rate
3-67 substantially impairs, or is likely to impair substantially,
3-68 competition with respect to the sale of the product.
3-69 (8) A hearing under Subdivision (6) is a contested
4-1 case hearing conducted under Chapter 2001, Government Code.
4-2 Judicial review of any action of the commissioner under Subdivision
4-3 (6) is governed by Subchapter D, Chapter 36 of this code.
4-4 SECTION 3. Section 40.003(c), Insurance Code, is amended to
4-5 read as follows:
4-6 (c) This chapter does not apply to a proceeding conducted
4-7 under Article 1.04D or to a proceeding relating to:
4-8 (1) approving or reviewing rates or rating manuals
4-9 filed by an individual company, unless the rates or manuals are
4-10 contested;
4-11 (2) adopting a rule;
4-12 (3) adopting or approving a policy form or policy form
4-13 endorsement; [or]
4-14 (4) adopting or approving a plan of operation for an
4-15 organization subject to the jurisdiction of the department; or
4-16 (5) adopting a presumptive rate under Article 3.53.
4-17 SECTION 4. Before January 31, 2005, the commissioner of
4-18 insurance, in consultation with the office of public insurance
4-19 counsel, shall submit a report to the 79th Legislature regarding
4-20 the effect of the changes made by this Act to Article 3.53,
4-21 Insurance Code, on rates for credit life and accident and health
4-22 insurance in this state.
4-23 SECTION 5. This Act takes effect immediately if it receives
4-24 a vote of two-thirds of all the members elected to each house, as
4-25 provided by Section 39, Article III, Texas Constitution. If this
4-26 Act does not receive the vote necessary for immediate effect, this
4-27 Act takes effect September 1, 2001.
4-28 * * * * *