By Ramsay H.B. No. 2871
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to rate rollback for certain lines of insurance.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 2(b), Article 5.131, Insurance Code, is
1-5 amended to read as follows:
1-6 (b) County [It is the intent of the legislature that all
1-7 insurers, including county] mutual insurers, joint underwriting
1-8 associations, and other insurers [others] whose rates are not
1-9 regulated shall[,] pass through the savings that accrue from the
1-10 legislation described by Section 1 of this article to their
1-11 policyholders on a prospective basis. To monitor compliance with
1-12 this legislative directive, the commissioner shall obtain and
1-13 examine data from each insurer described by this subsection as
1-14 necessary to ensure that the insurer is passing through savings to
1-15 the insurer's policyholders in compliance with this section. The
1-16 commissioner may require information in rate filings, special data
1-17 calls, informational hearings, and any other means consistent with
1-18 other provisions of this code applicable to the affected insurers.
1-19 Information provided under this subsection is privileged and
1-20 confidential to the same extent as the information is privileged
1-21 and confidential under this code or other laws for other insurers
1-22 licensed and writing the same line of insurance in this state. The
1-23 information remains privileged and confidential unless and until
1-24 introduced into evidence at an administrative hearing or in a court
2-1 of competent jurisdiction. Sections 3 and 4 of this article
2-2 [subchapter] do not apply to the [nonrate regulated] insurers
2-3 described [covered] by this subsection. Notwithstanding the
2-4 nonapplicability of those sections to those insurers, if the
2-5 commissioner determines on or before January 1, 2003, that an
2-6 insurer described by this subsection has failed to pass through
2-7 savings to that insurer's policyholders in compliance with this
2-8 subsection, the commissioner shall require the insurer to provide
2-9 rate refunds or reductions to the insurer's policyholders on a
2-10 prospective basis in an amount and manner determined by the
2-11 commissioner by rule.
2-12 SECTION 2. Section 6, Article 5.131, Insurance Code, is
2-13 amended to read as follows:
2-14 Sec. 6. DURATION OF REDUCTION. Unless the commissioner
2-15 grants relief under Section 4 or 5 of this article, each rate
2-16 resulting from the reduction required under Section 3 of this
2-17 article remains in effect until January 1, 2003 [2001].
2-18 SECTION 3. Subchapter O, Chapter 5, Insurance Code, is
2-19 amended by adding Article 5.132 to read as follows:
2-20 Art. 5.132. RATE ROLLBACK FOR CERTAIN LINES OF INSURANCE
2-21 Sec. 1. FINDINGS. The legislature finds that:
2-22 (1) the cost of litigation against insureds and their
2-23 insurers, the possibility of large and unjust judgments, and the
2-24 uncertainty created by a litigious environment within this state
2-25 have been significant factors in the high cost of certain lines of
2-26 insurance;
2-27 (2) legislation enacted by regular sessions of the
3-1 75th, 76th, and 77th legislatures, and legislation passed by or
3-2 pending in the Congress of the United States, is intended to
3-3 meaningfully reform the civil justice system of this state and this
3-4 nation and will result in reductions in the cost of litigation and
3-5 in the size of judgments;
3-6 (3) certain decisions by the Supreme Court of Texas
3-7 and federal appellate courts during the years 1995-2001 have
3-8 resulted in reductions in the size of certain judgments;
3-9 (4) it can be reasonably anticipated that there will
3-10 be additional legislation and court decisions in the future that
3-11 will result in reductions in the cost of litigation and in the size
3-12 of judgments;
3-13 (5) while the monetary effect of the legislative
3-14 changes can be actuarially determined within a reasonable degree of
3-15 certainty, insurers will delay implementation of rate reductions
3-16 until they have data evidencing actual loss experience;
3-17 (6) the delay described by Subdivision (5) of this
3-18 section will result in a windfall for the insurers benefited by the
3-19 changes described by Subdivisions (2), (3), and (4) of this
3-20 section, and this benefit should be passed on to their insureds;
3-21 and
3-22 (7) legislative action in the public interest and
3-23 within the police power of the state is required to eliminate
3-24 unnecessary delays to pass these benefits on to the insured public
3-25 of this state.
3-26 Sec. 2. APPLICABILITY OF ARTICLE; REPORTING. (a) This
3-27 article applies to any insurer that is authorized to engage in
4-1 business in this state and that is authorized to write the type of
4-2 coverage described by Subsection (b) of this section, including:
4-3 (1) a capital stock company;
4-4 (2) a mutual company;
4-5 (3) a Lloyd's plan; and
4-6 (4) a reciprocal or interinsurance exchange.
4-7 (b) It is the intent of the legislature that all insurers,
4-8 including county mutual insurers, joint underwriting associations,
4-9 and others whose rates are not regulated, pass through the savings
4-10 that accrue from the legislation and court decisions described by
4-11 Section 1 of this article to their policyholders on a prospective
4-12 basis. To monitor compliance with this legislative directive, the
4-13 commissioner may require information in rate filings, special data
4-14 calls, or informational hearings or through any other means
4-15 consistent with other provisions of this code applicable to the
4-16 affected insurers. Information provided under this subsection is
4-17 privileged and confidential only to the extent the information is
4-18 privileged and confidential under this code or other laws for other
4-19 insurers licensed and writing the same line of insurance in this
4-20 state. The information remains privileged and confidential unless
4-21 and until introduced into evidence at an administrative hearing or
4-22 in a court of competent jurisdiction. Sections 3 and 4 of this
4-23 article do not apply to the nonrate regulated insurers covered by
4-24 this subsection.
4-25 (c) This article applies only to rates for:
4-26 (1) private passenger automobile liability insurance
4-27 policies or coverage;
5-1 (2) the liability portion of homeowners, farm and
5-2 ranch owners, and renters insurance policies or coverage; and
5-3 (3) garage liability insurance policies or coverage.
5-4 Sec. 3. RATE ROLLBACK. (a) Notwithstanding Chapter 40 of
5-5 this code, on or before September 1 of each year, the commissioner
5-6 shall hold a rulemaking hearing under Chapter 2001, Government
5-7 Code, to:
5-8 (1) determine a percentage of equitable
5-9 across-the-board reductions in insurance rates required for each
5-10 line of coverage described by Section 2 of this article; and
5-11 (2) adopt those rate reductions by rule.
5-12 (b) A rate reduction adopted under this section shall be
5-13 based on the evidence presented at the hearing required by
5-14 Subsection (a) of this section. The rates resulting from the rate
5-15 reductions adopted under this section must be reasonable, adequate,
5-16 and nonconfiscatory and may not be unfairly discriminatory or
5-17 excessive.
5-18 (c) A rate reduction adopted under this section applies only
5-19 to a policy delivered, issued for delivery, or renewed on or after
5-20 the 90th day after the date the rule establishing the rate
5-21 reduction is adopted.
5-22 (d) Any rule or order of the commissioner that determines,
5-23 approves, or sets a rate reduction under this section that is
5-24 appealed or challenged remains in effect during the pendency of the
5-25 appeal or challenge. During the pendency of the appeal or
5-26 challenge, an insurer shall use the rate reduction provided in the
5-27 order being appealed or challenged, and the rate reduction is
6-1 lawful and valid during the period of the appeal or challenge.
6-2 (e) The commissioner shall consider the effect of the
6-3 legislation and court decisions described by Section 1 of this
6-4 article in determining rates under Section 5, Article 21.81, of
6-5 this code.
6-6 Sec. 4. ADMINISTRATIVE RELIEF. (a) Except as provided by
6-7 Subsection (b) of this section, a rate filed for a line of coverage
6-8 described by Section 2 of this article on or after the effective
6-9 date of a rate reduction for that line adopted under Section 3 of
6-10 this article shall reflect the rate reduction. The commissioner
6-11 shall disapprove a rate if the commissioner finds that the filed
6-12 rate does not reflect that reduction.
6-13 (b) The commissioner is not required to disapprove a filed
6-14 rate that reflects less than the full amount of the rate reduction
6-15 imposed under Section 3 of this article if:
6-16 (1) the commissioner determines based on clear and
6-17 convincing evidence that an insurer will be financially unable to
6-18 continue writing the line of coverage; or
6-19 (2) the rate reduction would likely result in placing
6-20 the insurer in a hazardous financial condition.
6-21 Sec. 5. CONTINUATION OF REDUCTION. After the conclusion of
6-22 each regular legislative session, beginning with the 78th
6-23 legislative session, the commissioner shall conduct a review of
6-24 state and federal legislation and court decisions analogous to the
6-25 legislation and court decisions described by Section 1 of this
6-26 article to determine if any legislation or court decisions can
6-27 reasonably be anticipated to reduce the cost of litigation or the
7-1 amount of damages. If the commissioner determines that a reduction
7-2 is likely, the commissioner shall order an additional rate
7-3 rollback, as provided by this article, to begin on January 1 of the
7-4 following even-numbered year.
7-5 Sec. 6. MODIFICATION. The commissioner by bulletin or
7-6 directive may, based on the evidence accumulated by the
7-7 commissioner before the bulletin or directive is issued, modify a
7-8 rate reduction adopted under this article if a final, unappealable
7-9 judgment of a court with appropriate jurisdiction stays the effect
7-10 of, enjoins, or otherwise modifies or declares unconstitutional any
7-11 of the legislation described by Section 1 of this article on which
7-12 the commissioner based the rate reduction.
7-13 Sec. 7. HEARINGS AND ORDERS. Notwithstanding Chapter 40 of
7-14 this code, a rulemaking hearing under this article shall be held
7-15 before the commissioner or the commissioner's designee. The
7-16 rulemaking procedures established by this section do not apply to
7-17 any other rate promulgation proceeding.
7-18 Sec. 8. RECOMMENDATIONS TO LEGISLATURE. The commissioner
7-19 shall assemble information, conduct hearings, and take other
7-20 appropriate measures to assess and evaluate changes in the
7-21 marketplace resulting from the implementation of this article and
7-22 shall report the commissioner's findings and recommendations to the
7-23 legislature.
7-24 SECTION 4. (a) Not later than September 30, 2001, the
7-25 commissioner of insurance by rule shall adopt the insurance rates
7-26 that resulted from the reduction required under Section 3, Article
7-27 5.131, Insurance Code, and that were in effect immediately before
8-1 January 1, 2001.
8-2 (b) The rates adopted under this section shall apply only to
8-3 an insurance policy delivered, issued for delivery, or renewed on
8-4 or after October 1, 2001.
8-5 (c) Section 6, Article 5.131, Insurance Code, applies to the
8-6 duration of the rates adopted under this section.
8-7 SECTION 5. (a) A rate reduction adopted under this section
8-8 or Article 5.132, Insurance Code, as added by this Act, does not
8-9 apply to a policy or coverage delivered, issued for delivery, or
8-10 renewed before January 1, 2002.
8-11 (b) Notwithstanding Section 3(a), Article 5.132, Insurance
8-12 Code, as added by this Act, on or before October 1, 2001, the
8-13 commissioner of insurance by rule shall adopt an appropriate rate
8-14 reduction for each line of coverage described by Section 2 of that
8-15 article. A rate reduction adopted under this subsection shall be
8-16 developed without consideration of the effect of the legislation
8-17 and court decisions described by Section 1, Article 5.132.
8-18 (c) Notwithstanding Subsection (b) of this section, if the
8-19 commissioner of insurance has not adopted rate reductions required
8-20 by that subsection before January 1, 2002, the following
8-21 reductions, measured from the base rates in effect on April 1,
8-22 2001, apply to each line of coverage described by Section 2,
8-23 Article 5.132, Insurance Code, as added by this Act, delivered,
8-24 issued for delivery, or renewed on or after January 1, 2002:
8-25 (1) private passenger automobile liability insurance,
8-26 15 percent;
8-27 (2) the liability portions of homeowners, farm and
9-1 ranch owners, and renters insurance, 5 percent; and
9-2 (3) garage liability insurance, 15 percent.
9-3 (d) A rate filed under an order of the commissioner of
9-4 insurance issued before May 1, 2001, is not subject to the rate
9-5 reduction required by this section or Article 5.132, Insurance
9-6 Code, as added by this Act, before January 1, 2002.
9-7 SECTION 6. This Act takes effect immediately if it receives
9-8 a vote of two-thirds of all the members elected to each house, as
9-9 provided by Section 39, Article III, Texas Constitution. If this
9-10 Act does not receive the vote necessary for immediate effect, this
9-11 Act takes effect September 1, 2001.