By Sibley S.B. No. 993
77R6522 PB-F
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the determination of premium rates for certain lines of
1-3 insurance.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Sections 3(b) and (d), Article 5.101, Insurance
1-6 Code, are amended to read as follows:
1-7 (b) The commissioner shall promulgate by rule a benchmark
1-8 rate for each line subject to this article after notice and hearing
1-9 [under Chapter 2001, Government Code (the Administrative Procedure
1-10 Act)]. The commissioner shall set the benchmark rate to produce a
1-11 range that:
1-12 (1) promotes stability in that line; and
1-13 (2) produces rates that are just, reasonable, adequate
1-14 and not excessive for the risks to which they apply, and not
1-15 confiscatory.
1-16 (d) Each flexibility band is based on a benchmark rate
1-17 promulgated by rule by the commissioner. The commissioner shall
1-18 conduct hearings annually to determine the benchmark rates by line
1-19 [on or before September 1 of each year]. Before each hearing
1-20 conducted under this subsection, the commissioner shall request
1-21 recommendations from insurers, the public insurance counsel, and
1-22 any other interested person or entity regarding changes to the
1-23 benchmark rates. The recommendations must include any supporting
1-24 actuarial analyses. Notice of each hearing proposing changes to
2-1 the benchmark rates must be published in the Texas Register. The
2-2 commissioner shall receive public comment for at least 30 days
2-3 after the notice is published. The determination of the rate shall
2-4 not include disallowed expenses under Subsection (o) of this
2-5 section. An insurer, the public insurance counsel, and any other
2-6 interested person may present views, analyses, and arguments in
2-7 response to the commissioner's request for recommendations, either
2-8 before or [testimony] at the hearing, and may file information for
2-9 consideration by the commissioner. [An advisory organization which
2-10 collects ratemaking data shall not be a party to the hearing.] A
2-11 trade association that does not collect historical data and that
2-12 does not provide statistical plans, prospective loss costs, or
2-13 supplementary rating information to its members may, on behalf of
2-14 its members that are small or medium-sized insurers, as defined by
2-15 the commissioner, present rate making data and make recommendations
2-16 to the commissioner before or at the hearing. There is no immunity
2-17 from antitrust liability for a trade association that presents rate
2-18 making data or makes recommendations to the commissioner [at the
2-19 hearing]. The definition of "small and medium-sized insurers"
2-20 shall be a limitation upon the scope of the presentation to be made
2-21 by a trade association, but may not limit the participation of a
2-22 trade association because its membership includes other sized
2-23 insurers. After the hearing, the commissioner shall adopt a rule
2-24 promulgating the benchmark rates. An insurer shall use that
2-25 benchmark rate and the flexibility band to develop rates used for
2-26 the line for the year following the setting of the benchmark rate.
2-27 SECTION 2. Section 5, Article 5.101, Insurance Code, is
3-1 amended to read as follows:
3-2 Sec. 5. APPLICABILITY OF CERTAIN GOVERNMENT CODE
3-3 REQUIREMENTS [ADMINISTRATIVE PROCEDURE ACT APPLICABLE; BENCHMARK
3-4 RATE HEARINGS]. (a) Subject to Chapter 40 of this code, Chapter
3-5 2001, Government Code [(the Administrative Procedure Act)], applies
3-6 to all rate hearings conducted under this article, other than a
3-7 benchmark rate hearing conducted under Section 3(d) of this article
3-8 [subject to Article 1.33B of this code and Subsections (b)-(d) of
3-9 this section].
3-10 (b) Subchapter A, Chapter 2006, Government Code, does not
3-11 apply to a benchmark rate hearing conducted under Section 3(d) of
3-12 this article. [In a hearing on benchmark rates conducted under this
3-13 article, discovery directed to any party to the proceeding
3-14 concerning that party's premium, loss, expense, profit, or rate of
3-15 return experience or its operations is prohibited, except to the
3-16 extent that the party presents evidence, relies on, or provides to
3-17 another party its own individual insurer data in the benchmark rate
3-18 hearing. This subsection does not deny or restrict any party's
3-19 right to produce or rely on relevant information concerning an
3-20 individual insurer as evidence in a benchmark rate hearing.]
3-21 [(c) As part of a benchmark rate hearing, any party may
3-22 present evidence regarding, and the administrative law judge shall
3-23 make proposed findings concerning, any adjustments or amendments
3-24 that should be made to the statistical reporting rules and
3-25 statistical plans to aid in presenting a case at future benchmark
3-26 rate hearings.]
3-27 [(d) If the record indicates evidence under Subsection (c)
4-1 of this section, the commissioner may initiate a proceeding under
4-2 Article 5.96 of this code to determine and make adjustments and
4-3 amendments to the rules and statistical plans as necessary to
4-4 further aid in determining whether rates and rating systems in use
4-5 under this article comply with the regulatory standards imposed
4-6 under this article. The commissioner shall consider the evidence
4-7 taken at the benchmark rate hearings under Subsection (c) of this
4-8 section, and shall address that evidence in any order or action
4-9 taken as a result of the proceeding.]
4-10 SECTION 3. Article 5.101, Insurance Code, is amended by
4-11 adding Section 6 to read as follows:
4-12 Sec. 6. JUDICIAL REVIEW STANDARD. Judicial review of an
4-13 order promulgating benchmark rates is under the substantial
4-14 evidence rule.
4-15 SECTION 4. Section 5, Article 21.81, Insurance Code, is
4-16 amended to read as follows:
4-17 Sec. 5. RATES FOR INSURANCE; HEARING. (a) [At least
4-18 annually, the commissioner shall conduct a hearing for the purpose
4-19 of determining appropriate rates to be charged for insurance
4-20 provided through the association. The association may appear as a
4-21 matter of right, shall be admitted as a party to present testimony
4-22 at the hearing, and may file information for consideration by the
4-23 commissioner.] The commissioner shall determine and prescribe
4-24 appropriate rates to be charged for insurance provided through the
4-25 association [rates] that are just, reasonable, adequate, not
4-26 excessive, not confiscatory, and not unfairly discriminatory for
4-27 the risks to which they apply. Rates shall be set in an amount
5-1 sufficient to carry all claims to maturity and to meet the expenses
5-2 incurred in the writing and servicing of the business. In making a
5-3 determination, the commissioner shall consider the reports of
5-4 aggregated premiums earned and losses and expenses incurred in the
5-5 writing of motor vehicle insurance through the plan collected under
5-6 the statistical plan provided for by Subsection (b) of this
5-7 section.
5-8 (b) The commissioner shall promulgate reasonable rules and
5-9 statistical plans to be used by each insurer in the recording and
5-10 reporting of its premium, loss, and expense experience which must
5-11 be reported separately for business assigned to it and other data
5-12 required by the commissioner.
5-13 (c) The association shall file annually with the department
5-14 for approval by the commissioner rates to be charged for insurance
5-15 provided through the association. The association may not make
5-16 such a filing more than once in any 12-month period. Subchapter B,
5-17 Chapter 40 of this code does not apply to:
5-18 (1) a filing made under this subsection;
5-19 (2) Subsections (d)-(h) of this section; or
5-20 (3) a department action with respect to such a filing.
5-21 (d) Before approving, disapproving, or modifying a filing
5-22 made under Subsection (c) of this section, the commissioner shall
5-23 provide all interested persons a reasonable opportunity to:
5-24 (1) review the filing;
5-25 (2) obtain copies of the filing on payment of any
5-26 legally required copying cost; and
5-27 (3) submit to the commissioner written comments,
6-1 analyses, or information related to the filing.
6-2 (e) Not later than the 45th day after the date on which the
6-3 department receives the filing required under Subsection (c) of
6-4 this section, the commissioner shall schedule a hearing at which
6-5 interested persons may present written or oral comments relating to
6-6 the filing. A hearing under this subsection is not a contested
6-7 case hearing under Chapter 2001, Government Code.
6-8 (f) The department shall file with the Texas Register notice
6-9 that a filing has been made under Subsection (c) of this section
6-10 not later than the seventh day after the date the filing is
6-11 received by the department. The notice must include information
6-12 relating to:
6-13 (1) the availability of the filing for public
6-14 inspection at the department during regular business hours and the
6-15 procedures for obtaining copies of the filing;
6-16 (2) procedures for making written comments related to
6-17 the filing; and
6-18 (3) the time, place, and date of the hearing scheduled
6-19 under Subsection (e) of this section.
6-20 (g) After the conclusion of the hearing, the commissioner
6-21 shall approve, disapprove, or modify the filing in writing. If the
6-22 commissioner disapproves a filing, the commissioner shall state in
6-23 writing the reasons for the disapproval and the criteria to be met
6-24 by the association to obtain approval. The association may file
6-25 with the commissioner, not later than the 10th day after the date
6-26 on which the association receives the commissioner's written
6-27 disapproval, an amended filing to comply with the commissioner's
7-1 comments.
7-2 (h) Before approving or disapproving an amended filing, the
7-3 commissioner shall provide all interested persons a reasonable
7-4 opportunity to review the amended filing, obtain copies of the
7-5 amended filing on payment of any legally required copying cost, and
7-6 submit to the commissioner written comments or information related
7-7 to the amended filing in the manner provided by Subsection (d) of
7-8 this section, and may hold a hearing not later than the 20th day
7-9 after the date on which the department receives the amended filing
7-10 in the manner provided by Subsection (e) of this section. Not
7-11 later than the 10th day after the date on which the hearing on the
7-12 amended filing is concluded, the commissioner shall approve or
7-13 disapprove the amended filing. Not later than the 30th day after
7-14 the date on which the amended filing is received by the department,
7-15 the commissioner shall disapprove the amended filing or it is
7-16 considered approved. The requirements adopted under Subsections
7-17 (f) and (g) of this section apply to a hearing conducted under this
7-18 subsection.
7-19 SECTION 5. Subchapter B, Chapter 40, Insurance Code, is
7-20 amended by adding Section 40.061 to read as follows:
7-21 Sec. 40.061. FLEXIBLE RATING PROGRAM. Notwithstanding
7-22 Sections 40.051-40.060, hearings for benchmark rates for all lines
7-23 of insurance subject to Article 5.101 of this code are conducted as
7-24 provided by Section 3(d) of that article.
7-25 SECTION 6. This Act applies only to premium rates for an
7-26 insurance policy delivered, issued for delivery, or renewed on or
7-27 after January 1, 2002. Rates for a policy delivered, issued for
8-1 delivery, or renewed before January 1, 2002, are governed by the
8-2 law as it existed immediately before the effective date of this
8-3 Act, and that law is continued in effect for that purpose.
8-4 SECTION 7. This Act takes effect September 1, 2001.