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.