LEGISLATIVE BUDGET BOARD
Austin, Texas
FISCAL NOTE, 77th Regular Session
February 8, 2001
TO: Honorable John T. Smithee, Chair, House Committee on
Insurance
FROM: John Keel, Director, Legislative Budget Board
IN RE: HB304 by Burnam (Relating to the application of the
flexible rating system to insurance written by county
mutual insurance companies, Lloyd's associations, and
reciprocal or interinsurance exchanges.), As Introduced
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* Estimated Two-year Net Impact to General Revenue Related Funds for *
* HB304, As Introduced: positive impact of $0 through the biennium *
* ending August 31, 2003. *
* *
* The bill would make no appropriation but could provide the legal *
* basis for an appropriation of funds to implement the provisions of *
* the bill. *
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General Revenue-Related Funds, Five-Year Impact:
****************************************************
* Fiscal Year Probable Net Positive/(Negative) *
* Impact to General Revenue Related *
* Funds *
* 2002 $0 *
* 2003 0 *
* 2004 0 *
* 2005 0 *
* 2006 0 *
****************************************************
All Funds, Five-Year Impact:
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*Fiscal Probable Probable Revenue Change in Number of *
* Year Savings/(Cost) from Gain/(Loss) from State Employees from *
* Texas Department of Texas Department of FY 2001 *
* Insurance Operating Insurance Operating *
* Fund Account/ Fund Account/ *
* GR-Dedicated GR-Dedicated *
* 0036 0036 *
* 2002 $(275,336) $275,336 2.3 *
* 2003 (294,013) 294,013 3.0 *
* 2004 (294,013) 294,013 3.0 *
* 2005 (294,013) 294,013 3.0 *
* 2006 (294,013) 294,013 3.0 *
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Technology Impact
The Department of Insurance would need three additional computers and
software at a cost of $10,796.
Fiscal Analysis
The bill would amend Article 5.101 of the Insurance Code by adding
Section 6 which would make county mutuals, Lloyd's, reciprocal and
interinsurance exchange insurance companies subject to the benchmark
rate system. The provisions would require the Commissioner of Insurance
to establish separate benchmark rates for county mutuals based only on
the experience of county mutuals. The bill allows a county mutual to
use multiple rating tiers or rating programs within the company as long
as a separate rate filing is made for each rating tier or program.
Methodology
The Texas Department of Insurance (TDI) estimates that it would require
three additional full-time equivalent (FTEs) positions. TDI would review
800 additional auto rate and residential property filings combined,
submitted for review. It would require the agency to handle the increase
in auto and residential property statistical plan data submissions. The
passage of the bill would result in one additional rate hearing per year
to set benchmark rates for county mutual companies. It is anticipated
that TDI would be involved in four more contested case hearings involving
individual rate filing, form filings, market conduct, solvency or other
regulatory matters. This would require the hiring of expert witnesses
for consultation during the hearing process and for filings overview.
It is assumed that TDI would adjust its rate of fees and/or assessments
to cover the costs of implementing the provisions of the bill.
The effective date of the bill is September 1, 2001.
Local Government Impact
No fiscal implication to units of local government is anticipated.
Source Agencies: 454 Texas Department of Insurance
LBB Staff: JK, JO, RT, DE