Amend CSSB 14 as follows:
(1) In SECTION 1.01 of the bill, in the recital (page 1, line 8, house committee printing), strike "Subchapter Q" and substitute
"Subchapters Q and S".
(2) In SECTION 1.01 of the bill, in the heading to added
Article 5.142, Insurance Code (page 1, lines 10-11, house committee
printing), strike "PERSONAL AUTOMOBILE INSURANCE COVERAGE AND".
(3) In SECTION 1.01 of the bill, in Section 1(a) of added
Article 5.142, Insurance Code (page 1, line 13, house committee
printing), strike "personal automobile insurance and".
(4) In SECTION 1.01 of the bill, in Section 1(b)(1) of added
Article 5.142, Insurance Code (page 1, lines 16-17, house committee
printing), strike "personal automobile insurance rates and".
(5) In SECTION 1.01 of the bill, in Section 1(b)(2) of added
Article 5.142, Insurance Code (page 1, lines 20-21, house committee
printing), strike "personal automobile and".
(6) In SECTION 1.01 of the bill, strike Section 2(a)(5) of
added Article 5.142, Insurance Code (page 3, line 13 through page 4,
line 4, house committee printing), and substitute the following:
(5) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity authorized to write residential property
insurance in this state. The term includes an affiliate, as
described by this code, if that affiliate is authorized to write
residential property insurance. The term does not include:
(A) the Texas Windstorm Insurance Association
under Article 21.49 of this code;
(B) the FAIR Plan Association under Article
21.49A of this code; or
(C) an insurer that is not engaged in the
business of residential property insurance in this state before the
effective date of S.B. 14, Acts of the 78th Legislature, Regular
Session, 2003.
(7) In SECTION 1.01 of the bill, strike Section 2(a)(7) of
added Article 5.142, Insurance Code (page 4, lines 7-16, house
committee printing).
(8) In SECTION 1.01 of the bill, in Section 2(a)(9) of added
Article 5.142, Insurance Code (page 4, line 27, house committee
printing), strike "personal automobile insurance or".
(9) In SECTION 1.01 of the bill, in Section 2(a) of added
Article 5.142, renumber subdivisions appropriately.
(10) In SECTION 1.01 of the bill (page 20, line 11, through
page 23, line 7, house committee printing), strike Sections 3-7 of
added Article 5.143, Insurance Code, and substitute the following:
Sec. 3. REDUCED FILING. For an insurer with a market share
of less than five percent, the commissioner shall consider insurer
and market-specific attributes, as applicable, and shall
promulgate filing requirements for those insurers accordingly to
accommodate premium volume and loss experience, targeted markets,
limitations on coverage, and any potential barriers to market entry
or growth in the market.
(11) Renumber the Sections of added Article 5.143,
Insurance Code, appropriately.
(12) In SECTION 1.01 of the bill, following added Subchapter
Q, Chapter 5, Insurance Code (page 24, between lines 4 and 5, house
committee printing), insert:
SUBCHAPTER S. REFUND
Art. 5.146. REFUND OF EXCESSIVE OR DISCRIMINATORY PREMIUM;
DISCOUNT. (a) In this article:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, capital
stock company, county mutual insurance company, Lloyd's plan, or
other legal entity authorized to write residential property
insurance in this state. The term includes an affiliate, as
described by this code, if that affiliate is authorized to write
residential property insurance. The term does not include:
(A) the Texas Windstorm Insurance Association
under Article 21.49 of this code; or
(B) the FAIR Plan Association under Article
21.49A of this code.
(2) "Personal automobile insurance" means motor
vehicle insurance coverage for the ownership, maintenance, or use
of a private passenger, utility, or miscellaneous type motor
vehicle, including a motor home, trailer, or recreational vehicle,
that is:
(A) owned or leased by an individual or
individuals; and
(B) not primarily used for the delivery of goods,
materials, or services, other than for use in farm or ranch
operations.
(3) "Residential property insurance" means insurance
coverage against loss to real or tangible personal property at a
fixed location that is provided through a homeowners policy,
including a tenants policy, a condominium owners policy, or a
residential fire and allied lines policy.
(b) Except as provided by Subsection (d) of this article, if
the commissioner determines that an insurer has charged a rate for
personal automobile insurance or residential property insurance
that is excessive or discriminatory, as described by Article
5.13-2, 5.101, or 5.142 of this code, the commissioner may order the
insurer to:
(1) issue a refund of the excessive or discriminatory
portion of the premium directly to each affected policyholder if
the amount of that portion of the premium is at least 7.5 percent of
the total premium charged for the coverage; or
(2) provide each affected policyholder a future
premium discount in the amount of the excessive or discriminatory
portion of the premium if the amount of that portion of the premium
is less than 7.5 percent.
(c) On or before the 20th day after the date an order is
issued under this article, an insurer may request a rate hearing to
be conducted by the State Office of Administrative Hearings to
determine whether the rate that is subject to the order is excessive
and discriminatory. The office of public insurance counsel may
participate in a hearing conducted under this subsection and
present evidence at the hearings.
(d) After completion of the rate hearing under Subsection
(c) of this section, the administrative law judge shall prepare a
proposal for decision under Section 40.058 of this code and remand
the case to the commissioner recommending:
(1) that the commissioner affirm the commissioner's
order; or
(2) additional review of the order by the commissioner
to be completed not later than the 10th day after the date the
commissioner receives the administrative law judge's proposal,
that the parties enter into negotiations, or that the commissioner
take other appropriate action with respect to the order within a
time period specified by the administrative law judge.
(e) An action or failure to act of the commissioner under
Subsection (d) of this section is subject to appeal under
Subchapter D, Chapter 36, of this code.
(f) This article does not apply to rates for personal
automobile insurance or residential property insurance for which an
insurer has obtained prior approval of those rates under Section 5,
Article 5.142, or Section 5A, Article 5.13-2, of this code.
(g) This article does not apply to a rate subject to Section
12, Article 5.13-2, of this code. This subsection expires
September 1, 2003.
(13) In ARTICLE 1 of the bill, strike PART B of the bill
(page 24, lines 5-11, house committee printing) and substitute the
following:
PART B. RATES FOR CERTAIN PERSONAL AUTOMOBILE INSURANCE
SECTION 1.02. The heading to Article 5.101, Insurance Code,
is amended to read as follows:
Art. 5.101. FLEXIBLE RATING PROGRAM FOR PERSONAL AUTOMOBILE
[CERTAIN] INSURANCE [LINES]
SECTION 1.03. Section 1, Article 5.101, Insurance Code, is
amended to read as follows:
Sec. 1. [PURPOSE;] APPLICABILITY. (a) [The program on
flexible rating is designed to help stabilize the rates charged for
insurance in lines of property and casualty insurance covered by
Subchapters A and C of this chapter.
[(b)] This article applies only to personal automobile
insurance [does not apply to:
[(1) ocean marine insurance;
[(2) inland marine insurance;
[(3) fidelity, surety and guaranty bond insurance;
[(4) errors and omissions insurance;
[(5) directors' and officers' liability insurance;
[(6) general liability insurance;
[(7) commercial property insurance;
[(8) workers' compensation insurance;
[(9) professional liability insurance for physicians
and health care providers as defined in Article 5.15-1 of this code;
or
[(10) attorney's professional liability insurance].
(b) [(c)] Notwithstanding Subsection (a) of this section,
this article does not apply to premium rates for motor vehicle
insurance computed using a mile-based rating plan under Article
5.01-4 of this code.
SECTION 1.04. Section 3, Article 5.101, Insurance Code, is
amended by amending Subsection (e) and adding Subsection (r) to
read as follows:
(e) An insurer may use any rate by classification within the
flexibility band without prior approval by the commissioner. The
rate may not include expenses disallowed under Subsection (o) of
this section. Within 30 days of the effective date of the benchmark
rate for a particular line, each insurer which proposes to write
that line of insurance in this state during the effective period of
the benchmark rate shall file with the commissioner its proposed
rate by line, and by classification and territory under the rating
manual promulgated by the commissioner, unless the insurer has
obtained approval from the commissioner under Subsection (l) of
this section to use its own rating manual. The insurer shall
include in the filing any statistics to support the rates to be used
by the insurer as required by rule of the commissioner, including
information necessary to evidence that the calculation of the rate
does not include disallowed expenses. [Rates proposed in filings
made under this subsection must be just, reasonable, adequate and
not excessive for the risks to which they apply.] The rate takes
effect on the date specified by the insurer, but not later than the
60th day after the date of filing of the rate with the commissioner.
For the purpose of this section, the date the rate is received by
the commissioner is the date of filing. From and after the
effective date of the benchmark rate and prior to the insurer's
specified effective date of a new rate, the insurer's previously
filed rate shall remain in effect. Subject to the limitations
contained in Subsection (p) of this section and Section 3B of this
article, an insurer may continue to use its previously filed rates
or may make additional rate filings based on the previous benchmark
rate for new policies or policies renewing prior to the specified
effective date of its new rate.
(r) An insurer who writes insurance in a line subject to
this article is subject to the rating standards described by
Section 3A of this article.
SECTION 1.05. Article 5.101, Insurance Code, is amended by
adding Sections 3A, 3B, 3C, and 7 to read as follows:
Sec. 3A. RATING STANDARDS. (a) Rates used by insurers
subject to this article may not be excessive, inadequate,
unreasonable, or unfairly discriminatory for the risks to which
they apply.
(b) For purposes of this section, a rate is:
(1) excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided;
(2) inadequate if the rate is insufficient to sustain
projected losses and expenses to which the rate applies, and
continued use of the rate:
(A) endangers the solvency of an insurer using
the rate; or
(B) has the effect of substantially lessening
competition or creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) cannot be actuarially justified;
(B) does not bear a reasonable relationship to
the expected loss and expense experience among risks; or
(C) is based wholly or partly on the race, creed,
color, ethnicity, or national origin of the policyholder or an
insured.
Sec. 3B. CHANGE OF RATE WITHIN FLEXIBILITY BAND; REQUIRED
FILING. Notwithstanding Section 3(e) of this article, an insurer
who changes a rate used by the insurer that is established within
the flexibility band shall file the changed rate with the
department in the manner prescribed by rule by the commissioner.
Sec. 3C. REFUND. If the commissioner determines that rates
of an insurer do not comply with the rating standards established
under this article and are excessive or discriminatory, the
commissioner may order the insurer to make a refund in the manner
prescribed by Article 5.146 of this code.
Sec. 7. EXPIRATION. This article expires effective
September 1, 2004.
(14) In ARTICLE 2 of the bill (page 38, line 22, through page
39, line 1, house committee printing), strike SECTION 2.04 and
substitute the following:
SECTION 2.04. Articles 21.49-2U and 21.49-2V, Insurance
Code, as added by this article, apply only to an insurance policy
delivered, issued for delivery, or renewed on or after January 1,
2004. A policy delivered, issued for delivery, or renewed before
that date is governed by the law as it existed immediately before
January 1, 2004, and that law is continued in effect for that
purpose.
(15) In SECTION 3.07 of the bill, in added Section 12(e),
Article 5.13-2, Insurance Code (page 44, line 5, house committee
printing), between "by rule" and the period, insert "required as
provided by Subsection (b) of this section in connection with the
rating criteria".
(16) In SECTION 3.07 of the bill, in added Section 12(i),
Article 5.13-2, Insurance Code (page 45, line 2, house committee
printing), between "disapproval" and "of the rate", insert "or
reduction".
(17) In SECTION 3.07 of the bill, in added Section 12(i),
Article 5.13-2, Insurance Code (page 45, line 3, house committee
printing), between "disapproval" and "order", insert "or
reduction".
(18) In SECTION 3.07 of the bill, in added Section 12(n),
Article 5.13-2, Insurance Code (page 46, line 26, house committee
printing), strike "the policyholder" and substitute "a person who
is a policyholder at the time the refund is ordered".
(19) In SECTION 3.07 of the bill, in added Section 12(n),
Article 5.13-2, Insurance Code (page 47, line 1, house committee
printing), between "overcharge" and "plus", insert "that would have
otherwise been required to be refunded".
(20) In SECTION 3.07 of the bill, in added Section 12(n),
Article 5.13-2, Insurance Code (page 47, line 2, house committee
printing), between "percent" and the period, insert ", as a credit
to the next renewal policy premium".
(21) In SECTION 4.01 of the bill, in amended Article 5.13,
Insurance Code (page 50, line 26 through page 51, line 2, house
committee printing), strike the underlined language and substitute
the following:
code, except that Article 5.13-2 of this code shall apply to a
county mutual insurance company with respect to personal automobile
and commercial automobile insurance, residential and commercial
property insurance, and inland marine insurance
(22) In SECTION 4.01 of the bill, in amended Article 5.13,
Insurance Code (page 51, line 25, house committee printing), strike
"noncommercial".
(23) In SECTION 4.02 of the bill, in the amended heading to
Article 5.13-2, Insurance Code (page 52, line 17, house committee
printing), strike "COMMERCIAL INLAND MARINE" and substitute
"INLAND MARINE".
(24) In SECTION 4.03 of the bill, in amended Section 1,
Article 5.13-2, Insurance Code (page 52, lines 22-23, house
committee printing), strike "commercial inland marine" and
substitute "inland marine".
(25) In SECTION 4.03 of the bill, in amended Section 2,
Article 5.13-2, Insurance Code (page 53, lines 16-17, house
committee printing), strike "commercial inland marine" and
substitute "inland marine".
(26) In ARTICLE 4 of the bill, strike SECTION 4.04 of the
bill (page 53, line 22 through page 54, line 6, house committee
printing) and substitute the following:
SECTION 4.04. Section 3, Article 5.13-2, Insurance Code, is
amended to read as follows:
Sec. 3. DEFINITIONS. (a) In this article:
(1) "Disallowed expenses" includes:
(A) administrative expenses, not including
acquisition, loss control, and safety engineering expenses, that
exceed 110 percent of the industry median for those expenses;
(B) lobbying expenses;
(C) advertising expenses, other than for
advertising:
(i) directly related to the services or
products provided by the insurer; or
(ii) designed and directed at loss
prevention;
(D) amounts paid by an insurer:
(i) as damages in an action brought against
the insurer for bad faith, fraud, or any matters other than payment
under the insurance contract; or
(ii) as fees, fines, penalties, or
exemplary damages for a civil or criminal violation of law;
(E) contributions to:
(i) social, religious, political, or
fraternal organizations; or
(ii) organizations engaged in legislative
advocacy;
(F) except as authorized by rule by the
commissioner, fees and assessments paid to advisory organizations;
and
(G) any unreasonably incurred expenses, as
determined by the commissioner after notice and hearing.
(2) "Filer" means an insurer that files rates,
prospective loss costs, or supplementary rating information under
this article.
(3) [(2)] "Insurer" means an insurer to which Article
5.13 of this code applies, but does not include the Texas Windstorm
Insurance Association, the FAIR Plan Association, or the Texas
Automobile Insurance Plan Association. All provisions of this
article shall apply to Lloyd's plans, reciprocals and
interinsurance exchanges, and county mutual insurance companies
with respect to the lines of insurance described in Section 1 of
this article, except that [However,] the provisions of Sections 4,
5, 6, and 7 of this article shall not apply to Lloyd's or
reciprocals with respect to commercial property insurance.
(4) [(3)] "Prospective loss costs" means that portion
of a rate that does not include provisions for profit or expenses,
other than loss adjustment expenses, that is based on historical
aggregate losses and loss adjustment expenses projected by
development to their ultimate value and through trending to a
future point in time.
(5) [(4)] "Rate" means the cost of insurance per
exposure unit, whether expressed as a single number or as a
prospective loss cost, with an adjustment to account for the
treatment of expenses, profit, and individual insurer variation in
loss experience, before any application of individual risk
variations based on loss or expense considerations.
(6) "Rating manual" means a publication or schedule
that lists rules, classifications, territory codes and
descriptions, rates, premiums, and other similar information used
by an insurer to determine the applicable premium charged an
insured.
(7) "Residential property insurance" means insurance
coverage against loss to real or tangible personal property at a
fixed location that is provided through a homeowners policy,
including a tenants policy, a condominium owners policy, or a
residential fire and allied lines policy. [The term does not
include a minimum premium.]
(8) [(5)] "Supplementary rating information" means
any manual, rating schedule, plan of rules, rating rules,
classification systems, territory codes and descriptions, rating
plans, and other similar information used by the insurer to
determine the applicable premium for an insured. The term includes
factors and relativities, including [such as] increased limits
factors, classification relativities, deductible relativities,
premium discount, and other similar factors and rating plans such
as experience, schedule, and retrospective rating.
(9) [(6)] "Supporting information" means:
(A) the experience and judgment of the filer and
the experience or information of other insurers or advisory
organizations relied on by the filer;
(B) the interpretation of any other information
relied on by the filer;
(C) descriptions of methods used in making the
rates; and
(D) any other information required by the
department to be filed.
(b) For purposes of this article, a rate is:
(1) excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided;
(2) inadequate if the rate is insufficient to sustain
projected losses and expenses to which the rate applies, and
continued use of the rate:
(A) endangers the solvency of an insurer using
the rate; or
(B) has the effect of substantially lessening
competition or creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) cannot be actuarially justified;
(B) does not bear a reasonable relationship to
the expected loss and expense experience among risks; or
(C) is based wholly or partly on the race, creed,
color, ethnicity, or national origin of the policyholder or an
insured.
(27) In ARTICLE 4 of the bill, strike SECTIONS 4.05 and 4.06
(page 54, lines 7-18, house committee printing) and substitute the
following:
SECTION 4.05. Section 4, Article 5.13-2, Insurance Code, is
amended by amending Subsections (b) and (d) and adding Subsection
(f) to read as follows:
(b) In setting rates, an insurer shall consider:
(1) past and prospective loss experience inside this
state, and outside this state if the state data are not credible;
(2) the peculiar hazards and experiences of individual
risks, past and prospective, inside and outside this state;
(3) the insurer's actuarially credible historical
premium, exposure, loss, and expense experience;
(4) [any applicable] catastrophe hazards within this
state;
(5) operating [(3) operation] expenses, excluding
disallowed expenses;
(6) [(4)] investment income;
(7) [(5)] a reasonable margin for profit [and
contingencies]; and
(8) [(6)] any other [relevant] factors inside and
outside this state determined to be relevant by the insurer and not
disallowed by the commissioner.
(d) Rates established under this article may not be
excessive, inadequate, unreasonable, or unfairly discriminatory
for the risks to which they apply [and may not be unreasonable].
(f) In determining a rating territory, an insurer shall use
methods based on actuarially sound principles.
SECTION 4.06. Section 5, Article 5.13-2, Insurance Code, is
amended by amending Subsection (a) and adding Subsections (a-1) and
(a-2) to read as follows:
(a) Except as provided by Section 5A of this article, each
[Each] insurer shall file with the commissioner all rates,
applicable rating manuals, supplementary rating information, and
additional [reasonable and pertinent supporting] information as
required by the commissioner for risks written in this state.
(a-1) The commissioner by rule shall determine the
information required to be provided in the filing, including:
(1) the categories of supporting information;
(2) the categories of supplementary rating
information;
(3) any statistics or other information to support the
rates to be used by the insurer, including information necessary to
evidence that the computation of the rate does not include
disallowed expenses; and
(4) information concerning policy fees, service fees,
and other fees that are charged or collected by the insurer under
Article 21.35A or 21.35B of this code.
(a-2) For an insurer with less than five percent of the
market, the commissioner shall consider insurer and
market-specific attributes, as applicable, and shall promulgate
filing requirements accordingly to accommodate premium volume and
loss experience, targeted markets, limitations on coverage, and any
potential barriers to market entry or growth.
SECTION 4.07. Article 5.13-2, Insurance Code, is amended by
adding Sections 5A and 8A to read as follows:
Sec. 5A. PRIOR APPROVAL REQUIRED FOR CERTAIN INSURERS. (a)
The commissioner by order may require an insurer to file with the
commissioner all rates, supplementary rate information, and any
supporting information as prescribed by this section if the
commissioner determines that:
(1) an insurer's rates require supervision because of
the insurer's financial condition;
(2) an insurer's rates require supervision because of
the insurer's rating practices; or
(3) a statewide insurance emergency exists.
(b) Except as provided by Subsection (k) of this section, an
insurer may not use a rate until the rate has been filed with the
department and approved by the commissioner as provided by this
section. For purposes of this section, a rate is filed with the
department on the date the rate filing is received by the
department.
(c) Not later than the 30th day after the date the rate is
filed with the department, the commissioner shall:
(1) approve the rate if the commissioner determines
that the rate complies with the requirements of this article; or
(2) disapprove the rate if the commissioner determines
that the rate does not comply with the requirements of this article.
(d) Except as provided by Subsection (f) of this section, if
the rate has not been approved or disapproved by the commissioner
before the expiration of the 30-day period described by Subsection
(c) of this section, the rate is considered approved and the insurer
may use the rate unless the rate proposed in the filing represents
an increase of 12.5 percent or more from the insurer's prior filed
rate.
(e) The commissioner and the insurer may not by agreement
extend the 30-day period described by Subsection (c) of this
section.
(f) For good cause, the commissioner may extend the period
for approval or disapproval of a rate for one additional 30-day
period on the expiration of the 30-day period described by
Subsection (c) of this section.
(g) If the department determines that the information filed
by the insurer under this article is incomplete or otherwise
deficient, the department, not later than the 10th day after the
date the insurer files the rate with the department, may request
additional information from the insurer. If the department
requests additional information from the insurer during the first
30-day review period provided under Subsection (c) of this section
or under the second 30-day review period provided under Subsection
(f) of this section, the period of time between the date of the
department's submission of the request for additional information
to the insurer and the date of the receipt of the additional
information by the department from the insurer is not counted to
determine what constitutes the first 30-day review period or the
second 30-day review period. For purposes of this subsection, the
date of the department's submission of the request for additional
information is the date of the electronic mailing or telephone call
or the postmarked date on the department's letter relating to the
request for additional information.
(h) The commissioner shall approve the rate filing if the
proposed rate is adequate, not excessive, and not unfairly
discriminatory.
(i) If the commissioner approves a rate filing, the
commissioner shall provide written or electronic notification of
the approval to the insurer. On receipt of the notice of the
commissioner's approval of a rate, the insurer may use the rate.
(j) From the date of the filing of the rate with the
department to the effective date of the new rate, the insurer's
previously filed rate that is in effect on the date of the filing
remains in effect.
(k) After approval of a rate filing under this section, an
insurer may use any rate subsequently filed by the insurer, without
prior approval of the commissioner, if the subsequently filed rate
does not exceed the lesser of 107.5 percent of the rate approved by
the commissioner or 110 percent of any rate used by the insurer
within the previous 12-month period. Filed rates under this
subsection take effect on the date specified by the insurer.
(l) If the commissioner disapproves a rate filing under
Subsection (c)(2) of this section, the commissioner shall issue an
order in the manner prescribed by Section 7(b) of this article. The
insurer is entitled to a hearing in accordance with Section 7(b) of
this article.
(m) The commissioner may require an insurer to file the
insurer's rates under this section until the commissioner
determines that the conditions described by Subsection (a) of this
section no longer exist.
Sec. 8A. INLAND MARINE FORMS AND RATES. The commissioner
shall adopt rules governing the manner in which forms and rates for
classifications of risks for inland marine insurance, as determined
by the commissioner, are regulated.
(28) Renumber current SECTIONS 3.09, 3.10, and 3.11 of the
bill, adding Sections 13, 14, and 15, Article 5.13-2, Insurance
Code (page 47, line 15 through page 50, line 13, house committee
printing), as SECTIONS 4.08, 4.09, and 4.10 of the bill, and
renumber the SECTIONS of ARTICLE 3 of the bill appropriately.
(29) In renumbered SECTION 4.08 of the bill, in added
Section 13(c), Article 5.13-2, Insurance Code (page 48, line 12,
house committee printing), after "in this state.", insert "After
the effective date of S.B. 14, Acts of the 78th Legislature, Regular
Session, 2003, and before the first annual adjustment by the
commissioner, the commissioner may adjust the computation of the
rate index under this section as the commissioner determines
necessary."
(30) In renumbered SECTION 4.08 of the bill, in added
Section 13(f), Article 5.13-2, Insurance Code (page 48, line 22,
house committee printing), between "insurance" and "at nonstandard
rates", strike "polices" and insert "policies only".
(31) In renumbered SECTION 4.08 of the bill, in added
Section 13(f), Article 5.13-2, Insurance Code (page 48, line 25,
house committee printing), following the period, insert: "In
setting rates, an insurance company subject to this subsection must
comply with the rating standards established by this article. Not
later than the first day on which any change in the rates becomes
effective, the company shall for informational purposes file the
rates and any additional information required by the department.
The commissioner by rule shall determine the information required
to be provided in the filing under this subsection. The
commissioner may inspect the books and records of the company at any
time to ensure compliance with the rating standards. An insurance
company described by this subsection is subject to Article 5.146 of
this code. A county mutual insurance company not described by this
section is subject to Article 21.81 of this code and is required to
comply with the filing requirements of this article and Article
5.142 of this code and any other provision of this code applicable
to a county mutual insurance company."
(32) In renumbered SECTION 4.08 of the bill, in the first
sentence of added Section 13(h), Article 5.13-2, Insurance Code
(page 49, lines 5-6, house committee printing), strike "have served
or are serving" and substitute "have served exclusively or are
serving exclusively".
(33) In renumbered SECTION 4.08 of the bill, in the first
sentence of added Section 13(h), Article 5.13-2, Insurance Code
(page 49, line 6, house committee printing), between "market" and
the period, insert "and meet capitalization and solvency
requirements set by the commissioner".
(34) In renumbered SECTION 4.08 of the bill, in the second
sentence of added Section 13(h), Article 5.13-2, Insurance Code
(page 49, lines 7-8, house committee printing), strike "as having
served or serving the nonstandard market" and substitute "under
this subsection".
(35) In renumbered SECTION 4.08 of the bill, in added
Section 13, Article 5.13-2, Insurance Code (page 49, between lines
8 and 9, house committee printing), insert new Subsections (i) and
(j) to read as follows:
(i) Notwithstanding Article 17.02 or Section 912.004 or
912.102 of this code, the commissioner may issue a new charter to a
county mutual insurance company to write insurance coverage
exclusively in a nonstandard market as necessary to provide:
(1) adequate capacity in that market; and
(2) reasonably affordable insurance in that market.
(j) The commissioner may adopt rules as necessary to
implement this section.
(36) In renumbered SECTION 4.10 of the bill, in added
Section 15, Article 5.13-2, Insurance Code (page 49, line 17, house
committee printing), strike "PREMIUM CHARGES" and substitute "RATE
INCREASE".
(37) In ARTICLE 4 of the bill (page 54, between lines 17 and
18) insert new SECTIONS 4.11, 4.12, and 4.13 to read as follows:
SECTION 4.11. Article 5.13-2, Insurance Code, is amended by
adding Sections 16 and 17 to read as follows:
Sec. 16. RIGHTS OF PUBLIC INSURANCE COUNSEL. (a) On
request to the commissioner, the public insurance counsel may
review all rate filings and additional information provided by an
insurer under this article. Confidential information reviewed
under this subsection remains confidential.
(b) The public insurance counsel, not later than the 30th
day after the date of a rate filing under this article, may object
to an insurer's rate filing or the criteria relied on by the insurer
to determine the rate by filing a written objection with the
commissioner. The written objection must contain the reasons for
the objection.
Sec. 17. ADVISORY ORGANIZATIONS. (a) An advisory
organization may file with the commissioner for use by insurers
loss and loss adjustment expense information. An insurer that
subscribes to the advisory organization may use information filed
under this subsection after the information is approved by the
commissioner.
(b) An advisory organization may not publish rates for
insurance subject to this article.
SECTION 4.12. A county mutual insurance company required to
make informational rate filings under Section 13(f), Article
5.13-2, Insurance Code, as added by this Act, shall make an initial
informational rate filing, as required by the commissioner, not
later than the 30th day after the effective date of this article.
SECTION 4.13. This article takes effect September 1, 2004,
except that Sections 13, 14, and 15, Article 5.13-2, Insurance
Code, as added by this article, take effect on the effective date of
this Act.
(38) In SECTION 7.01, in added Section 6(b)(1), Article
21.21-6, Insurance Code, strike "and the same risk" (page 60, line
22, house committee printing), and substitute ", other than for the
classifications applicable alike to persons of every race, color,
religion, ethnicity, or national origin".
(39) In SECTION 7.01, in added Section 6(b)(2), Article
21.21-6, Insurance Code, strike "and the same risk" (page 60, line
26, house committee printing), and substitute ", other than a rate
reflecting the classifications applicable alike to persons of every
race, color, religion, ethnicity, or national origin".
(40) In SECTION 8.05 of the bill, in added Section 15,
Article 21.49A, Insurance Code (page 68, line 22), between
"association" and "may not be distributed", insert "shall be used
to mitigate losses, including the purchase of reinsurance and the
offset of future assessments, and".
(41) In SECTION 9.01 of the bill, strike amended Article
5.01(f), Insurance Code (page 69, lines 5-14, house committee
printing), and substitute the following:
(f) Notwithstanding Subsections (a) through (d) of this
article, on and after the effective date of S.B. 14, Acts of the
78th Legislature, Regular Session, 2003 [March 1, 1992], rates for
personal automobile insurance in this state are determined as
provided by Article 5.101 of this code, and rates for commercial
motor vehicle insurance in this state are determined as provided by
Article 5.13-2 [the flexible rating program adopted under
Subchapter M] of this code [chapter]. On and after September 1,
2004, rates for personal automobile insurance and commercial
automobile insurance in this state are determined as provided by
Article 5.13-2 of this code.
(42) In SECTION 9.03 of the bill, strike amended Article
5.01-2(b), Insurance Code (page 69, line 24 through page 70, line 3,
house committee printing), and substitute the following:
(b) On and after the effective date of S.B. 14, Acts of the
78th Legislature, Regular Session, 2003 [March 1, 1992], rates for
personal automobile [motor vehicle] insurance written by a Lloyd's
plan insurer or a reciprocal or interinsurance exchange are
determined as provided by the flexible rating program adopted under
Subchapter M of this chapter. This subsection expires September 1,
2004.
(43) In SECTION 9.04 of the bill, in amended Section 4(a),
Article 5.01-4, Insurance Code (page 70, line 8, house committee
printing), strike "Subchapter Q [M] of this chapter" and substitute
"Subchapter M of this chapter".
(44) In SECTION 9.04 of the bill, in amended Section 4(b),
Article 5.01-4, Insurance Code (page 70, line 15, house committee
printing), strike "Subchapter Q [M] of this chapter" and substitute
"Subchapter M of this chapter".
(45) In SECTION 9.05 of the bill, strike amended Article
5.03(g), Insurance Code (page 70, line 19 through page 71, line 1,
house committee printing), and substitute the following:
(g) Notwithstanding Sections (a) through (e) of this
article, on and after the effective date of S.B. 14, Acts of the
78th Legislature, Regular Session, 2003 [March 1, 1992], rates for
personal automobile insurance in this state are determined as
provided by Article 5.101 of this code, and rates for commercial
motor vehicle insurance in this state [vehicles] are determined as
provided by Article 5.13-2 [Subchapter M] of this code [chapter].
On and after September 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
(46) In SECTION 9.06 of the bill, strike amended Article
5.04(c), Insurance Code (page 71, lines 4-13, house committee
printing), and substitute the following:
(c) Notwithstanding Subsections (a) and (b) of this
article, on and after the effective date of S.B. 14, Acts of the
78th Legislature, Regular Session, 2003 [March 1, 1992], rates for
personal automobile insurance in this state are determined as
provided by Article 5.101 of this code, and rates for commercial
motor vehicle insurance in this state [vehicles] are determined as
provided by Article 5.13-2 [Subchapter M] of this code [chapter].
On and after September 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
(47) In SECTION 9.07 of the bill, in added Subsection
(12)(a), Article 5.06, Insurance Code (page 71, line 17, house
committee printing), strike "personal".
(48) In SECTION 9.10 of the bill, strike amended Article
5.09(c), Insurance Code (page 74, lines 1-10, house committee
printing), and substitute the following:
(c) Notwithstanding Subsection (a) of this article, on and
after the effective date of S.B. 14, Acts of the 78th Legislature,
Regular Session, 2003 [March 1, 1992], rates for personal
automobile insurance in this state are determined as provided by
Article 5.101 of this code, and rates for commercial motor vehicle
insurance in this state [vehicles] are determined as provided by
Article 5.13-2 [Subchapter M] of this code [chapter]. On and after
September 1, 2004, rates for personal automobile insurance and
commercial automobile insurance in this state are determined as
provided by Article 5.13-2 of this code.
(49) In SECTION 9.11 of the bill, strike amended Article
5.11(c), Insurance Code (page 74, lines 13-22, house committee
printing), and substitute the following:
(c) Notwithstanding Subsections (a) and (b) of this
article, on and after the effective date of S.B. 14, Acts of the
78th Legislature, Regular Session, 2003 [March 1, 1992], rates for
personal automobile insurance in this state are determined as
provided by Article 5.101 of this code, and rates for commercial
motor vehicle insurance in this state [vehicles] are determined as
provided by Article 5.13-2 [Subchapter M] of this code [chapter].
On and after September 1, 2004, rates for personal automobile
insurance and commercial automobile insurance in this state are
determined as provided by Article 5.13-2 of this code.
(50) In SECTION 9.28 of the bill, in amended Article
5.53(g), Insurance Code (page 84, lines 21-26, house committee
printing), strike the underlined language and substitute the
following:
On and after September 1, 2004, rates for inland marine insurance
are determined as provided by Article 5.13-2 of this code.
Notwithstanding any other provision in this article, policy forms
and endorsements for inland marine insurance are regulated under
Article 5.13-2 of this code. An insurer may continue to use policy
forms and endorsements approved by the commissioner under this
article on or before the effective date of S.B. 14, Acts of the 78th
Legislature, Regular Session, 2003.
(51) In SECTION 9.29 of the bill, strike amended Article
5.96(a-1), Insurance Code (page 85, lines 4-9, house committee
printing), and substitute the following:
(a-1) This [Except as provided by Section 5(d), Article
5.101, of this code, this] article does not apply to the setting of
[benchmark] rates for personal automobile [motor vehicle]
insurance under Article 5.101 of this code, rates for [and] fire and
allied lines insurance under Subchapter Q [M] of this chapter or, on
and after September 1, 2004, rates for personal automobile
insurance and fire and allied lines insurance under Article 5.13-2
of this code.
(52) In SECTION 9.31(a) of the bill, strike added Section
912.002(c), Insurance Code (page 85, line 24 through page 86, line
7, house committee printing), and substitute the following:
(c) Rate regulation for a residential fire and allied lines
insurance policy written by a county mutual insurance company is
subject to Subchapter Q, Chapter 5. On and after September 1, 2004,
rate regulation for a personal automobile insurance policy and a
residential fire and allied lines insurance policy written by a
county mutual insurance company is subject to Article 5.13-2. A
county mutual insurance company is subject to Subchapter O, Chapter
5. The commissioner may adopt rules as necessary to implement this
subsection.
(53) In SECTION 9.31(b) of the bill, strike amended Article
17.22(b), Insurance Code (page 86, lines 10-19, house committee
printing), and substitute the following:
(b) Rate regulation for a residential fire and allied lines
insurance policy written by a county mutual insurance company is
subject to Subchapters O and Q, Chapter 5, of this code. The
commissioner may adopt rules as necessary to implement this
subsection. The flexible rating program created under Subchapter
M, Chapter 5, of this code does not apply to county mutual insurance
companies. This subsection expires June 1, 2003.
(54) In SECTION 9.33(a) of the bill, strike amended Section
941.003(b), Insurance Code (page 87, lines 12-21, house committee
printing), and substitute the following:
(b) A Lloyd's plan is subject to:
(1) Section 5, Article 1.10;
(2) Article 1.15A;
(3) Subchapters [Subchapter] A, O, Q, R, and S,
Chapter 5;
(4) Articles 5.35, 5.38, 5.39, 5.40, and 5.49;
(5) Articles 21.21 and 21.49-8; [and]
(6) Sections 822.203, 822.205, 822.210, and 822.212;
and
(7) Article 5.13-2, as provided by that article.
(55) In SECTION 9.33(b) of the bill, strike added Article
18.23(c), Insurance Code (page 87, line 24 through page 88, line 4,
house committee printing), and substitute the following:
(c) Rate regulation for a personal automobile insurance
policy written by a Lloyd's plan is subject to Subchapter M, Chapter
5, of this code. Rate regulation for a homeowners or residential
fire and allied lines insurance policy written by a Lloyd's plan is
subject to Subchapter Q, Chapter 5, of this code. The commissioner
may adopt rules as necessary to implement this subsection. A
Lloyd's plan is subject to Subchapter O, Chapter 5, of this code.
This subsection expires June 1, 2003.
(56) In SECTION 9.34(a) of the bill, strike amended Section
942.003(b), Insurance Code (page 88, lines 7-16, house committee
printing), and substitute the following:
(b) An exchange is subject to:
(1) Section 5, Article 1.10;
(2) Articles 1.15, 1.15A, and 1.16;
(3) Subchapters [Subchapter] A, O, Q, R, and S,
Chapter 5;
(4) Articles 5.35, 5.37, 5.38, 5.39, and 5.40;
(5) Articles 21.21 and 21.49-8; [and]
(6) Sections 822.203, 822.205, 822.210, 822.212,
861.254(a)-(f), 861.255, 862.001(b), and 862.003; and
(7) Article 5.13-2, as provided by that article.
(57) In SECTION 9.34(b) of the bill, strike added Article
19.12(c), Insurance Code (page 88, lines 19-27, house committee
printing), and substitute the following:
(c) Rate regulation for a personal automobile insurance
policy written by a reciprocal or interinsurance exchange is
subject to Subchapter M, Chapter 5, of this code. Rate regulation
for a homeowners or residential fire and allied lines insurance
policy written by a reciprocal or interinsurance exchange is
subject to Subchapter Q, Chapter 5, of this code. The commissioner
may adopt rules as necessary to implement this subsection. A
reciprocal or interinsurance exchange is subject to Subchapter O,
Chapter 5, of this code. This subsection expires June 1, 2003.
(58) Strike SECTION 9.37 of the bill (page 89, lines 11-23,
house committee printing), and substitute the following:
SECTION 9.37. (a) On the effective date of this Act, the
following laws are repealed:
(1) Articles 5.03-2, 5.03-3, 5.03-4, and 5.03-5,
Insurance Code;
(2) Articles 5.26(h), 5.33A, 5.33C, 5.50, and 40.061,
Insurance Code;
(3) Section 5(b), Article 5.13-2, Insurance Code;
(4) Section 4C, Article 5.73, Insurance Code; and
(5) Article 5.33B, Insurance Code, as added by Chapter
337, Acts of the 74th Legislature, Regular Session, 1995.
(b) Effective September 1, 2004, Sections 941.003(c) and
942.003(c), Insurance Code, are repealed.
(59) In ARTICLE 9 of the bill, insert the following
appropriately numbered new SECTIONS and renumber ARTICLE 9 of the
bill appropriately:
SECTION 9.__. (a) Effective June 1, 2003, Section 912.201,
Insurance Code, is amended to read as follows:
Sec. 912.201. SCHEDULE OF CHARGES. A county mutual
insurance company shall file with the department a schedule of the
amounts the company charges a policyholder or an applicant for a
policy, regardless of the term the company uses to refer to those
charges, including "rate," "policy fee," "inspection fee,"
"membership fee," or "initial charge." An insurer shall file the
schedules required under this section according to rules
promulgated by the commissioner.
(b) Until June 1, 2003, Section 6, Article 17.25, Insurance
Code, is amended to read as follows:
Sec. 6. FILE SCHEDULE OF CHARGES. Such companies shall file
with the Board a schedule of its rates, the amount of policy fee,
inspection fee, membership fee, or initial charge by whatever name
called, to be charged its policyholders or those applying for
policies. Items required under this section shall be filed
according to rules promulgated by the commissioner.
SECTION 9.__. Section 1(2), Article 21.81, Insurance Code,
is amended to read as follows:
(2) "Authorized insurer" means any insurer authorized
by the Texas Department of Insurance to write motor vehicle
liability coverage under the provisions of Chapter 5 of this code.
Except as provided by Section 13(f), Article 5.13-2, of this code,
the [The] term does not include an insurer organized under Chapter
17 of this code.
(60) Insert the following new ARTICLE, appropriately
numbered, and renumber the ARTICLES of the bill accordingly:
ARTICLE __. INFORMATIONAL RATE FILINGS
FOR CERTAIN COMPANIES
SECTION ____. Chapter 911, Insurance Code, as effective
June 1, 2003, is amended by adding Subchapter H to read as follows:
SUBCHAPTER H. INFORMATIONAL RATE FILINGS
FOR RESIDENTIAL PROPERTY INSURANCE
Sec. 911.351. APPLICABILITY. This subchapter applies only
to the regulation of rates for residential property insurance
issued by a farm mutual insurance company.
Sec. 911.352. DEFINITION. In this subchapter, "residential
property insurance" means insurance coverage against loss to real
or tangible personal property at a fixed location that is provided
through a residential fire and allied lines policy.
Sec. 911.353. INFORMATIONAL RATE FILINGS. A farm mutual
insurance company shall file with the department, for informational
purposes only, all rates and additional information as required by
the commissioner for residential property insurance risks written
in this state.
Sec. 911.354. RATING STANDARDS. (a) Rates established by a
farm mutual insurance company for residential property insurance
may not be excessive, inadequate, unreasonable, or unfairly
discriminatory for the risks to which they apply.
(b) For purposes of this subchapter, a rate is:
(1) excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided;
(2) inadequate if the rate is insufficient to sustain
projected losses and expenses to which the rate applies, and
continued use of the rate:
(A) endangers the solvency of a company using the
rate; or
(B) has the effect of substantially lessening
competition or creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) cannot be actuarially justified;
(B) does not bear a reasonable relationship to
the expected loss and expense experience among risks; or
(C) is based in whole or in part on the race,
creed, color, ethnicity, or national origin of the policyholder or
an insured.
SECTION ____. Chapter 912, Insurance Code, as effective
June 1, 2003, is amended by adding Subchapter H to read as follows:
SUBCHAPTER H. INFORMATIONAL RATE FILINGS
FOR PERSONAL AUTOMOBILE INSURANCE
Sec. 912.351. APPLICABILITY. This subchapter applies only
to the regulation of rates for personal automobile insurance issued
by a county mutual insurance company.
Sec. 912.352. DEFINITION. In this subchapter, "personal
automobile insurance" means motor vehicle insurance coverage for
the ownership, maintenance, or use of a private passenger, utility,
or miscellaneous type motor vehicle, including a motor home,
trailer, or recreational vehicle, that is:
(1) owned or leased by an individual or individuals;
and
(2) not primarily used for the delivery of goods,
materials, or services, other than for use in farm or ranch
operations.
Sec. 912.353. INFORMATIONAL RATE FILINGS. A county mutual
insurance company shall file with the department, for informational
purposes only, all rates and additional information as required by
the commissioner for personal automobile insurance risks written in
this state.
Sec. 912.354. RATING STANDARDS. (a) Rates established by a
county mutual insurance company for personal automobile insurance
may not be excessive, inadequate, unreasonable, or unfairly
discriminatory for the risks to which they apply.
(b) For purposes of this subchapter, a rate is:
(1) excessive if the rate is likely to produce a
long-term profit that is unreasonably high in relation to the
insurance coverage provided;
(2) inadequate if the rate is insufficient to sustain
projected losses and expenses to which the rate applies, and
continued use of the rate:
(A) endangers the solvency of a company using the
rate; or
(B) has the effect of substantially lessening
competition or creating a monopoly within any market; or
(3) unfairly discriminatory if the rate:
(A) cannot be actuarially justified;
(B) does not bear a reasonable relationship to
the expected loss and expense experience among risks; or
(C) is based in whole or in part on the race,
creed, color, ethnicity, or national origin of the policyholder or
an insured.
Sec. 912.355. REFUND OF EXCESSIVE OR DISCRIMINATORY
PREMIUM; DISCOUNT. A county mutual insurance company required to
make informational rate filings under this subchapter is, with
regard to the rates required to be filed, subject to Article 5.146.
Sec. 912.356. EXPIRATION. This subchapter expires
September 1, 2004.
SECTION ____. A farm mutual insurance company required to
make informational rate filings under Subchapter H, Chapter 911,
Insurance Code, as added by this Act, shall make an initial
informational rate filing as required by the commissioner not later
than the 30th day after the effective date of this Act.
SECTION ____. (a) A county mutual insurance company
required to make informational rate filings under Subchapter H,
Chapter 912, Insurance Code, as added by this Act, shall make an
initial informational rate filing as required by the commissioner
not later than the 30th day after the effective date of this Act.
(b) The expiration of Subchapter H, Chapter 912, Insurance
Code, as added by this Act, does not affect an action or proceeding
against a county mutual insurance company subject to that law for a
failure to comply with that law before its expiration, regardless
of when the action or proceeding was commenced, and that law is
continued in effect for this purpose.
SECTION ____. This article takes effect June 1, 2003.