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Amend CSSB 14 by striking Section 2.02 (on page 35, line 22
through page 38, line 16) and substituting the following:
SECTION 2.02. Subchapter E, Chapter 21, Insurance Code, is
amended by adding Article 21.49-2V to read as follows:
Article 21.49-2V. Regulation of Underwriting Guidelines.
Sec. 1. DEFINITIONS. In this article:
(1) "Actuarially sound" means the underwriting
guideline is shown to differentiate among consumers who have
different expected costs associated with the transfer of risk, all
other relevant factors being the same. The burden of proof in any
proceeding regarding whether an underwriting guideline is
actuarially sound shall be on the party that used or intends to use
the underwriting guideline to show that the underwriting guideline
is actuarially sound.
(2) "Credit scoring" and "insurance scoring" mean an
underwriting guideline based in whole or in part on information
related to an individual's credit, credit worthiness, credit
standing, credit capacity, credit history, payment habits, or
financial responsibility.
(3) "Person" means any individual, insurance company,
reciprocal or interinsurance exchange, mutual, farm mutual
insurance company, capital stock company, fraternal benefit
society, local mutual aid association, county mutual insurance
company, association, Lloyd's plan company, farm mutual company,
and any other legal entity engaged in the business of insurance,
including agents.
(4) "Personal automobile insurance" means an
automobile insurance policy providing insurance coverages for the
ownership, maintenance, or use of private passenger, utility, and
miscellaneous type motor vehicles and trailers including mobile
homes and recreational trailers, and not primarily used for the
delivery of goods, materials, or services, unless such use is in
farm or ranch operations and provided that such vehicles are owned
or leased by an individual or individuals.
(5) "Residential property insurance" means insurance
against loss to real or tangible personal property at a fixed
location provided in a homeowners policy, a tenant policy, a
condominium owners policy, or a residential fire and allied lines
policy.
(6) "Underwriting guideline" means a rule, standard,
marketing decision, guideline, or practice, whether written, oral
or electronic, used by an insurer or its agent to examine, bind,
accept, reject, renew, nonrenew, cancel, or limit coverages made
available to classes of consumers or individual consumers.
Sec. 2. PROHIBITION. No person shall use an underwriting
guideline for personal automobile insurance or residential
property insurance, other than underwriting guidelines covered in
section 3 of this article, without the prior approval of the
commissioner. If the commissioner has not issued an order
approving the filing within 30 days after the filing of the
application, the insurer may request a hearing on the application,
to be held at the State Office of Administrative Hearings under
Government Code Chapter 2001. The burden of proof in any such
hearing shall be on the insurer. The hearings examiner must issue a
proposal for decision within 30 days after the filing of the request
for a hearing. The hearings examiner's proposed order shall be
final unless the commissioner issues a different order within 15
days after the commissioner receives the proposed order.
Sec. 3. PERMISSIBLE UNDERWRITING GUIDELINES. An insurer is
not required to obtain the commissioner's approval to use an
underwriting guideline that complies with paragraph (1), (2), or
(3) of this section:
(1) Underwriting guidelines for personal automobile
insurance that are based on the following characteristics:
(A) average miles driven in a year or other
specified time period;
(B) accidents in which a person to be insured
under the policy can reasonably be considered to have been at fault
and which resulted in bodily injury or property damage;
(C) a final conviction in any court in the United
States, forfeiture of bond, or payment of a fine or an amount
accepted by the court if the conviction, forfeiture or payment was a
result of an allegation that a violation of a law regulating the
operation of motor vehicles was committed;
(D) the making of a fraudulent insurance claim;
or
(E) number of years of driving experience or
number of years licensed to drive.
(2) Underwriting guidelines for residential property
insurance that are based on the following characteristics:
(A) the physical condition of the property to be
insured, provided the underwriting guideline has specific and
objective measures to evaluate the hazard;
(B) claim experience on a residential property
policy arising out of the owner's negligence;
(C) if a structure to be insured is vacant or
unoccupied for more than 60 days;
(D) the making of a fraudulent insurance claim;
or
(E) an act of arson.
(3) underwriting guidelines promulgated by the
commissioner by rule, if the commissioner determines after a
hearing that the underwriting guideline:
(A) is actuarially sound;
(B) promotes the mitigation of losses; and
(C) does not have an adverse impact based on
income level.
Sec. 4. PRIOR APPROVAL STANDARDS. The commissioner shall
not approve the use of an underwriting guideline unless the
underwriting guideline:
(A) is actuarially sound;
(B) promotes the mitigation of losses; and
(C) does not have an adverse impact based on income
level.