Senate Research Center   S.B. 14
By: Jackson, et al.
Business & Commerce
As Filed


Currently, the commissioner of insurance establishes benchmark rates for
automobile and residential property insurance.  Most homeowners and many
automobile owners are insured by companies not subject to benchmark rate
regulation. As proposed, S.B. 14 regulates the rates of personal
automobile and homeowners insurance under a file and use system with a
60-day waiting period.  The file and use regulation would apply to all
insurers writing homeowners and personal auto insurance in Texas,
including county mutuals, Lloyd's plan companies, and reciprocal or
interinsurance exchanges.   

Under a file and use system, an insurer is required to file rates, rating
manuals, supplementary supporting data, and policy and service fees.  The
filed rate becomes effective 60 days after the rate is filed with the
commissioner unless the rate is disapproved.  To enable rates to be used
more quickly and therefore be more responsive to current market
conditions, the commissioner may approve a filed rate on written or
electronic notification to the insurer at any time before the 60th day
after the date of filing of the rate or before the effective date
specified by the insurer in the filing.  The new rate may then take effect
upon receipt of the approval notice. 

The bill also addresses rate standards, public disclosure requirements,
rights of insureds and the public insurance counsel, required quarterly
legislative reports, rate hearings and appeals.  The bill also regulates
commercial automobile insurance rates and forms under the same system as
commercial property insurance. 


Rulemaking authority is expressly granted to the Commissioner of Insurance
in SECTION 1 (Article 5.141, Sections 3 and 4, Insurance Code) of this


SECTION 1.  Amends Chapter 5, Insurance Code, by adding Subchapter P, as



Sec. 1.  SCOPE; PURPOSE.  Provides that this article's purpose is to
regulate personal automobile and residential property insurance rates in
order to prohibit excessive or unfair rates, promote the availability of
insurance, promote price competition, and prohibit anticompetitive
behavior.  Exempts from the terms of this article premium rates for motor
vehicle insurance computed using a mile-based rating plan. 

Sec.  2.  DEFINITIONS.  Defines "classification," "disallowed expenses,"
"filer," "insurer," "line," "personal automobile insurance," "rate,"
"residential property insurance," "supplementary  rating information," and
"supporting information." 

Sec.  3.  RATE STANDARDS.  (a) Requires rates under this article to be set
according to the provisions of this section. 

(b)  Sets forth factors that an insurer must consider when setting rates.

(c)  Authorizes the insurer to group risks by classifications when setting
rates and minimum premiums.  Authorizes the insurer to modify
classification rates for individual risks in accordance with rating plans
that set standards for measuring risk variations based upon factors listed
in Subsection (b). 

(d)  Prohibits rates from being excessive, inadequate, unreasonable, or
unfairly discriminatory for the risks to which they apply. 

(e)  Requires an insurer to use certain types of its own historical data
when setting rates applicable solely to policyholders in this state.
Authorizes the commissioner of insurance (commissioner) to require an
audit of the insurer's data.  Authorizes the insurer to supplement its own
historical premium and loss data with historical premium and loss data.
Authorizes the commissioner to establish, by rule, requirements for
reporting such data under this subsection. 

Sec. 4.  RATE FILINGS.  (a)  Requires an insurer to provide the
commissioner with certain information and materials pertaining to rates
and supplementary rating information. 

(b)  Provides that a new rate takes effect on the date specified by the
insurer in the filing, unless disapproved by the commissioner under
Section 9 of this article.  Provides that the new rate cannot take effect
before the 60th day after filing the rate with the commissioner, except as
provided by Subsection (c).  Provides that the date the rate is received
by the commissioner is the date the rate is filed with the commissioner.
Provides that the insurer's previously filed rate is in effect between the
time the rate is filed and the effective date of the new rate. 

(c)  Authorizes the commissioner to approve a filing at any time before
the 60th day after the date  that the rate was filed, or before the
effective date specified by the insurer.  Provides that the new rate may
take effect on receipt of the commissioner's approval. 

Sec.  5.  SUPERVISION REQUIREMENT.  Authorizes the commissioner to require
an insurer to file certain information upon determining that the insurer's
rates require supervision due to the insurer's financial condition or
rating practices. 

Sec.  6.  PUBLIC INFORMATION.  Provides that each filing and any
supporting information filed under this article is open to public
inspection upon filing. 

an aggrieved insured or the public insurance counsel to apply to the
commissioner for a hearing on the filing.  Requires the application to
specify the grounds on which the grievance is based.  Requires the
commissioner to hold a hearing within 30 days of receiving the application
if the commissioner determines that the grievance is justified and merits
a hearing.  Requires the commissioner to give 10 days' written notice of
the hearing to the applicant and the insurer. 

(b)  Requires the commissioner, after finding that the filing does not
meet this article's requirements in a hearing, to issue an order
specifying how the filing fails to meet those  requirements and stating
the date on which the filing is no longer in effect.  Requires the
commissioner to send copies of the order to the applicant and each
affected insurer. 

Sec.  8.  QUARTERLY LEGISLATIVE REPORT.  Requires each insurer subject to
this article to file certain information with the commissioner on a
quarterly basis, including information beginning with January 1, 2003.
Requires the commissioner to report to certain individuals on a quarterly
basis information pertaining to market conduct and consumer complaints. 

Sec.  9.  DISAPPROVAL.  (a)  Requires the commissioner to disapprove a
rate upon determining that the rate filing does not meet the requirements
of this article.  Authorizes the commissioner to consider the extent and
nature of market competition in insurance markets affected by this article
and the extent of availability of such insurance when making such a

(b)  Requires the commissioner to issue an order specifying how a filing
fails to meet the requirements of this article, if such a disapproval is
made within 60 days of the filing. Entitles the filer to a hearing upon
making a written request within 30 days of the disapproval order's
effective date. 

(c)  Authorizes the commissioner to issue a disapproval order of a rate in
effect after holding a hearing after at least 20 days written notice to
the insurer that made the filing. Requires the commissioner to issue the
disapproval order including certain information within 15 days of the
hearing's close.  Requires the commissioner, upon disapproving a rate in
effect, to require the insurer to refund certain funds to policyholders if
they have been overcharged.  Provides a de minimis exception. 

(d)  Requires the commissioner to specify an interim rate if a disapproval
has left an insurer with no legally effective rate.  Authorizes the
commissioner to modify the interim rate, and establishes that the interim
rate and any modifications shall take effect upon the commissioner's
decision.  Requires the commissioner to order any overcharge in the
interim rates to be refunded to policyholders, once rates are finally
determined. Provides a de minimis exception. 

Sec.  10.  RATE HEARINGS.  Provides that all rate hearings are to be
conducted under Chapter 2001, Government Code, subject to Chapter 40 of
this code.  Provides that the provisions of this article prevail in the
event of any conflict with Chapter 2001, Government Code. 

Sec.  11.  APPEAL.  Authorizes certain parties aggrieved by an order of
the commissioner to appeal the order under Chapter 36D of this code within
30 days of the date the commissioner issued the order. 

SECTION 2.  Amends Article 5.01(f), Insurance Code, to establish June 1,
2003, as the date on which motor vehicle insurance rates are to be
determined under Article 5.141 of this code, notwithstanding Subsections
(a)-(d) of this article. 

SECTION 3.   Amends Article 5.13, Insurance Code, to exempt entities
regulated under Chapters 911 and 912 of this code from this subchapter,
except that Section 8, Article 5.13-2, shall apply to a county mutual
insurance company with respect to commercial automobile insurance.  Grants
regulatory power previously held by the Board of Insurance Commissioners
of the State of Texas to the commissioner. Creates subsections (a)-(e)
from existing text.  Makes nonsubstantive changes. 

SECTION 4.  Amends the heading to Article 5.13-2, Insurance Code, to read:


SECTION 5.  Amends Sections 1 and 2, Article 5.13-2, Insurance Code, to
include commercial automobile insurance among the types of insurance rates
and forms regulated by this article. 

SECTION 6.  Amends Section 3(2), Article 5.13-2, Insurance Code, to
provide that Section 8 of this article shall apply to county mutual
insurance companies with respect to commercial automobile insurance. 

SECTION 7.  Amends Section 912.002, Insurance Code, to remove a clause
exempting a county mutual insurance company from the flexible rating
program under Article 5.101.  Makes county mutual insurance companies
subject to Section 8 of Article 5.13-2 with respect to commercial
automobile insurance. 

SECTION 8.  Repealer:  Section (a-1), Article 5.96 (pertaining to the
setting of benchmark rates for certain types of insurance), Insurance
Code;  Article 5.101 (Flexible Rating Program for Certain Insurance
Lines), Insurance Code;  and Section 40.061 (Flexible Rating Program),
Insurance Code. 

SECTION 9.  Effective date: June 1, 2003, or September 1, 2003.