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78R1268 PB-D
By: Seaman H.B. No. 100
A BILL TO BE ENTITLED
AN ACT
relating to premium rates for certain lines of residential property
and casualty insurance coverage.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter M, Chapter 5, Insurance Code, is
amended by adding Article 5.103 to read as follows:
Art. 5.103. PREMIUM RATES FOR CERTAIN RESIDENTIAL PROPERTY
AND CASUALTY INSURANCE COVERAGE
Sec. 1. DEFINITIONS. In this article:
(1) "Benchmark rate" means the rate set annually by
the commissioner, relative to which the flexibility bands and
statutory rate limitations apply.
(2) "Classification" means the process of grouping
risks with similar characteristics to recognize differences in
costs.
(3) "Flexibility band" means the range of rates from
30 percent below to 30 percent above, inclusive, the benchmark
rates approved or set by the commissioner by line, within which an
insurer subject to rate regulation, during a set period, may
increase or decrease rate levels by classification without prior
approval by the commissioner.
(4) "Insurer" means a property and casualty insurer
authorized to write homeowners insurance and residential fire and
allied lines insurance in this state. The term includes:
(A) a Lloyd's plan, a county mutual insurance
company, and a reciprocal or interinsurance exchange; and
(B) the affiliate of an insurer described by this
subsection, as described by Section 823.003 of this code.
(5) "Residential property and casualty insurance"
means homeowners insurance and residential fire and allied lines
insurance.
Sec. 2. INITIAL DETERMINATION OF MARKET CONDITIONS;
HEARING. (a) The department shall conduct a public hearing to
determine whether a noncompetitive residential property and
casualty insurance market exists in this state. At the hearing, the
department shall accept written and oral testimony from any
interested party regarding market conditions. Based on the
information obtained from the hearing, the commissioner shall
determine whether a reasonable degree of competition exists in the
market in this state as of the date of the hearing.
(b) The commissioner shall consider the following factors
in determining whether a reasonable degree of competition exists in
the residential property and casualty insurance market:
(1) the number of insurers or groups of affiliated
insurers providing coverage in the market;
(2) measures of market concentration and changes in
market concentration over time;
(3) the ease of an insurer's entry into the market and
the existence of financial or economic barriers that could prevent
new insurers from entering the market;
(4) the extent to which any one insurer or group of
affiliated insurers controls all or part of the market;
(5) whether the total number of insurers writing
residential property and casualty insurance in this state is
sufficient to provide multiple alternatives to consumers;
(6) whether insurers are offering a variety of
residential property and casualty insurance products to consumers;
(7) the availability of residential property and
casualty insurance coverage to consumers in the market; and
(8) the opportunities available to consumers in the
market to acquire price information and other consumer information.
Sec. 3. FINDING OF NONCOMPETITIVE MARKET. (a) If the
commissioner determines under Section 2 of this article that a
reasonable degree of competition does not exist in the residential
property and casualty insurance market in this state, the
commissioner shall issue an initial order to that effect.
(b) The initial order expires on the first anniversary of
the effective date of the order unless the commissioner:
(1) rescinds the order before the first anniversary;
or
(2) renews the order after a public hearing and a
determination by the commissioner as to the continued lack of a
reasonable degree of competition.
(c) After the expiration of an initial order issued under
Subsection (a) of this section that is not renewed, the
commissioner may issue a subsequent order if, after a hearing
conducted in accordance with Section 2 of this article, the
commissioner determines that the factors described by Section 2 of
this article have reoccurred.
(d) The commissioner shall identify, in an order issued
under Subsection (a), (b)(2), or (c) of this section, the factors on
which the determination is based.
(e) A competitive market is presumed to exist if the
commissioner does not renew the initial order.
Sec. 4. DETERMINATION OF MARKET SHARE. If the commissioner
issues an order finding that a reasonable degree of competition
does not exist, the department shall determine the residential
property and casualty insurance market share in this state of each
insurer not later than the 30th day after the effective date of the
order.
Sec. 5. RATE REGULATION FOR INSURERS WITH MORE THAN 10
PERCENT OF MARKET. (a) Except as provided by Section 7 of this
article, premium rates for residential property and casualty
insurance products for an insurer with a market share in this state
of more than 10 percent are regulated as provided by this section.
(b) An insurer subject to this section shall file with the
department, not later than the 30th day after the effective date of
the department's determination under Section 4 of this article, the
insurer's premium rates as of the effective date of the
determination for each residential property and casualty insurance
product offered by the insurer, accompanied by the insurer's
proposed rates, rating manuals, supplementary rating information,
and other supporting information used by the insurer to determine
the rate for each residential property and casualty insurance
product.
(c) The commissioner shall provide written notice to the
insurer not later than the 15th day after the date of receipt of the
rate information filing. The rate filing shall be considered in
compliance with this article unless the commissioner informs the
insurer after receipt of the filing as to what supplementary rate
information or supporting information is required to complete the
filing.
(d) The commissioner shall review the filing not later than
the 60th day after the date on which the filing is complete. The
commissioner may not reject the filing unless the commissioner
determines that the rates are excessive, inadequate, unfairly
discriminatory, or unreasonable or violate this code and specifies
the reasons for the rejection. If the commissioner does not take
action within the 60-day period, the filed rates are adopted and
presumed reasonable.
(e) After rates are adopted under Subsection (d) of this
section, an insurer subject to this section may change its rate for
a residential property and casualty insurance product without
additional approval from the department if the new rate is within a
flexibility band of 30 percent below to 30 percent above the rate
approved by the commissioner under Subsection (d) of this section.
The insurer's rate is not subject to further action or approval by
the commissioner unless the insurer files a rate outside the
flexibility band described by this subsection.
(f) If the commissioner rejects a rate filing made by an
insurer for any of the reasons stated in Subsection (d) of this
section, the commissioner shall schedule a public hearing not later
than the 30th day after the effective date of the rejection to
determine a benchmark rate for that insurer. The department shall
notify the insurer in writing of the rejection and the reasons for
the rejection. The rejection notice must state the time and place
for the public hearing. At the hearing under this subsection, the
commissioner shall hear testimony from the insurer and other
interested parties, including the office of public insurance
counsel, regarding the appropriate benchmark rate and may accept
supporting information from any party. Not later than the 30th day
after the date of the public hearing, the commissioner shall
determine the benchmark rate.
(g) In determining the benchmark rate under Subsection (f)
of this section, the commissioner shall use the procedures adopted
under Section 3, Article 5.101, of this code for promulgating a
benchmark rate.
(h) After a benchmark rate is adopted under Subsection (g)
of this section, the insurer may change its rates for a residential
property and casualty insurance product without additional
approval from the department if the new rate is within a flexibility
band of 30 percent below to 30 percent above the benchmark rate.
The insurer's rates are not subject to further action or approval
by the commissioner unless the insurer files rates outside the
flexibility band described by this subsection.
Sec. 6. INSURERS WITH 10 PERCENT OR LESS OF MARKET. Premium
rates for residential property and casualty insurance products for
insurers with a market share of 10 percent or less are not
rate-regulated.
Sec. 7. FINDING OF COMPETITIVE MARKET. (a) If the
commissioner determines that the residential property and casualty
insurance market in this state is competitive or if the effective
period of a previous order of a noncompetitive market expires
without renewal, the premium rates for residential property and
casualty insurance products for insurers writing those lines in
this state are not rate-regulated.
(b) After a market has been determined to be competitive
under this article, the commissioner may determine that a
reasonable degree of competition does not exist in the residential
property and casualty insurance market in this state and issue an
order to that effect. The determination must be made in accordance
with Section 2 of this article and the order must be issued in the
manner described by Section 3 of this article.
Sec. 8. REVIEW BY COMMISSIONER OF NON-RATE-REGULATED
INSURERS. (a) As provided by Subsection (b) of this section, the
commissioner may review information regarding the residential
property and casualty insurance rates of an insurer that, under
Section 6 or 7 of this article, are not subject to rate regulation.
(b) The commissioner may review rating manuals,
supplementary rating information, and other supporting information
used by the insurer to determine the premium rate for each
residential property and casualty insurance product if the
department:
(1) receives a substantial number of consumer
complaints, as determined by the commissioner, about an insurer's
prices or practices; or
(2) otherwise reasonably determines that the rates may
be inadequate or unfairly discriminatory.
Sec. 9. RULES. The commissioner shall adopt rules as
necessary to implement this article.
SECTION 2. Article 5.01(f), Insurance Code, is amended to
read as follows:
(f) Notwithstanding Subsections (a) through (d) of this
article, [on and after March 1, 1992,] rates for motor vehicle
insurance in this state are determined as provided by the flexible
rating program adopted under Article 5.101 [Subchapter M] of this
chapter.
SECTION 3. Article 5.01-2(b), Insurance Code, is amended to
read as follows:
(b) Rates [On and after March 1, 1992, rates] for 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 Article 5.101 [Subchapter M]
of this chapter.
SECTION 4. Section 3(c), Article 5.01-4, Insurance Code, is
amended to read as follows:
(c) Premium rates used by an insurer under the mile-based
rating plan adopted under this article are exempt from other rate
regulation under this subchapter and the rating system [benchmark
rates] established under Article 5.101 [Subchapter M] of this
chapter.
SECTION 5. Article 5.53(g), Insurance Code, is amended to
read as follows:
(g) The writing of inland marine insurance, rain insurance
and insurance against loss by hail on farm crops, shall be governed
by the provisions of Articles 5.25 to 5.48, inclusive, and also
Articles 5.50 to 5.51, inclusive, of this subchapter and Article
5.67 of Subchapter D[.] of this chapter, in the same manner and to
the same extent as fire insurance and fire insurance rates are now
affected by the provisions of said articles, except that wherever
in any of said articles reference is made to making, fixing,
prescribing, determination or promulgation by the Board of rates or
policy forms or endorsements, the provisions of this article shall
control. Notwithstanding any other provision of this subchapter,
the flexible rating programs [program] created under Subchapter M
of this chapter do [does] not apply to this article.
SECTION 6. Article 5.96(a-1), Insurance Code, is amended to
read as follows:
(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 motor vehicle insurance and fire and allied
lines insurance under Subchapter M of this chapter.
SECTION 7. Section 1(c), Article 5.101, Insurance Code, is
amended to read as follows:
(c) Notwithstanding Subsection (a) of this section, this
article does not apply to premium rates for:
(1) motor vehicle insurance computed using a
mile-based rating plan under Article 5.01-4 of this code; or
(2) residential property and casualty insurance
computed under Article 5.103 of this code.
SECTION 8. Section 40.003(c), Insurance Code, is amended to
read as follows:
(c) This chapter does not apply to:
(1) a proceeding conducted under Article 1.04D;
(2) [or to] a proceeding relating to:
(A) [(1)] approving or reviewing rates or rating
manuals filed by an individual company, unless the rates or manuals
are contested;
(B) [(2)] adopting a rule;
(C) [(3)] adopting or approving a policy form or
policy form endorsement;
(D) [(4)] adopting or approving a plan of
operation for an organization subject to the jurisdiction of the
department; or
(E) [(5)] adopting a presumptive rate under
Article 3.53; or
(3) an action governed by Article 5.103.
SECTION 9. Section 40.061, Insurance Code, is amended to
read as follows:
Sec. 40.061. FLEXIBLE RATING PROGRAMS [PROGRAM].
(a) Notwithstanding Sections 40.051-40.060, hearings for
benchmark rates for all lines of insurance subject to Article 5.101
[of this code] are conducted as provided by Section 3(d) of that
article.
(b) Notwithstanding Sections 40.051-40.060, hearings for
benchmark rates for insurance subject to Article 5.103 are
conducted as provided by that article.
SECTION 10. Section 912.002, Insurance Code, as effective
June 1, 2003, is amended to read as follows:
Sec. 912.002. LIMITED EXEMPTION FROM INSURANCE LAWS;
APPLICABILITY OF CERTAIN LAWS. (a) A county mutual insurance
company is exempt from the operation of all insurance laws of this
state, including [the flexible rating program under] Article 5.101,
except laws that are made applicable by their specific terms or
except as specifically provided by this chapter.
(b) A county mutual insurance company is subject to:
(1) Sections 38.001 and 822.204; and
(2) Articles 1.15, 1.15A, 1.16, 2.10, 4.10, 5.12,
5.37, 5.38, 5.39, 5.40, 5.49, 5.103, 21.21, and 21.49.
SECTION 11. Section 941.003(c), Insurance Code, as
effective June 1, 2003, is amended to read as follows:
(c) Article 5.101 [Subchapter M, Chapter 5,] applies to
rates for motor vehicle insurance written by a Lloyd's plan.
Article 5.103 applies to rates for homeowners insurance and
residential fire and allied lines insurance written by a Lloyd's
plan.
SECTION 12. Section 942.003(c), Insurance Code, as
effective June 1, 2003, is amended to read as follows:
(c) Article 5.101 [Subchapter M, Chapter 5,] applies to the
rates for motor vehicle insurance written by an exchange. Article
5.103 applies to rates for homeowners insurance and residential
fire and allied lines insurance written by an exchange.
SECTION 13. (a) The Texas Department of Insurance shall
conduct the public hearing required under Section 2(a), Article
5.103, Insurance Code, as added by this Act, not later than the
120th day after the effective date of this Act.
(b) The commissioner of insurance shall adopt rules as
required under Article 5.103, Insurance Code, as added by this Act,
not later than the 90th day after the effective date of this Act.
(c) Article 5.103, Insurance Code, as added by this Act,
applies only to the rate applicable to a policy of homeowners
insurance or residential fire and allied lines insurance that is
delivered, issued for delivery, or renewed on or after the 150th day
after the effective date of this Act. The rate applicable to a
policy delivered, issued for delivery, or renewed before that date
is governed by the law as it existed immediately before the
effective date of this Act, and that law is continued in effect for
that purpose.
SECTION 14. This Act takes effect immediately if it
receives a vote of two-thirds of all the members elected to each
house, as provided by Section 39, Article III, Texas
Constitution. If this Act does not receive the vote necessary for
immediate effect, this Act takes effect September 1, 2003.