78R712 PB-D
By: Dukes H.B. No. 596
A BILL TO BE ENTITLED
AN ACT
relating to insurer notice to applicants for insurance coverage
regarding coverage tiers used by the insurer.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter E, Chapter 21, Insurance Code, is
amended by adding Article 21.49-2W to read as follows:
Art. 21.49-2W. NOTICE REGARDING COVERAGE TIERS
Sec. 1. DEFINITIONS. In this article:
(1) "Affiliate" means an entity classified as an
affiliate of an insurer under Section 823.003 of this code.
(2) "Applicant for insurance coverage" includes an
applicant for new coverage and a policyholder renewing coverage.
(3) "Coverage tier" means a classification made by an
insurer under which an application for insurance coverage offered
by the insurer is assigned for processing by the insurer or an
affiliate or subsidiary of the insurer in a manner that may result
in various premium levels for the same coverage.
(4) "Credit report" means a collection of data
specific to a person's credit history, credit standing, credit
capacity, or creditworthiness.
(5) "Credit score" means a numerical representation of
the insurance risk presented by an applicant for insurance coverage
that uses attributes derived from a credit report on the applicant
in a formula designed to assess risk on an actuarial or statistical
basis.
(6) "Insurer" means an insurer authorized to write
property and casualty insurance in this state, including:
(A) a county mutual insurer;
(B) a farm mutual insurer;
(C) a Lloyd's plan; and
(D) a reciprocal or interinsurance exchange.
(7) "Subsidiary" means an entity classified as a
subsidiary of an insurer under Section 823.003 of this code.
(8) "Underwriting guideline" means a rule, standard,
marketing decision, or practice that is used by an insurer or an
agent of an insurer to examine, bind, accept, reject, cancel, or
limit insurance coverage to groups of consumers of insurance.
Sec. 2. APPLICATION. This article applies only to an
insurer in this state that writes:
(1) a personal automobile insurance policy;
(2) a homeowners or farm and ranch or farm and ranch
owners insurance policy; or
(3) a residential fire and allied lines insurance
policy.
Sec. 3. INSURER NOTICE. (a) Each insurer shall provide to
an applicant for insurance coverage a written notice, in the form
prescribed by the department, that describes:
(1) each entity through which the insurer provides the
insurance coverage for which the applicant is applying, including
an affiliate or subsidiary;
(2) each coverage tier provided by the insurer for the
insurance coverage for which the applicant is applying, including
the premium levels for coverage under various tiers; and
(3) the qualifications used by the insurer to assign
an applicant for insurance coverage to a specific coverage tier,
including:
(A) the use of a credit score derived from
information relating to the applicant;
(B) the applicant's driving record; and
(C) any other analogous consumer classification
system used by the insurer as an underwriting guideline.
(b) The notice must include or accompany written
information specific to the applicant for insurance coverage that
explains the coverage tier to which the insurer proposes to assign
the applicant, and the insurer's reasons for that assignment.
Sec. 4. RULES. The commissioner shall adopt rules as
necessary to implement this article.
Sec. 5. PENALTY. An insurer who violates this article
commits an unfair practice in violation of Article 21.21 of this
code.
SECTION 2. Article 21.49-2W, Insurance Code, as added by
this Act, applies 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 January 1, 2004,
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 3. This Act takes effect September 1, 2003.