This website will be unavailable from Friday, April 26, 2024 at 6:00 p.m. through Monday, April 29, 2024 at 7:00 a.m. due to data center maintenance.
By: Jackson, et al. S.B. No. 14
A BILL TO BE ENTITLED
AN ACT
relating to certain insurance rates, forms, and practices;
providing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RATE REQUIREMENTS
PART A. RATE FILINGS
SECTION 1.01. Chapter 5, Insurance Code, is amended by
adding Subchapters Q and R to read as follows:
SUBCHAPTER Q. RATES FOR CERTAIN LINES
Art. 5.142. RATES FOR PERSONAL AUTOMOBILE AND RESIDENTIAL
PROPERTY INSURANCE COVERAGE
Sec. 1. SCOPE. (a) This article governs the regulation of
rates for personal automobile insurance and residential property
insurance.
(b) 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.
Sec. 2. DEFINITIONS. In this article:
(1) "Advisory organization" means an organization
licensed under Article 5.73 of this code.
(2) "Classification" means the grouping of risks with
similar risk characteristics so that differences in expected costs
may be appropriately recognized.
(3) "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;
(ii) designed and directed at loss
prevention; or
(iii) for the promotion of organizations
exempt from federal taxation under Section 501(c)(3), Internal
Revenue Code of 1986, and its subsequent amendments;
(D) amounts paid or reserved by an insurer,
whether classified by the insurer as a loss or an expense:
(i) as damages in an action brought against
the insurer for bad faith; or
(ii) as fees, fines, or penalties 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.
(4) "Filer" means an insurer that files rates,
supplementary rating information, supporting information, rating
manuals, or any other information required to be filed under this
article.
(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 personal automobile
insurance or residential property insurance in this state. The
term includes an affiliate, as described by Section 823.003(a) of
this code, if that affiliate is authorized to write and is writing
personal automobile insurance or residential property insurance in
this state. 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) the Texas Automobile Insurance Plan
Association under Article 21.81 of this code.
(6) "Line" means a type of insurance subject to this
article.
(7) "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, mobile 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.
(8) "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, and
before any application of individual risk variations based on loss
or expense considerations.
(9) "Rating manual" means a publication or schedule
that lists rules, rating factors, classifications, territory codes
and descriptions, rates, premiums, and other similar information
used by an insurer to determine the applicable premium charged an
insured for personal automobile insurance or residential property
insurance.
(10) "Residential property insurance" means insurance
coverage against loss to residential real property at a fixed
location or tangible personal property provided in a homeowners
policy, which includes a tenant policy, a condominium owners
policy, or a residential fire and allied lines policy.
(11) "Supplementary rating information" means any
manual, rating schedule, plan of rules, rating rules,
classification systems, territory codes and descriptions, rating
plans, discount and surcharge programs, and other similar
information used by the insurer to determine the applicable premium
for an insured. The term includes factors and relativities,
including increased limits factors, classification relativities,
deductible relativities, minimum premiums, and other similar
factors.
(12) "Supporting information" means:
(A) the experience and judgment of the filer and
the experience or information of advisory organizations or other
insurers 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
commissioner by rule to be filed.
Sec. 3. RATE STANDARDS. (a) An insurer shall set rates for
each line in accordance with this section.
(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 historical premium, exposure, loss,
and expense experience;
(4) catastrophe hazards within this state;
(5) operating expenses, excluding disallowed
expenses;
(6) investment income;
(7) a reasonable margin for profit; and
(8) any other relevant factors inside and outside this
state.
(c) An insurer may:
(1) group risks by classification for the
establishment of rates and minimum premiums; and
(2) modify classification rates to produce rates for
individual risks in accordance with rating plans that establish
standards for measuring variations in those risks on the basis of
any factor listed in Subsection (b) of this section.
(d) Rates established under this section may not be
excessive, inadequate, unreasonable, or unfairly discriminatory
for the risks to which they apply.
(e) In setting rates applicable to policyholders in this
state, an insurer shall use its own historical premium and loss
data, as well as its own data for expenses and for profit and
contingency factors. The commissioner may require an audit of the
insurer's historical premium and loss data. The insurer may
separately supplement its own historical premium and loss data with
industry-wide historical premium and loss data for this state as
necessary. The commissioner by rule may establish requirements for
reporting historical premium and loss data under this subsection.
Sec. 4. RATE FILINGS. (a) An insurer shall file with the
department all rates, supplementary rating information, reasonable
and pertinent supporting information, and all applicable rating
manuals for risks written in this state. The insurer shall include
in the filing any statistics or other information to support the
rates to be used by the insurer and as required by the commissioner
by rule, including information necessary to evidence that the
computation of the rate does not include disallowed expenses. An
insurer shall include in the filing all information concerning
policy fees, service fees, and other fees that are charged or
collected by the insurer under Article 21.35B of this code.
(b) The commissioner may simplify filing requirements by
rule for small insurers, subject to the following:
(1) a "small insurer" is defined as an insurer,
including a Lloyd's plan insurer or reciprocal exchange, that
during the previous calendar year wrote less than two percent of the
total homeowners premium in the state; if such an insurer is part of
an insurance group, the total aggregate homeowners premium for the
group must be less than two percent for any insurer in the group to
be considered a small insurer for purposes of this subsection;
(2) the commissioner must specify what information the
small insurer must file to constitute a filing sufficient to comply
with the filing requirements adopted under this article; and
(3) the commissioner shall allow for the immediate use
of filed rates provided the rate filing does not constitute a
significant overall rate increase, as determined by rule.
(c) No territory in a rating manual shall be smaller than
the boundary of a county except as follows:
(1) for counties in the designated catastrophe area
for the Texas Windstorm Insurance Association under Article 21.49
of this code, insurers may file their own territories no smaller
than the areas seaward of the intracoastal canal and landward of the
intracoastal canal to reflect the exposure to weather-related
catastrophic events; and
(2) insurers may subdivide territories between the
portion of the county located in the catastrophe area and that
portion not located in the catastrophe area in non-first tier
coastal counties, as defined in Article 21.49 of this code.
(d) Insurers shall reflect differences in expected water
damage losses in calculating territorial rate relativities.
Sec. 5. PRIOR APPROVAL REQUIRED. (a) 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.
(b) 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.
(c) 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.
(d) Except as provided by Subsection (e) of this section or
Section 9 of this article, if the rate has not been approved or
disapproved by the commissioner before the expiration of the 30-day
period described by Subsection (b) of this section, the rate is
deemed approved and the insurer may use the rate.
(e) The commissioner may extend the period for approval or
disapproval of a rate filing for an additional 30-day period on the
expiration of the 30-day period described by Subsection (b) of this
section. If the rate has not been approved or disapproved by the
commissioner before the expiration of the additional 30-day period
described in this subsection, the rate is deemed approved and the
insurer may use the rate. The commissioner may not extend the
period for approval or disapproval of a rate filing beyond the
additional 30-day period described in this subsection.
(f) If the department has requested additional information
from the insurer during the first 30-day review period provided
under Subsection (b) of this section or under the second 30-day
review period provided under Subsection (e) 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 shall not be counted in the days 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 email or telephone call or postmarked date on the
letter pertaining to the request for additional information.
(g) From the date of the filing of the rate with the
commissioner to the effective date of the new rate, the insurer's
previously filed rate that is in effect as provided in this article
shall remain in effect.
Sec. 6. DISAPPROVAL; WITHDRAWAL OF APPROVAL. (a) The
commissioner shall disapprove a rate filed under this article if
the commissioner determines that the rate does not meet the
requirements of this article. The commissioner may consider the
extent and nature of market competition in the personal automobile
insurance and residential property insurance markets and the
availability or lack of availability of personal automobile
insurance and residential property insurance in determining
whether to disapprove any rates filed under this article.
(b) If the commissioner disapproves a rate filing before the
30th day after the date of the filing of the rate with the
department, as provided in Section 5(b)(2) of this article and
Subsection (e) of this section, or before the expiration of the
additional 30-day period as provided in Section 5(e) of this
article and Subsection (e) of this section, the commissioner shall
issue an order specifying in what respects the rate filing fails to
meet the requirements of this article. If the insurer has filed all
of the information required to be filed under Section 4 of this
article, the commissioner's order shall include the rates and terms
which the commissioner would approve for use by the insurer. The
filer is entitled to a hearing on written request to the
commissioner not later than the 30th day after the effective date of
the disapproval order.
(c) If the commissioner withdraws approval of a rate that is
in effect, the commissioner shall notify in writing the insurer
that made the filing and may issue a withdrawal of approval order
only after a hearing held not sooner than the 20th day after the
date of the written notice. The order must be issued not later than
the 15th day after the close of the hearing and must specify how the
rate fails to meet the requirements of this article. The order must
state the future date on which the further use of the disapproved
rate is prohibited and, if applicable, specify the interim rate as
provided in Subsection (d) of this section.
(d) If an insurer has no legally effective rate because of
an order withdrawing the approval of rates that are in effect, the
commissioner may specify an interim rate at the time the order is
issued. The interim rate may be modified by the commissioner on the
commissioner's own motion or on motion by the insurer. The interim
rate or any modification of that rate shall take effect on the date
specified in the commissioner's order.
(e) A commissioner's order disapproving a rate or
withdrawing the previous approval of a rate, and any notice of the
commissioner's intent to withdraw a previous approval, must state
the grounds for the disapproval or for the withdrawal of previous
approval in sufficient detail to reasonably inform the filer of the
grounds.
(f) An insurer may not use a rate in this state after
disapproval or withdrawal of approval of the rate by the
commissioner, except as provided by Section 13(b) of this article.
Sec. 7. SUPERVISION REQUIREMENT. If the commissioner
determines after a hearing that an insurer's rates require
supervision because of the insurer's financial condition or the
insurer's rating practices, the commissioner may require the
insurer to file with the commissioner all rates, supplementary
rating information, and any supporting information prescribed by
the commissioner.
Sec. 8. PUBLIC INFORMATION. Each rate filing and any
supporting information filed under this article are subject to
disclosure under Chapter 552, Government Code, as of the date the
filing is received by the commissioner.
Sec. 9. RIGHTS OF INSUREDS, PUBLIC INSURANCE COUNSEL, AND
OTHERS. An insured, the public insurance counsel, and any other
interested person may make a written application to the
commissioner not later than the 20th day after the date of a rate
filing under Section 5 of this article requesting a hearing on the
rate filing. The application must specify the grounds on which the
applicant is requesting the hearing. If the commissioner finds
that the application is made in good faith and that the applicant
establishes reasonable grounds to justify holding the hearing, the
commissioner shall conduct a hearing under Chapter 2001, Government
Code. After that hearing, the commissioner has 30 days to
disapprove the filing under Section 6 of this article, or it is
deemed approved.
Sec. 10. QUARTERLY LEGISLATIVE REPORT. (a) Each insurer
subject to this article shall file with the commissioner on a
quarterly basis information relating to changes in losses,
premiums, and market share.
(b) The commissioner shall report on a quarterly basis to
the governor, the lieutenant governor, and the speaker of the house
of representatives on the information provided by the insurers'
reports, summary information obtained from market conduct
examinations and analyses to the extent such information is not
confidential by law, and consumer complaints received by the
department.
Sec. 11. RATE HEARINGS; ADMINISTRATIVE PROCEDURES. Chapter
2001, Government Code, applies to all hearings on rates conducted
under this article. To the extent of any conflict between this
article and Chapter 2001, Government Code, this article prevails.
Sec. 12. APPEAL. An insurer, the public insurance counsel,
or an interested person described by Section 9 of this article
aggrieved by an order of the commissioner issued under this article
may, not later than the 30th day after the date the commissioner
issued the order, appeal the order in accordance with Subchapter D,
Chapter 36, of this code.
Sec. 13. JUDICIAL REVIEW. (a) Not later than the 10th day
after the date of receipt of the commissioner's order under Section
6(c) of this article, an insurer may file a petition for judicial
review in a district court in Travis County. The standard of review
of the commissioner's order is substantial evidence.
(b) During the pendency of the appeal, an insurer may charge
either its existing rates or the rates as ordered by the
commissioner.
Sec. 14. REFUND REQUIRED. If on final appeal the court
upholds the commissioner's determination as to rates, the insurer
shall refund the difference in overcharged premium to each
policyholder, plus interest. The interest rate is the prime rate
plus one percent as published in The Wall Street Journal on the
first day of each calendar year that is not a Saturday, Sunday, or
legal holiday.
Sec. 15. RULES. The commissioner shall adopt rules as
necessary to implement this article.
SUBCHAPTER R. NONSTANDARD MARKETS
Art. 5.1425. RATE REQUIREMENTS
Sec. 1. SCOPE. This article governs the regulation of rates
for personal automobile insurance in nonstandard markets.
Sec. 2. PURPOSE. The purpose of this article is to:
(1) promote the availability of personal automobile
liability insurance in this state by preserving residual markets
for Texas residents historically served by such residual markets;
(2) reduce the number of uninsured drivers in this
state by ensuring a readily available residual market for high
risk, nonstandard drivers;
(3) ensure that rates in such residual markets are not
excessive, inadequate, unreasonable, or unfairly discriminatory
for the risks to which they apply; and
(4) ensure that such residual markets are subject to
unfair discrimination statues and to market conduct examination by
the commissioner.
Sec. 3. STANDARD RATE INDEX. (a) Using standard and
generally accepted actuarial techniques, the commissioner shall
annually calculate and publish a statewide standard rate index
intended to accurately reflect the statewide average rate for
classifications, including the following:
(1) for private passenger automobile liability,
standard rate indexes for bodily injury liability, property damage
liability, personal injury protection, medical payments, and
uninsured or underinsured motorist coverages; and
(2) for private passenger automobile physical damage,
standard rate indexes for collision and other than collision
coverages.
(b) The commissioner may establish and calculate other
standard rate indexes for private passenger automobile insurance as
necessary to implement the provisions of this article.
Sec. 4. NONSTANDARD RATES. (a) "Nonstandard rates" are
rates that are 30 percent or higher than the standard rate index
calculated by the commissioner.
(b) A county mutual insurance company, as defined in Chapter
17 or 912 of this code, writing personal automobile insurance at
nonstandard rates is not subject to Article 5.142 of this code
provided the county mutual insurance company, its affiliated
company, or group writes an aggregate of less than 3.5 percent of
the total personal automobile insurance premiums in this state.
(c) A county mutual insurance company that increases its
aggregate rates by 10 percent or more in a calendar year must
secure the prior approval of the commissioner as provided by
Section 5, Article 5.142 of this code.
(d) Notwithstanding Subsection (b) of this section, the
commissioner may designate by rule other types of insurers that
historically and currently, as of the effective date of this
article, serve residual markets for high risk, nonstandard drivers
in this state. Such insurers designated by the commissioner may be
subject to this article.
Sec. 5. RATE STANDARDS AND FILING. (a) Rates established
under this article may not be excessive, inadequate, unreasonable,
or unfairly discriminatory for the risks to which they apply.
(b) The commissioner by rule shall determine what an insurer
must file to ensure compliance with Subsection (a) of this section
and Section 3 of this article.
(c) The commissioner may disapprove a rate that does not
comply with Subsection (a) of this section as provided for in
Section 6, Article 5.142 of this code.
(d) Nothing in this article shall be construed to limit the
commissioner's authority to conduct market conduct examinations
under Article 1.15 of this code for an insurer subject to this
article.
(e) Insurers subject to this article are subject to unfair
discrimination provisions in this code, including Article 21.21-6
of this code, as added by Chapter 415, Acts of the 74th Legislature,
Regular Session, 1995, and Articles 21.21-8 and 21.21-10 of this
code.
(f) No territory in a rating manual shall be smaller than
the boundary of a county, except as follows:
(1) for counties in the designated catastrophe area
for the Texas Windstorm Insurance Association, under Article 21.49
of this code, insurers may file their own territories no smaller
than the areas seaward of the intracoastal canal and landward of the
intracoastal canal to reflect the exposure to weather-related
catastrophic events; and
(2) insurers may subdivide territories between the
portion of the county located in the catastrophe area and that
portion not located in the catastrophe area in non-first tier
coastal counties, as defined in Article 21.49 of this code.
(g) Each rate filing and any supporting information filed
under this article are subject to disclosure under Chapter 552,
Government Code, as of the date the filing is received by the
department.
PART B. TRANSITION
SECTION 1.02. An insurer's initial filing under Section 10,
Article 5.142, Insurance Code, as added by this article, must
include the information required under that section beginning with
the calendar quarter beginning January 1, 2003.
ARTICLE 2. POLICY FORMS AND ENDORSEMENTS
PART A. FORM FILINGS
SECTION 2.01. Chapter 5, Insurance Code, is amended by
adding Subchapter S to read as follows:
SUBCHAPTER S. POLICY FORMS FOR CERTAIN LINES
Art. 5.143. POLICY FORMS FOR PERSONAL AUTOMOBILE INSURANCE
COVERAGE AND RESIDENTIAL PROPERTY INSURANCE COVERAGE
Sec. 1. SCOPE. This article governs the regulation of
policy forms and endorsements for personal automobile insurance and
residential property insurance.
Sec. 2. DEFINITIONS. In this article:
(1) "Filer" means an insurer that files forms or any
other information required to be filed under this article.
(2) "Form" means any insurance policy form or
endorsement form used in writing personal automobile insurance or
residential property insurance in this state.
(3) "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 personal automobile
insurance or residential property insurance in this state. The
term includes an affiliate, as described by Section 823.003(a) of
this code, if that affiliate is authorized to write and is writing
personal automobile insurance or residential property insurance in
this state. 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) the Texas Automobile Insurance Plan
Association under Article 21.81 of this code.
(4) "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, mobile 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.
(5) "Residential property insurance" means insurance
coverage against loss to residential real property at a fixed
location or tangible personal property provided in a homeowners
policy, which includes a tenant policy, a condominium owners
policy, or a residential fire and allied lines policy.
Sec. 3. PRIOR APPROVAL REQUIRED. (a) Each insurer shall
file its forms with the department. The forms may not be delivered
or issued for delivery in this state unless the forms have been
filed with the department and approved by the commissioner as
provided by this article.
(b) An insurer may continue to use the policy forms and
endorsements promulgated, approved, or adopted under Articles 5.06
and 5.35 of this code on notification to the commissioner in writing
that the insurer will continue to use those forms.
(c) For the purposes of this article, the date the form is
received by the department is the date of filing of the form with
the commissioner.
(d) Not later than the 60th day after the date the form is
filed with the department, the commissioner shall:
(1) approve the form if the commissioner determines
that the form complies with the requirements of this article; or
(2) disapprove the form if the commissioner determines
that the form does not comply with the requirements of this article.
(e) If the commissioner approves a form, 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 form, the insurer may use the form.
(f) If the form has not been approved or disapproved by the
commissioner before the expiration of the 60-day period described
by Subsection (d) of this section, the form is deemed approved and
the insurer may use the form. The commissioner may not extend the
60-day period for approval or disapproval of a form.
(g) If the department has requested additional information
from the insurer during the 60-day review period provided under
Subsection (d) 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 shall not
be counted in the days to determine what constitutes the 60-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 email or telephone call or postmarked date on the
letter pertaining to the request for additional information.
Sec. 4. REQUIREMENTS FOR FORMS; PLAIN LANGUAGE REQUIREMENT.
(a) Each form filed under this article must comply with applicable
state and federal law.
(b) Each form for a policy of personal automobile insurance
must provide the coverages mandated under Articles 5.06-1 and
5.06-3 of this code unless the coverages are rejected by the named
insured in the manner provided by those articles.
(c) A form may not be used if it is not in plain language.
For the purposes of this section, a form is written in plain
language if it achieves the minimum score established by the
commissioner on the Flesch reading ease test or an equivalent test
selected by the commissioner or, at the option of the commissioner,
if it conforms to the language requirements in a National
Association of Insurance Commissioners model act relating to plain
language. This section does not apply to policy language that is
mandated by state or federal law.
Sec. 5. PERSONAL AUTOMOBILE INSURANCE. (a) A contract or
agreement that is not written into the application for insurance
coverage and the personal automobile insurance policy:
(1) is void and of no effect; and
(2) violates this article and Subchapter A of this
chapter.
(b) A contract or agreement described by Subsection (a) of
this section constitutes grounds for the revocation of the
certificate of authority of an insurer to write personal automobile
insurance in this state.
Sec. 6. PUBLIC INFORMATION. Each form filing and any
supporting information filed under this article are subject to
Chapter 552, Government Code, as of the date the filing is received
by the department.
Sec. 7. DISAPPROVAL; WITHDRAWAL OF APPROVAL. (a) The
commissioner may disapprove a form filed under this article or
withdraw any previous approval of a form filed under this article if
the form:
(1) violates or does not comply with this code or a
valid rule duly adopted by the commissioner or is otherwise
contrary to law; or
(2) contains provisions or has any titles or headings
that are unjust, encourage misrepresentation, are deceptive, or
violate public policy.
(b) If the commissioner disapproves a filing before the 60th
day after the date of the filing of the form with the department,
the commissioner shall issue an order specifying in what respects
the form fails to meet the requirements of this article. The filer
is entitled to a hearing on written request made to the commissioner
not later than the 30th day after the effective date of the
disapproval order.
(c) If the commissioner withdraws approval of a form that is
in effect, the commissioner shall notify in writing the insurer
that made the filing, and may issue a withdrawal of approval order
only after a hearing held not sooner than the 20th day after the
date of the written notice. The order must be issued not later than
the 15th day after the close of the hearing and must specify how the
form fails to meet the requirements of this article. The order must
state the date on which the further use of the form is prohibited.
(d) A commissioner's order disapproving a form or
withdrawing the previous approval of a form, and any notice of the
commissioner's intent to withdraw a previous approval, must state
the grounds for the disapproval or withdrawal of previous approval
in sufficient detail to reasonably inform the filer of the grounds.
(e) An insurer may not use a form in this state after
disapproval or withdrawal of approval of the form by the
commissioner.
Sec. 8. PUBLIC INSURANCE COUNSEL. Notwithstanding Article
1.35A of this code, the office of public insurance counsel may
submit written comments to the commissioner and otherwise
participate regarding individual company filings made under this
article.
Sec. 9. RULEMAKING. The commissioner may adopt reasonable
and necessary rules to implement this article.
PART B. TRANSITION
SECTION 2.02. The commissioner of insurance shall adopt
rules necessary to implement Article 5.143, Insurance Code, as
added by this article, not later than the 120th day after the
effective date of this Act.
SECTION 2.03. In the initial filing of forms under Article
5.143, Insurance Code, as added by this article, the commissioner
of insurance may determine a schedule of staggered filings for
insurers required to make filings under that article. The
commissioner shall notify the insurers of the schedule not later
than the 10th day after the effective date of this Act. The period
for staggered filings under this section may not exceed 120 days
after the effective date of this Act.
ARTICLE 3. USE OF CREDIT SCORING
PART A. CREDIT SCORING
SECTION 3.01. Subchapter B, Chapter 21, Insurance Code, is
amended by adding Article 21.21-10 to read as follows:
Art. 21.21-10. CREDIT SCORING BY INSURERS OF RESIDENTIAL
PROPERTY AND PERSONAL AUTOMOBILES; SANCTIONS
Sec. 1. DEFINITIONS. In this article:
(1) "Adverse action" has the meaning assigned by
Section 603(k), Fair Credit Reporting Act (15 U.S.C. Section
1681a), as amended.
(2) "Credit information" means any information by a
consumer reporting agency bearing on a consumer's credit
worthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living that is
used or expected to be used or collected in whole or in part for the
purpose of serving as a factor in establishing the consumer's
eligibility for credit or insurance.
(3) "Insurance credit score" means a numerical, alpha,
or alphanumerical representation of the insurance risk an
individual presents using some or all of the individual's
attributes derived from a credit report or credit information in a
formula to assess insurance risk on an actuarial or statistical
basis. The term includes "credit score," "credit scoring," and
"insurance score."
(4) "Insurance credit score model" means the
methodology by which an individual's insurance credit score is
determined.
(5) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, farm mutual
insurance company, capital stock company, county mutual insurance
company, Lloyd's plan, surplus lines insurer, or other legal entity
engaged in the business of personal automobile insurance or
residential property insurance in this state. The term includes:
(A) an affiliate as described by Section 2,
Article 21.49-1 of this code or Section 823.003(a) of this code if
that affiliate is authorized to write and is writing personal
automobile insurance or residential property insurance in this
state;
(B) the Texas Windstorm Insurance Association
created and operated under Article 21.49 of this code;
(C) the FAIR Plan Association under Article
21.49A of this code; and
(D) the Texas Automobile Insurance Plan
Association under Article 21.81 of this code.
(6) "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, mobile 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.
(7) "Residential property insurance" means insurance
coverage against loss to residential real property at a fixed
location or tangible personal property provided in a homeowners
policy, which includes a tenant policy, a condominium owners
policy, or a residential fire and allied lines policy.
Sec. 2. USE OF CREDIT INFORMATION BY INSURER. An insurer
that uses credit information in whole or in part in connection with
a determination regarding any of the following must comply with the
requirements of this article:
(1) whether to issue a policy;
(2) the amount and terms of coverage in the policy;
(3) the duration of the policy;
(4) the rates and fees to be charged in the policy;
(5) whether to cancel a policy; or
(6) whether to renew a policy.
Sec. 3. RESTRICTIONS ON THE USE OF CREDIT INFORMATION.
(a) An insurer may not make a determination based in whole or in
part on a credit score that includes:
(1) disputed credit information that is the subject of
a pending dispute;
(2) medical bill collection information;
(3) the number of insurance inquiries or
non-consumer-initiated credit inquiries; or
(4) the person's total available line of credit,
except that the insurer may consider the total amount of
outstanding debt in relation to the total available line of credit.
(b) An insurer may not make a determination based in whole
or in part on the fact that a person has little or no credit history.
(c) An insurer may not make a determination based in whole
or in part on the fact that the insurer is unable to determine a
person's credit score, if the insurer has received complete and
accurate information from the person.
(d) An insurer may not make a determination based in whole
or in part on a person's ownership or possession of a particular
type of credit card, charge card, or debit card.
(e) At the request of an insured or an applicant for
insurance, an insurer shall rerun a credit check if a previous
credit check on an insured or an applicant for insurance provided
incorrect credit information and shall recalculate the credit score
if the credit information changes.
(f) An insurer may not reject an application for, cancel, or
refuse to renew, or determine the rate and fees to be charged for a
personal automobile insurance policy or a residential property
insurance policy predominately on the basis of a credit score. The
commissioner by rule shall define the term "predominately."
(g) The commissioner shall promulgate by rule the allowable
differences in the rates charged by insurers due solely to the
differences in insurance credit scores.
Sec. 4. IMPROPER USES OF CREDIT INFORMATION AND SCORING.
(a) An insurer may not use credit information that is arbitrary,
capricious, or unfairly discriminatory.
(b) An insurer may not use insurance credit scoring or an
insurance credit score model or methodology that incorporates the
race, color, religion, or national origin of an insured or an
applicant for insurance.
(c) An insurer may not use insurance credit scoring or an
insurance credit score model or methodology that incorporates the
gender of an insured or an applicant for insurance.
(d) An insurer may not use insurance inquiries or
non-consumer-initiated credit inquiries as part of the insurance
credit scoring process.
Sec. 5. DISCLOSURE REQUIREMENTS. (a) If an insurance
credit score results in or contributes to an adverse action, the
insurer shall fully explain to the insured or applicant each
specific item or factor which resulted in or contributed to the
adverse action and the weight given to each item or factor. The
insurer shall provide such explanation to the insured or applicant
at or near the time the adverse action is taken or as soon as
practicable thereafter.
(b) Contracting with a vendor to develop insurance credit
scores does not relieve an insurer of its duties under this article.
A contract between an insurer and a vendor must specify how the
information required by this section will be made available to the
insured or the applicant.
(c) An insured or applicant may not be charged a fee for the
information.
(d) An insurer shall require its agents to disclose to its
customers, on a form promulgated by the commissioner, whether
credit information will be obtained on the applicant or insured or
on any other member or members of the applicant's or insured's
household and used as part of the insurance credit scoring process.
If credit information is obtained or used on the applicant or
insured, or on any member of the applicant's or insured's household,
the insurer shall disclose to the applicant the name of each person
on whom credit information was obtained or used and how each
person's credit information was used to underwrite or rate the
policy.
Sec. 6. FILING OF CREDIT SCORING MODELS. An insurer that
uses insurance credit scoring in whole or in part in deciding
whether to take any action described by this article shall file with
the commissioner the insurance credit score models or methodologies
for residential property insurance and personal automobile
insurance used by the insurer. The commissioner may require an
explanation from an insurer, through a promulgated form or in any
other manner, as to how an insurer uses insurance credit scores that
are developed on more than one named insured or resident of a
household. If an insurer contracts with a vendor to develop
insurance credit scores, the insurer shall file the vendor's credit
scoring models or methodologies with the commissioner.
Sec. 7. PUBLIC INFORMATION. A credit scoring model filed
for purposes of compliance with this article, as of the date the
filing is received by the department:
(1) is public information;
(2) is not subject to any exceptions to disclosure
under Chapter 552, Government Code; and
(3) cannot be withheld from disclosure under any other
law.
Sec. 8. RIGHT TO APPEAL. (a) An insurer shall reconsider
an adverse action by the insurer that has been appealed by an
insured or an applicant for insurance.
(b) An appeal may be filed under this section on the basis
of:
(1) catastrophic illness or injury;
(2) temporary loss of employment;
(3) death of an immediate family member; or
(4) any other grounds as determined by the
commissioner by rule as provided by Section 9 of this article.
(c) In considering an appeal, the insurer shall make
reasonable exceptions for credit scores that are adversely affected
by any of the factors specified under Subsection (b) of this
section.
(d) An insurer shall implement a procedure for appeals that
conforms with rules for appeals adopted by the commissioner under
Section 9 of this article.
Sec. 9. RULES; PROCEDURES. (a) The commissioner shall
adopt rules governing the procedure for appeals under Section 8 of
this article, including:
(1) rules regarding:
(A) the time during which an insured or an
applicant for insurance has the right to file an appeal;
(B) the means of notification of the appeals
process;
(C) the grounds for an appeal, which may include
additional grounds for appeal and other exceptions as determined by
the commissioner;
(D) provisions for reasonable, fair, and
nondiscriminatory means of review and determination of an appeal;
(E) the time frame for the appeals decision; and
(F) the means of notification of the appeals
decision; and
(2) any other rules the commissioner determines are
reasonable and necessary to implement the appeals process under
this section and Section 8 of this article.
(b) The commissioner shall adopt any other rules as
necessary to implement the provisions of this article.
Sec. 10. SALE OF POLICY TERM INFORMATION BY CONSUMER
REPORTING AGENCY PROHIBITED. (a) A consumer reporting agency may
not provide or sell data or lists that include any information that,
in whole or in part, was submitted in conjunction with an insurance
inquiry about a consumer's credit information or a request for a
credit report or insurance score, including:
(1) the expiration dates of an insurance policy or any
other information that may identify periods during which a
consumer's insurance may expire; and
(2) the terms and conditions of the consumer's
insurance coverage.
(b) The restriction under Subsection (a) of this section
does not apply to data or lists that the consumer reporting agency
provides to:
(1) the insurance agent from whom information was
received;
(2) the insurer on whose behalf the agent acted; or
(3) the insurer's affiliates.
(c) This section may not be construed to restrict the
ability of an insurer to obtain a claims history report or a report
regarding a motor vehicle.
Sec. 11. INDEMNIFICATION. (a) An insurer shall indemnify,
defend, and hold its agent harmless from and against all liability,
fees, and costs that arise out of or relate to the actions, errors,
or omissions of an agent who obtains or uses credit information or
insurance scores for the insurer if the agent follows the
instructions of or procedures established by the insurer and
complies with any applicable law or rule.
(b) This section may not be construed to establish a cause
of action that does not exist in the absence of this section.
Sec. 12. SANCTIONS. If the commissioner determines that an
insurer has violated any provision of this article, the insurer is
subject, after notice and opportunity for hearing, to sanctions as
provided by Chapters 82 and 84 of this code.
PART B. TRANSITION
SECTION 3.02. Not later than the 120th day after the
effective date of this Act, the commissioner of insurance shall
adopt rules governing the procedures for appeal as provided by
Subsection (a), Section 9, Article 21.21-10, Insurance Code, as
added by this article, and any other rules as necessary to implement
the provisions of Article 21.21–10, as provided by Subsection (b),
Section 9, Article 21.21-10, Insurance Code, as added by this
article.
SECTION 3.03. An insurer that is using an insurance credit
score system on the effective date of this Act must file the
insurance credit scoring models described by Section 6, Article
21.21-10, Insurance Code, as added by this article, with the
commissioner of insurance not later than the 30th day after the
effective date of this Act. An insurer that uses an insurance
credit score system after the effective date of this Act must file
the insurer's insurance credit scoring models with the commissioner
of insurance before using those models.
SECTION 3.04. (a) This article applies only to a
residential property or personal automobile insurance policy:
(1) that is delivered, issued for delivery, or renewed
on or after the effective date of this Act;
(2) the application for which is submitted on or after
the effective date of this Act; or
(3) that is subject to determination of denial,
cancellation, or nonrenewal on or after the effective date of this
Act.
(b) A residential property or personal automobile insurance
policy delivered, issued for delivery, or renewed before the
effective date of this Act, or the application for which is
submitted before the effective date of this Act, or that is subject
to determination of denial, cancellation, or nonrenewal before the
effective date of this Act, 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.
ARTICLE 4. INITIAL RATE FILINGS; RATE REDUCTION
SECTION 4.01. Subchapter C, Chapter 5, Insurance Code, is
amended by adding Articles 5.26-1 and 5.26-2 to read as follows:
Art. 5.26-1. RESIDENTIAL PROPERTY INSURANCE INITIAL RATE
FILINGS; RATE REDUCTION
Sec. 1. APPLICATION; DEFINITIONS. (a) This article
applies only to residential property insurance.
(b) The definitions adopted under Article 5.142 of this code
apply to this article.
Sec. 2. INITIAL RATE FILING. (a) Not later than the 10th
day after the effective date of this article, each insurer subject
to Article 5.142 of this code must file the insurer's rates,
supporting information, and supplementary rating information with
the commissioner. The insurer may notify the department that the
insurer is using the rate filing submitted under Article 5.141 of
this code to comply with the requirements of this article, or the
insurer may file a completely new rate in accordance with the
provisions of Section 4, Article 5.142 of this code.
(b) The department may approve the rate filed by an insurer
under Subsection (a) of this section or modify a filed rate not
later than the 20th day after the effective date of this article for
each insurer with $10 million or more in direct written residential
property insurance premium in this state during 2002 and not later
than the 80th day after the effective date of this article for each
insurer with less than $10 million in direct written residential
property insurance premium. An approved or modified rate under
this subsection must be just, reasonable, adequate, not excessive,
and not unfairly discriminatory for the risks to which it applies.
The department has exclusive jurisdiction to determine a rate under
this subsection. The department shall notify the insurer of the
applicable rate.
Sec. 3. APPEAL TO COMMISSIONER. Not later than the 10th day
after the date of receipt by the insurer of notification from the
department of rates determined by the department under Section 2(b)
of this article, an insurer may appeal the department's decision to
the commissioner.
Sec. 4. HEARING. Not later than the 30th day after the date
of receipt of notification of an insurer's appeal under Section 3 of
this article, the commissioner shall conduct a hearing and issue an
order on the insurer's appeal. The burden of proof is on the
insurer to show, by clear and convincing evidence, that the rate
reduction specified by the department would produce inadequate
rates. Notwithstanding any other provision of this code or the
Government Code, the hearing shall not be conducted by the State
Office of Administrative Hearings, but directly by the
commissioner. The commissioner, by order, may affirm the rate
reduction, grant a lesser rate reduction, or order a greater rate
reduction than the rate reduction imposed under Section 2(b) of
this article.
Sec. 5. JUDICIAL REVIEW. (a) Not later than the 10th day
after the date of receipt of the commissioner's order under Section
4 of this article, an insurer may file a petition for judicial
review in a district court of Travis County. The standard of review
of the commissioner's order is substantial evidence.
(b) During the pendency of the appeal, an insurer may charge
either its existing rates or the rates as ordered by the
commissioner.
Sec. 6. REFUND REQUIRED. If on final appeal the court
upholds the commissioner's determination that the insurer's rates
are excessive, the insurer shall refund the difference in
overcharged premium to each policyholder, plus interest. The
interest rate is the prime rate plus one percent as published in The
Wall Street Journal on the first day of each calendar year that is
not a Saturday, Sunday, or legal holiday.
Art. 5.26-2. PERSONAL AUTOMOBILE INSURANCE INITIAL RATE
FILINGS
Sec. 1. APPLICATION; DEFINITIONS. (a) This article
applies only to personal automobile insurance.
(b) The definitions adopted under Article 5.142 of this code
apply to this article.
Sec. 2. (a) An insurer writing personal automobile
insurance in this state must file its rates for that insurance
coverage with the department in accordance with a schedule
determined by the commissioner.
(b) Rates filed under this section are subject to Article
5.142 of this code.
ARTICLE 5. REGULATION OF UNDERWRITING GUIDELINES
SECTION 5.01. Subchapter A, Chapter 38, Insurance Code, is
amended by amending Section 38.002 and adding Section 38.003 to
read as follows:
Sec. 38.002. UNDERWRITING GUIDELINES FOR PERSONAL
AUTOMOBILE AND RESIDENTIAL PROPERTY INSURANCE; FILING;
CONFIDENTIALITY. (a) In this section:
(1) "Insurer" means an insurance company, reciprocal
or interinsurance exchange, mutual insurance company, farm mutual
insurance company, capital stock company, county mutual insurance
company, Lloyd's plan, a surplus lines insurer, or other legal
entity engaged in the business of personal automobile insurance or
residential property insurance in this state. The term includes:
(A) an affiliate as described by Section 2,
Article 21.49-1, or Section 823.003(a) if that affiliate is
authorized to write and is writing personal automobile insurance or
residential property insurance in this state;
(B) the Texas Windstorm Insurance Association
created and operated under Article 21.49;
(C) the FAIR Plan Association under Article
21.49A; and
(D) the Texas Automobile Insurance Plan
Association under Article 21.81.
(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, mobile 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 residential real property at a fixed
location or tangible personal property provided in a homeowners
policy, which includes a tenant policy, a condominium owners
policy, or a residential fire and allied lines policy.
(4) "Underwriting guideline" means a rule, standard,
guideline, or practice, whether written, oral, or electronic, that
is used by an insurer or its agent to decide whether to accept or
reject an application for coverage under a personal automobile
insurance policy or residential property insurance policy or to
determine how to classify those risks that are accepted for the
purpose of determining a rate.
(b) Each insurer shall file with the department a copy of
the insurer's underwriting guidelines. The insurer shall update
its filing each time the underwriting guidelines are changed. If a
group of insurers files one set of underwriting guidelines for the
group, they shall identify which underwriting guidelines apply to
each company in the group.
(c) The office of public insurance counsel may obtain a copy
of each insurer's underwriting guidelines.
(d) The department or the office of public insurance counsel
may disclose to the public a summary of an insurer's underwriting
guidelines in a manner that does not directly or indirectly
identify the insurer.
(e) Underwriting guidelines must be sound, actuarially
justified, or otherwise substantially commensurate with the
contemplated risk. Underwriting guidelines may not be unfairly
discriminatory.
(f) The underwriting guidelines are subject to Chapter 552,
Government Code.
Sec. 38.003. UNDERWRITING GUIDELINES FOR OTHER LINES;
CONFIDENTIALITY. (a) This section applies to all underwriting
guidelines that are not subject to Section 38.002.
(b) For purposes of this section, "insurer" means a
reciprocal or interinsurance exchange, mutual insurance company,
farm mutual insurance company, capital stock company, county mutual
insurance company, Lloyd's plan, surplus lines insurer, life,
accident, or health or casualty insurance company, health
maintenance organization, mutual life insurance company, mutual
insurance company other than life, mutual, or natural premium life
insurance company, general casualty company, fraternal benefit
society, group hospital service company, or other legal entity
engaged in the business of insurance in this state. The term
includes an affiliate as described by Section 2, Article 21.49-1,
or Section 823.003(a) if that affiliate is authorized to write and
is writing insurance in this state.
(c) The department or the office of public insurance counsel
may obtain a copy of an insurer's underwriting guidelines.
(d) [(b)] Underwriting guidelines are confidential, and the
department or the office of public insurance counsel may not make
the guidelines available to the public.
(e) [(c)] The department or the office of public insurance
counsel may disclose to the public a summary of an insurer's
underwriting guidelines in a manner that does not directly or
indirectly identify the insurer.
(f) [(d)] When underwriting guidelines are furnished to the
department or the office of public insurance counsel, only a person
within the department or the office of public insurance counsel
with a need to know may have access to the guidelines. The
department and the office of public insurance counsel shall
establish internal control systems to limit access to the
guidelines and shall keep records of the access provided.
(g) [(e)] This section does not preclude the use of
underwriting guidelines as evidence in prosecuting a violation of
this code. Each copy of an insurer's underwriting guidelines that
is used in prosecuting a violation is presumed to be confidential
and is subject to a protective order until all appeals of the case
have been exhausted. If an insurer is found, after the exhaustion
of all appeals, to have violated this code, a copy of the
underwriting guidelines used as evidence of the violation is no
longer presumed to be confidential.
(h) [(f)] A violation of this section is a violation of
Chapter 552, Government Code.
ARTICLE 6. WITHDRAWAL REQUIREMENTS
SECTION 6.01. (a) Section 827.001, Insurance Code, as
effective June 1, 2003, is amended to read as follows:
Sec. 827.001. DEFINITIONS [DEFINITION]. In this chapter:
(1) "Affiliate" has the meaning described by Section
823.003(a) if that affiliate is authorized to write and is writing
insurance in this state.
(2) "Insurer" means an insurance company or other
legal entity authorized to engage in the business of insurance in
this state, including a reciprocal or interinsurance exchange, a
Lloyd's plan, a county mutual insurance company, and a farm mutual
insurance company. The term does not include an eligible surplus
lines insurer regulated under Chapter 981[, "rating territory"
means a rating territory established by the department].
(b) Subsection (a), Article 21.49-2C, Insurance Code, as
effective until June 1, 2003, is amended by adding Subdivisions (4)
and (5) to read as follows:
(4) "Affiliate" has the meaning described by Section
2, Article 21.49-1 of this code if that affiliate is authorized to
write and is writing personal automobile insurance or residential
property insurance in this state.
(5) "Insurer" means an insurance company or other
legal entity authorized to engage in the business of insurance in
this state, including a reciprocal or interinsurance exchange, a
Lloyd's plan, a county mutual insurance company, and a farm mutual
insurance company. The term does not include an eligible surplus
lines insurer regulated under Article 1.14-2 of this code.
SECTION 6.02. (a) Section 827.002, Insurance Code, as
effective June 1, 2003, is amended to read as follows:
Sec. 827.002. EXEMPTION. This chapter does not apply to a
transfer of business from an insurer to a company that:
(1) is under common ownership with the insurer; [and]
(2) is authorized to engage in the business of
insurance in this state; and
(3) is not a reciprocal or interinsurance exchange, a
Lloyd's plan, a county mutual insurance company, or a farm mutual
insurance company.
(b) Subsection (b), Article 21.49-2C, Insurance Code, as
effective until June 1, 2003, is amended to read as follows:
(b) This article does not apply to the transfer of the
business from an insurer to a company that is under common
ownership, is admitted to do business in this state, and is not a
reciprocal or interinsurance exchange, a Lloyd's plan, a county
mutual insurance company, or a farm mutual insurance company.
SECTION 6.03. (a) Section 827.003, Insurance Code, as
effective June 1, 2003, is amended to read as follows:
Sec. 827.003. WITHDRAWAL PLAN REQUIRED. An [authorized]
insurer shall file with the commissioner a plan for orderly
withdrawal if the insurer proposes to:
(1) withdraw from writing a line of insurance in this
state or reduce the insurer's total annual premium volume by 75
percent or more; or
(2) reduce, in a rating territory, the insurer's total
annual premium volume in a [personal] line of personal automobile
[motor vehicle comprehensive] or residential property insurance by
50 percent or more.
(b) Subsections (a) and (g), Article 21.49-2C, Insurance
Code, as effective until June 1, 2003, are amended to read as
follows:
(a)(1) An [authorized] insurer shall file with the
commissioner a plan for orderly withdrawal if the insurer proposes
to withdraw from writing a line of insurance in this state or to
reduce its total annual premium volume by 75 percent or more or
proposes, in a [personal] line of personal automobile [motor
vehicle comprehensive] or residential property insurance, to
reduce its total annual premium volume in a rating territory by 50
percent or more. The insurer's plan shall be constructed to protect
the interests of the people of this state and shall indicate the
date it intends to begin and complete its withdrawal plan and must
contain provisions for:
(A) meeting the insurer's contractual
obligations;
(B) providing service to its Texas policyholders
and claimants; and
(C) meeting any applicable statutory
obligations, such as the payment of assessments to the guaranty
fund and participation in any assigned risk plans or joint
underwriting arrangements.
(2) If within six months after a catastrophic event of
natural origin an insurer, in response to such catastrophic event,
wishes to restrict its writing of new business in a [personal] line
of personal automobile [comprehensive motor vehicle] or
residential property insurance in a rating territory, it shall
prepare and file a plan as to such proposed plan of restriction with
the commissioner for the commissioner's review and approval, unless
the commissioner finds that any line of insurance described in the
filed withdrawal plan is not offered in the state in a quantity or
manner adequate to cover the risks or protect the interests of the
citizens or potential policyholders of the state in consideration
of the impact of the catastrophic event. If the commissioner makes
this finding, then the commissioner may order the date that the
withdrawal begins and may modify, restrict, or limit the withdrawal
in any manner the commissioner decides, in the discretion of the
commissioner [comment. Approval of such plan is not required and
the insurer may institute such plan 15 days after filing]. However,
in the event of a conflict between Subsections (a)(1) and (a)(2),
where not accepting new business may result in a withdrawal as
defined in Subsection (a)(1), Subsection (a)(1) controls.
(3) "Insurer" means an insurance company or other
legal entity authorized to engage in the business of insurance in
this state, including a reciprocal or interinsurance exchange, a
Lloyd's plan, a county mutual insurance company, and a farm mutual
insurance company. The term does not include an eligible surplus
lines insurer regulated under Article 1.14-2 of this code ["Rating
territory" means a rating territory established by the Texas
Department of Insurance].
(g) The commissioner may impose a moratorium of up to two
years on the approval of plans for withdrawal or implementation of
plans to restrict the writing of new business pursuant to
Subsection (a)(2) of this section, including those such plans
implemented subsequent to the commissioner's publishing of notice
of intention to impose a moratorium regarding the catastrophic
event related to such plans, and may renew the moratorium annually.
To impose or renew a moratorium, the commissioner must find after
notice and public hearing that a catastrophic event has occurred
and that as a result of the event, the relevant line of insurance is
not reasonably expected to be available to a substantial number of
policyholders or potential policyholders in this state, or in the
case of [personal] lines of personal automobile [motor vehicle
comprehensive] or residential property insurance, in a rating
territory. Such notice and hearing shall be governed by provisions
of Chapter 2001, Government Code, related to contested cases and of
Subsection (b), Article 1.33B, Insurance Code. The commissioner
shall, by rule, establish reasonable criteria for applying the
above set forth standards for determining whether to impose a
moratorium. The commissioner may limit a moratorium on withdrawal
from or reduction in personal lines insurance to certain
geographical areas of this state.
SECTION 6.04. (a) Section 827.005, Insurance Code, as
effective June 1, 2003, is amended to read as follows:
Sec. 827.005. APPROVAL OF WITHDRAWAL PLAN REQUIRED.
(a) The commissioner shall approve a withdrawal plan that
adequately provides for meeting the requirements prescribed by
Section 827.004(3), unless the commissioner finds that any line of
insurance described in the filed withdrawal plan is not offered in
the state in a quantity or manner adequate to cover the risks or
protect the interests of the citizens or potential policyholders of
the state. If the commissioner makes such a finding, then the
commissioner may order the date that the withdrawal begins and may
modify, restrict, or limit the withdrawal in any manner the
commissioner decides, in the discretion of the commissioner.
(b) A withdrawal plan is deemed approved if the
commissioner:
(1) does not hold a hearing on the plan before the 61st
[31st] day after the date the plan is filed with the commissioner;
or
(2) does not deny approval before the 61st [31st] day
after the date a hearing on the plan is held.
(b) Subsections (e) and (f), Article 21.49-2C, Insurance
Code, as effective until June 1, 2003, are amended to read as
follows:
(e)(1) The commissioner shall approve the plan if it
adequately provides for:
(A) [(1)] meeting the insurer's contractual
obligations;
(B) [(2)] providing service to its Texas
policyholders and claimants; and
(C) [(3)] meeting any applicable statutory
obligations, such as the payment of assessments to the guaranty
fund and participation in any assigned risk plans or joint
underwriting arrangements.
(2) Notwithstanding the provisions of Subdivision
(1), if the commissioner finds that any line of insurance described
in the filed withdrawal plan is not offered in the state in a
quantity or manner adequate to cover the risks or protect the
interests of the citizens or potential policyholders of the state
then the commissioner may order the date that the withdrawal begins
and may modify, restrict, or limit the withdrawal in any manner the
commissioner decides, in the discretion of the commissioner.
(f) The withdrawal plan shall be deemed approved if the
commissioner has not held a hearing before the 61st day [within 30
days] after the plan is filed with the commissioner or has not
denied approval before the 61st day [within 30 days] after the
hearing. An insurer that withdraws from writing insurance in this
state or that reduces its total annual premium volume by 75 percent
or more in any year without receiving the commissioner's approval
is subject to the civil penalties under Article 1.10 of this code.
SECTION 6.05. Section 827.008, Insurance Code, as effective
June 1, 2003, is amended to read as follows:
Sec. 827.008. RESTRICTION PLAN. (a) Before an insurer, in
response to a catastrophic natural event that occurred during the
preceding six months, may restrict writing new business in a rating
territory in a [personal] line of personal automobile
[comprehensive motor vehicle] or residential property insurance,
the insurer must file a proposed restriction plan with the
commissioner for the commissioner's review and approval, unless the
commissioner finds that any line of insurance described in the
filed withdrawal plan is not offered in the state in a quantity or
manner adequate to cover the risks or protect the interests of the
citizens or potential policyholders of the state in consideration
of the impact of the catastrophic event. If the commissioner makes
this finding, then the commissioner may order the date that the
withdrawal begins and may modify, restrict, or limit the withdrawal
in any manner the commissioner decides, in the discretion of the
commissioner [comment].
(b) A [The commissioner's approval of a restriction plan
filed under Subsection (a) is not required. An insurer that files a
restriction plan may institute the plan on or after the 15th day
after the date the plan is filed.
[(c) Notwithstanding Subsection (b), a] withdrawal plan
must be filed and approved under Sections 827.003 and 827.004 if an
insurer's decision not to accept new business in a [personal] line
of personal automobile [comprehensive motor vehicle] or
residential property insurance results in a reduction of the
insurer's total annual premium volume by 50 percent or more.
SECTION 6.06. Subsection (d), Section 827.010, Insurance
Code, as effective June 1, 2003, is amended to read as follows:
(d) To impose or renew a moratorium under this section, the
commissioner must determine, after notice and hearing, that a
catastrophic event has occurred and that as a result of that event a
particular line of insurance is not reasonably expected to be
available to a substantial number of policyholders or potential
policyholders in this state or, in the case of [personal] lines of
personal automobile [motor vehicle comprehensive] or residential
property insurance, in a rating territory.
SECTION 6.07. Subsections (a) and (b), Article 21.11-1,
Insurance Code, are amended to read as follows:
(a) After an agency contract has been in effect for a period
of two years an insurance company writing fire and casualty
insurance in this state, specifically including a reciprocal or
interinsurance exchange, mutual insurance company, capital stock
company, county mutual insurance company, association, or Lloyd's
plan company, may not terminate or suspend an agency contract or
terminate one or more lines of insurance included within the agency
contract with any appointed agent unless the company gives the
agent notice in writing of the termination or suspension at least
six months in advance. As used in this article, "suspend" means the
temporary cessation of business relations and refusal to accept
insurance contracts [contract] submitted by the agent and shall not
include situations in which business is suspended immediately
following a natural disaster.
(b) The company shall renew all contracts or lines of
insurance included within the agency contract for fire and casualty
insurance for the agent during a period of six months from the
effective date of the termination or suspension, but in the event
any risk shall not meet current underwriting standards of the
company, the company may decline its renewal, provided that the
company shall give the agent not less than 60 days' notice of its
intention not to renew the contract or line of insurance. The
company's written underwriting standards shall be provided to its
agents who have been terminated at the same time the company first
notifies the agent of the company's intention to terminate the
agent's contract or a line of insurance. The written underwriting
standards that the insurer furnishes to its terminated agents must
conform to the same underwriting standards that were in effect for
that agent before the company's decision to terminate or suspend
the agent's contract or a line of insurance. Notwithstanding the
provisions of this section, an insurance company may furnish
different underwriting standards to different agents of the
company, so long as such underwriting standards are not used in ways
that intentionally or otherwise serve to prevent or discourage the
renewal of the insurance policies of terminated agents. An
insurance company that is renewing contracts or lines of insurance
under this subsection shall pay to the terminated agent commissions
for those renewals according to the same commission schedule that
was in effect for that agent before the company's decision to
terminate the agency contract or line of insurance. A terminated
agent must be allowed to pay to the company all sums due according
to the same accounts current payment terms that are in effect for
agents of the company who have not been terminated. An insurance
company that is renewing contracts or lines of insurance under this
subsection may not require a terminated agent to convert from
agency billing to company billing during the termination period
unless that agent agrees to such conversion in writing.
SECTION 6.08. Subsection (a), Article 17.22, Insurance
Code, is amended to read as follows:
(a) County mutual insurance companies shall be exempt from
the operation of all insurance laws of this state, except such laws
as are made applicable by their specific terms or as in this Chapter
specifically provided. In addition to such other Articles as may be
made to apply by other Articles of this Code, county mutual
insurance companies shall be subject to:
(1) Subdivision 7 of Article 1.10 of this Code; and
(2) Articles 1.15, 1.15A, 1.16, 1.24, 2.04, 2.05,
2.08, 2.10, 4.10, 5.12, 5.37, 5.38, 5.39, 5.40, 5.49, 21.21,
21.21-1, and 21.49 of this Code.
SECTION 6.09. Subsection (b), Article 18.23, Insurance
Code, is amended to read as follows:
(b) In addition to such Articles as may be made to apply by
other Articles of this Chapter, underwriters at a Lloyds' shall not
be exempt from and shall be subject to Articles 1.15A, 2.20, 5.35,
5.38, 5.39, 5.40, 5.49, 21.21, 21.11-1, and 21.49-8 of this Code.
SECTION 6.10. (a) This article applies only to a reduction
or withdrawal of a line of insurance by an insurer on or after the
effective date of this Act. A reduction or withdrawal of a line of
insurance by an insurer before the effective date of this Act 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.
(b) The change in law made by this article to Article
21.49-2C, Insurance Code, shall not be construed as affecting the
repeal of that article by Chapter 1419, Acts of the 77th
Legislature, Regular Session, 2001.
ARTICLE 7. DEPARTMENT REVIEW
SECTION 7.01. Article 1.15, Insurance Code, is amended by
adding Section 11 to read as follows:
Sec. 11. (a) The department shall review any insurer or
group of insurers licensed to write private passenger automobile or
residential property insurance in this state for purposes of
ascertaining the business practices, performance, and operations
of an insurer. Insurers shall make available to the department for
review or duplication all papers, books, records, documents, files,
or other relevant information.
(b) The review shall be independent of the examination of
financial condition of the insurer, and include but not be limited
to advertising, trade, rating, claim, underwriting, and other
practices, performance, or operations not wholly related to the
financial solvency of an insurer.
(c) For insurers with a market share greater than five
percent in either private passenger automobile or residential
property insurance, the department shall conduct a review no less
than every 12 months. For insurers with a market share less than or
equal to five percent in either private passenger automobile or
residential property insurance, the department shall conduct a
review no less than every two years. The period between reviews
shall begin on the completion of the previous review under this
section. Market share shall be determined by the most recent four
consecutive calendar quarters for which market share data is
available.
(d) The department may conduct nonfinancial and financial
reviews of an insurer under this article simultaneously. The
review shall result in distinct and separate reports on financial
practices, performance, and operations and on nonfinancial
practices, performance, and operations.
(e) The department shall publish a schedule of mandatory
reviews no later than September 1 of each year for the upcoming
12-month period. The schedule shall not preclude the department
from conducting reviews on a more frequent basis. To the greatest
extent possible, the department shall notify an insurer of an
upcoming review not on the published schedule, unless there is
probable and documented cause for a known violation of this code and
notification may result in the possible destruction or alteration
of information subject to review under this article.
(f) This section shall not be construed to be exclusive
authority or limit reviews, reports, or remedies in any manner. All
other provisions of this code or any other law are in addition to,
and shall be harmonized with, the provisions of this section.
SECTION 7.02. The Texas Department of Insurance shall
publish the schedule for reviews under Section 11, Article 1.15,
Insurance Code, as added by this article, no later than 90 days
after the effective date of this Act. All initial reviews shall be
completed in accordance with the schedule published by the
commissioner of insurance.
ARTICLE 8. INSURANCE DISCRIMINATION
SECTION 8.01. Article 21.21-6, Insurance Code, as added by
Chapter 415, Acts of the 74th Legislature, Regular Session, 1995,
is amended by adding Section 6 to read as follows:
Sec. 6. CRIMINAL PENALTY. (a) In this section, "person"
means a legal entity described in Sections (2)(a), (b), (e), (f),
and (j) of this article, or its officers or directors.
(b) A person commits an offense if the person, with criminal
negligence:
(1) offers insurance coverage at a premium based on a
rate that is, because of race, color, religion, or national origin,
different than another premium rate offered or used by the person
for the same coverage; or
(2) collects an insurance premium based on a rate that
is, because of race, color, religion, or national origin, different
than another premium rate offered or used by the person for the same
coverage.
(c) An offense under this section is a state jail felony.
ARTICLE 9. RATES STANDARDS
SECTION 9.01. Chapter 1, Insurance Code, is amended by
adding Article 1.02 to read as follows:
Art. 1.02. RATING. Rates adopted under this code must be
just, fair, reasonable, adequate, not confiscatory and not
excessive for the risks to which they apply, and not unfairly
discriminatory.
ARTICLE 10. CONFORMING AND OTHER AMENDMENTS; REPEALER
SECTION 10.01. Subsection (f), Article 5.01, Insurance
Code, is amended to read as follows:
(f) Notwithstanding Subsections (a) through (d) of this
article, on and after the effective date of Subchapter Q of this
chapter [March 1, 1992], rates for personal automobile insurance in
this state are determined as provided by that subchapter, and rates
for commercial automobile [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].
SECTION 10.02. Section 4, Article 5.01C, Insurance Code, is
amended to read as follows:
Sec. 4. FORMS. An insurer selling short-term liability
insurance policies under this article must use the policy forms
adopted by the commissioner under Article 5.06 of this code or filed
and approved as provided by Article 5.143 of this code [unless the
insurer is exempt from using those forms].
SECTION 10.03. Subsection (b), Article 5.01-2, Insurance
Code, as effective until June 1, 2003, is amended to read as
follows:
(b) On and after the effective date of Subchapter Q of this
chapter [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 Q [M] of
this chapter.
SECTION 10.04. Section 4, Article 5.01-4, Insurance Code,
is amended to read as follows:
Sec. 4. APPLICABILITY OF CERTAIN LAWS. (a) In reporting
incurred losses and earned premiums as required under this
[subchapter, Subchapter M of this chapter, or Chapter 17 of this]
code, an insurer shall separately report experience based on use of
the mile-based rating plan and the time-based rating plan.
(b) The classifications used by an insurer for motor
vehicles insured under the mile-based rating plan are exempt from
the provisions of this subchapter other than this article [and
Subchapter M of this chapter].
SECTION 10.05. Subsection (g), Article 5.03, Insurance
Code, is amended to read as follows:
(g) Notwithstanding Sections (a) through (e) of this
article, on and after the effective date of Subchapter Q of this
chapter [March 1, 1992], rates for personal automobile insurance in
this state are determined as provided by that subchapter, and rates
for commercial automobile insurance in this state [motor vehicles]
are determined as provided by Article 5.13-2 [Subchapter M] of this
code [chapter].
SECTION 10.06. Subsections (b) and (c), Section 2, Article
5.03-2, Insurance Code, are amended to read as follows:
(b) An insurer shall, on receipt of written verification
from the insured that the insured motorbicycle is equipped with a
qualifying antitheft device, grant a discount in the premiums
charged for comprehensive insurance for a motorcycle or
motorbicycle in an amount greater than a Category I or Category II
discount if the department [State Board of Insurance], by rule,
authorizes additional discounts based on the installation of
additional antitheft devices that are designed for use on
motorcycles or motorbicycles.
(c) The discounts under this article shall be set by the
department based on sound actuarial principles [State Board of
Insurance].
SECTION 10.07. Subsection (c), Section 2, Article 5.03-3,
Insurance Code, is amended to read as follows:
(c) The commissioner by rule shall set, based on sound
actuarial principles, the amount of the discounts applicable under
this article and may adopt other rules necessary for the
implementation of this article.
SECTION 10.08. Subsection (a), Article 5.03-4, Insurance
Code, is amended to read as follows:
(a) The commissioner shall by rule set, based on sound
actuarial principles, a [require a five percent premium] discount
applicable to a personal motor vehicle insurance policy for
completion of a drug and alcohol driving awareness program that has
been approved by the Texas Education Agency under the Texas Driver
and Traffic Safety Education Act (Article 4413(29c), Vernon's Texas
Civil Statutes).
SECTION 10.09. Subsection (f), Section 2, Article 5.03-5,
Insurance Code, is amended to read as follows:
(f) The commissioner by rule shall set, based on sound
actuarial principles, the amount of the discount applicable under
this article and may adopt other rules necessary for the
implementation of this article, including rules identifying youth
groups whose members are eligible for a discount under this
article.
SECTION 10.10. Subchapter A, Chapter 5, Insurance Code, is
amended by adding Article 5.03-6 to read as follows:
Art. 5.03-6. PREMIUM DISCOUNT FOR MORE AUTOS THAN
OPERATORS. (a) For purposes of this article, "motor vehicle"
means any private passenger vehicle or utility type vehicle, with a
gross vehicle weight of 25,000 pounds or less, of the pickup body,
sedan delivery, panel truck, van type, and multi-use type, not used
for the delivery or transportation of goods, materials, or supplies
other than samples; unless the delivery of goods, materials, or
supplies is not the primary usage of the vehicle, or unless used for
farming or ranching.
(b) An insurer who writes, delivers, or issues for delivery
in this state personal automobile insurance as defined by Article
5.143 of this code, for a motor vehicle, in addition to any
applicable multi-car discount, shall provide a discount for motor
vehicles in excess of operators in a household.
(c) The commissioner by rule shall set, based on sound
actuarial principles, the amount of the discount applicable under
this article and may adopt other rules necessary for the
implementation of this article.
SECTION 10.11. Subsection (c), Article 5.04, Insurance
Code, is amended to read as follows:
(c) Notwithstanding Subsections (a) and (b) of this
article, on and after the effective date of Subchapter Q of this
chapter [March 1, 1992], rates for personal automobile insurance in
this state are determined as provided by that subchapter, and rates
for commercial automobile insurance in this state [motor vehicles]
are determined as provided by Article 5.13-2 [Subchapter M] of this
code [chapter].
SECTION 10.12. Article 5.06, Insurance Code, is amended by
adding Subsection (12) to read as follows:
(12) Notwithstanding Subsections (1)-(8) of this article,
policy forms and endorsements for personal automobile insurance in
this state are regulated as provided by Article 5.143 of this code.
An insurer may continue to use the policy forms and endorsements
adopted or approved by the commissioner under this article that the
insurer used immediately before the effective date of Article 5.143
of this code on notification to the commissioner in writing that the
policy forms and endorsements will continue to be used.
SECTION 10.13. Subsection (2), Article 5.06-1, Insurance
Code, is amended to read as follows:
(2) For the purpose of these coverages: (a) the term
"uninsured motor vehicle" shall, subject to the terms and
conditions of such coverage, be deemed to include an insured motor
vehicle where the liability insurer thereof is unable to make
payment with respect to the legal liability of its insured within
the limits specified therein because of insolvency.
(b) The term "underinsured motor vehicle" means an
insured motor vehicle on which there is valid and collectible
liability insurance coverage with limits of liability for the owner
or operator which were originally lower than, or have been reduced
by payment of claims arising from the same accident to, an amount
less than the limit of liability stated in the underinsured
coverage of the insured's policy.
(c) The commissioner [Board] may, in the policy forms
adopted under Article 5.06 of this code, define "uninsured motor
vehicle" to exclude certain motor vehicles whose operators are in
fact uninsured. The commissioner may in the policy forms filed and
approved under Article 5.143 of this code allow the term "uninsured
motor vehicle" to be defined to exclude certain motor vehicles
whose operators are in fact uninsured.
(d) The portion of a policy form adopted under Article
5.06 of this code or filed and approved under Article 5.143 of this
code to provide coverage under this article shall include
provisions that, regardless of the number of persons insured,
policies or bonds applicable, vehicles involved, or claims made,
the total aggregate limit of liability to any one person who
sustains bodily injury or property damage as the result of any one
occurrence shall not exceed the limit of liability for these
coverages as stated in the policy and the total aggregate limit of
liability to all claimants, if more than one, shall not exceed the
total limit of liability per occurrence as stated in the policy; and
shall provide for the exclusion of the recovery of damages for
bodily injury or property damage or both resulting from the
intentional acts of the insured. The portion of a policy form
adopted under Article 5.06 of this code or filed and approved under
Article 5.143 of this code to provide coverage under this article
shall require that in order for the insured to recover under the
uninsured motorist coverages where the owner or operator of any
motor vehicle which causes bodily injury or property damage to the
insured is unknown, actual physical contact must have occurred
between the motor vehicle owned or operated by such unknown person
and the person or property of the insured.
SECTION 10.14. Article 5.06-6, Insurance Code, is amended
to read as follows:
Art. 5.06-6. COVERAGES FOR SPOUSES AND FORMER SPOUSES. A
personal automobile policy or any similar policy form adopted or
approved by the commissioner [State Board of Insurance] under
Article 5.06 of this code or filed and approved under Article 5.143
of this code that covers liability arising out of ownership,
maintenance, or use of a motor vehicle of a spouse, who is otherwise
insured by the policy, shall contain a provision to continue
coverage for the spouse during a period of separation in
contemplation of divorce.
SECTION 10.15. Subsection (c), Article 5.09, Insurance
Code, is amended to read as follows:
(c) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for personal automobile insurance in this state are
determined as provided by that subchapter, and rates for commercial
automobile insurance in this state [motor vehicles] are determined
as provided by Article 5.13-2 [Subchapter M] of this code
[chapter].
SECTION 10.16. Subsection (c), Article 5.11, Insurance
Code, is amended to read as follows:
(c) Notwithstanding Subsections (a) and (b) of this
article, on and after the effective date of Subchapter Q of this
chapter [March 1, 1992], rates for personal automobile insurance in
this state are determined as provided by that subchapter, and rates
for commercial automobile insurance in this state [motor vehicles]
are determined as provided by Article 5.13-2 [Subchapter M] of this
code [chapter].
SECTION 10.17. Article 5.13, Insurance Code, is amended to
read as follows:
Art. 5.13. SCOPE OF SUBCHAPTER [SUB-CHAPTER]. (a) This
subchapter [Sub-chapter] applies to every insurance company,
corporation, interinsurance exchange, mutual, reciprocal,
association, Lloyd's plan, [Lloyds] or other organization or
insurer writing any of the characters of insurance business herein
set forth, hereinafter called "Insurer"; provided that nothing in
this entire subchapter [Sub-chapter] shall [ever] be construed to
apply to any county or farm mutual insurance company or
association, as regulated under Chapters 16 and 17 of this code,
except that Section 8, Article 5.13-2 of this code, shall apply to a
county mutual insurance company with respect to commercial
automobile insurance [Code].
(b) This subchapter [Sub-chapter] applies to the writing of
casualty insurance and the writing of fidelity, surety, and
guaranty bonds, on risks or operations in this State except as
herein stated.
(c) This subchapter [Sub-chapter] does not apply to the
writing of motor vehicle, life, health, accident, professional
liability, reinsurance, aircraft, fraternal benefit, fire,
lightning, tornado, windstorm, hail, smoke or smudge, cyclone,
earthquake, volcanic eruption, rain, frost and freeze, weather or
climatic conditions, excess or deficiency of moisture, flood, the
rising of the waters of the ocean or its tributaries, bombardment,
invasion, insurrection, riot, civil war or commotion, military or
usurped power, any order of a civil authority made to prevent the
spread of a conflagration, epidemic or catastrophe, vandalism or
malicious mischief, strike or lockout, water or other fluid or
substance, resulting from the breakage or leakage of sprinklers,
pumps, or other apparatus erected for extinguishing fires, water
pipes or other conduits or containers, or resulting from casual
water entering through leaks or opening in buildings or by seepage
through building walls, including insurance against accidental
injury of such sprinklers, pumps, fire apparatus, conduits or
container, workers' [workmen's] compensation, inland marine, ocean
marine, marine, or title insurance; nor does this subchapter
[Sub-chapter] apply to the writing of explosion insurance, except
insurance against loss from injury to person or property which
results accidentally from steam boilers, heaters or pressure
vessels, electrical devices, engines and all machinery and
appliances used in connection therewith or operation thereby.
(d) This subchapter [Sub-chapter] shall not be construed as
limiting in any manner the types or classes of insurance which may
be written by the several types of insurers under appropriate
statutes or their charters or permits.
(e) The regulatory power herein conferred is vested in the
commissioner [Board of Insurance Commissioners of the State of
Texas. Within the Board, the Casualty Insurance Commissioner shall
have primary supervision of regulation herein provided, subject
however to the final authority of the entire Board].
SECTION 10.18. The heading to Article 5.13-2, Insurance
Code, is amended to read as follows:
Art. 5.13-2. RATES FOR GENERAL LIABILITY, COMMERCIAL
AUTOMOBILE, AND COMMERCIAL PROPERTY INSURANCE COVERAGE
SECTION 10.19. Sections 1 and 2, Article 5.13-2, Insurance
Code, are amended to read as follows:
Sec. 1. PURPOSE. This article governs the regulation of
general liability, commercial automobile, commercial property,
which shall include farm and ranch owners and farm and ranch
policies, all commercial casualty, and medical professional
liability insurance rates and forms. It does not govern
[automobile,] fidelity, surety, or guaranty bonds. The purposes of
this article are to:
(1) promote the public welfare by regulating insurance
rates to prohibit excessive, inadequate, or unfairly
discriminatory rates;
(2) promote availability of insurance;
(3) promote price competition among insurers to
provide rates and premiums that are responsive to competitive
market conditions;
(4) prohibit price-fixing agreements and other
anticompetitive behavior by insurers;
(5) regulate the insurance forms used for lines of
insurance subject to this article to ensure that they are not
unjust, unfair, inequitable, misleading, or deceptive; and
(6) provide regulatory procedures for the maintenance
of appropriate information reporting systems.
Sec. 2. SCOPE. This article applies to all lines of general
liability, commercial automobile, commercial property, all
commercial casualty, and medical professional liability insurance
written under policies or contracts of insurance issued by a
licensed insurer, other than a fidelity, surety, or guaranty bond
or an automobile insurance policy.
SECTION 10.20. Subdivision (2), Section 3, Article 5.13-2,
Insurance Code, is amended to read as follows:
(2) "Insurer" means an insurer to which Article 5.13
of this code applies, but does not include the Texas Windstorm
Insurance Association. However, the provisions of Sections 4, 5,
6, and 7 of this article shall not apply to Lloyd's plans or
reciprocals with respect to commercial property insurance. The
provisions of Section 8 of this article shall apply to county mutual
insurance companies with respect to commercial automobile
insurance.
SECTION 10.21. Subsection (b), Article 5.25, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code. This
subsection does not affect the requirement for the commissioner to
conduct inspections of commercial property and prescribe a manual
of rules and rating schedules for commercial property under this
subchapter.
SECTION 10.22. Subsection (b), Article 5.25A, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.23. Article 5.25-2, Insurance Code, is amended
to read as follows:
Art. 5.25-2. CITY FIRE LOSS LISTS
Sec. 1. In this article,
[(1)] "list" means the list of fire and lightning
losses in excess of $100 paid under policy forms adopted or approved
by the commissioner [board] under Article 5.35 of this code or filed
and approved as provided by Article 5.143 of this code [subchapter]
in a particular city or town prepared by the department [State Board
of Insurance] for distribution to the city or town[;
[(2) "board" means the State Board of Insurance].
Sec. 2. (a) The department [board] shall compile for each
city or town in Texas a list of the insured fire losses paid under
policy forms adopted or approved by the commissioner [board] under
Article 5.35 of this code or filed and approved as provided by
Article 5.143 of this code [subchapter] in that city or town for the
preceding statistical year.
(b) The list shall include:
(1) the names of persons recovering losses under
policy forms adopted or approved by the commissioner [board] under
Article 5.35 of this code or filed and approved as provided by
Article 5.143 of this code [subchapter];
(2) the addresses or locations where the losses
occurred; and
(3) the amount paid by the insurance company on each
loss.
(c) The department [board] shall obtain the information to
make the lists from insurance company reports of individual losses
during the statistical year.
Sec. 3. Upon the request of any city or town, or its duly
authorized agent or fire marshal [marshall], the department [board]
shall provide that city or [and] town with a copy of the list for its
particular area.
Sec. 4. Each city or town shall investigate its list to
determine the losses actually occurring in its limits and shall
make a report to the department, [board] which report shall
include:
(1) a list of the losses that actually occurred in the
limits of the city or town;
(2) a list of any losses not occurring in the limits of
the city or town; and
(3) other evidence essential to establishing the
losses in the city or town.
Sec. 5. The department [board] shall make such changes or
corrections as to it shall seem appropriate in order to correct the
list of insured fire and lightning losses paid under policy forms
adopted or approved by the commissioner [board] under Article 5.35
of this code or filed and approved as provided by Article 5.143 of
this code [subchapter] in a particular city or town and said list of
losses, as changed or corrected, shall be used to determine the fire
record credit or debit for each particular city or town for the next
year.
Sec. 6. The commissioner [board] shall set and collect a
charge for compiling and providing a list of fire and lightning
losses paid under policy forms adopted or approved by the
commissioner [board] under Article 5.35 of this code or filed and
approved as provided by Article 5.143 of this code [subchapter] in a
particular city or town and as the commissioner [board] shall deem
appropriate to administer the fire record system.
Sec. 7. The department [board] is authorized to require
each and every city or town in the State of Texas and each and every
insurance company or carrier of every type and character whatsoever
doing business in the State of Texas to furnish to it a complete and
accurate list of all fire and lightning losses occurring within the
State of Texas and reflected in their records for the purpose of
accumulating statistical information for the control and
prevention of fires.
Sec. 8. The department [board] may, at its discretion,
furnish such list only during such time as the fire record system
remains in force and effect.
SECTION 10.24. Subsection (i), Article 5.26, Insurance
Code, is amended to read as follows:
(i) Notwithstanding Subsections (a)-(h) of this article, on
and after the effective date of Subchapter Q of this chapter
[March 1, 1992], rates for homeowners and residential fire and
residential allied lines insurance coverage under this subchapter
are determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.25. Subsection (d), Article 5.28, Insurance
Code, is amended to read as follows:
(d) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.26. Subsection (b), Article 5.29, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.27. Subsection (b), Article 5.30, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.28. Subsection (b), Article 5.31, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.29. Subsection (b), Article 5.32, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.30. Subdivision (3), Section 1, Article 5.33A,
Insurance Code, is amended to read as follows:
(3) "Department" ["Board"] means the Texas Department
[State Board] of Insurance.
SECTION 10.31. Subsection (c), Section 3, Article 5.33A,
Insurance Code, is amended to read as follows:
(c) The inspector who is assigned by the city or county
shall inspect the property and shall file a written report with the
department [Board] stating the inspector's findings and whether or
not the property qualifies for a premium reduction.
SECTION 10.32. Subsection (a), Section 4, Article 5.33A,
Insurance Code, is amended to read as follows:
(a) If the inspector's report states that the applicant's
property qualifies for a premium reduction, the department [board]
shall issue to the applicant a premium reduction certificate
entitling him or her to a premium reduction on the homeowners
insurance.
SECTION 10.33. Section 5, Article 5.33A, Insurance Code, is
amended to read as follows:
Sec. 5. AMOUNT OF PREMIUM REDUCTION. The department
[board] shall establish by rule, based on sound actuarial
principles, the amount of premium reduction applicable under this
article to homeowners insurance.
SECTION 10.34. Subsection (e), Section 6, Article 5.33A,
Insurance Code, is amended to read as follows:
(e) The department [Board] may adopt rules that set
standards for alternative specifications to protect a person's
property that are at least as effective as those listed in this
section. Such alternative specifications shall entitle a person's
property meeting such specifications to a similar homeowners
premium reduction under this article.
SECTION 10.35. Section 9, Article 5.33A, Insurance Code, is
amended to read as follows:
Sec. 9. ASSUMPTION OF POWERS, DUTIES, AND RESPONSIBILITIES
BY BOARD. If for any reason the commission is unable to assume the
powers, duties, and responsibilities given to it under this
article, the department [board] shall designate a successor to
exercise those powers, duties, and responsibilities.
SECTION 10.36. Section 5, Article 5.33B, Insurance Code, as
added by Chapter 337, Acts of the 74th Legislature, Regular
Session, 1995, is amended to read as follows:
Sec. 5. AMOUNT OF PREMIUM REDUCTION. The commissioner
shall establish by rule, based on sound actuarial principles, the
amount of a premium reduction applicable under this article to a
homeowners insurance policy.
SECTION 10.37. Subsection (b), Section 3, Article 5.33C,
Insurance Code, is amended to read as follows:
(b) The commissioner shall establish by rule, based on sound
actuarial principles, the amount of discount applicable under this
article. The commissioner may adopt rules necessary for the
implementation of this article.
SECTION 10.38. Subsection (b), Article 5.34, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.39. Article 5.35, Insurance Code, is amended by
adding Subsection (k) to read as follows:
(k) Notwithstanding Subsections (a)-(j) of this article,
policy forms and endorsements for residential property insurance in
this state are regulated as provided by Article 5.143 of this code.
An insurer may continue to use the policy forms and endorsements
adopted or approved by the commissioner under this article that the
insurer used immediately before the effective date of Article 5.143
of this code on notification to the commissioner in writing that the
policy forms and endorsements will continue to be used.
SECTION 10.40. Article 5.35-1, Insurance Code, is amended
to read as follows:
Art. 5.35-1. COVERAGES FOR SPOUSES AND FORMER SPOUSES. A
homeowner's policy or fire policy promulgated under Article 5.35 of
this code or filed and approved as provided by Article 5.143 of this
code may not be delivered, issued for delivery, or renewed in this
state unless the policy contains the following language: "It is
understood and agreed that this policy, subject to all other terms
and conditions contained in this policy, when covering residential
community property, as defined by state law, shall remain in full
force and effect as to the interest of each spouse covered,
irrespective of divorce or change of ownership between the spouses
unless excluded by endorsement attached to this policy until the
expiration of the policy or until canceled in accordance with the
terms and conditions of this policy."
SECTION 10.41. Article 5.36, Insurance Code, is amended to
read as follows:
Art. 5.36. WRITTEN EXPLANATION OF CERTAIN ENDORSEMENTS
REQUIRED. An insurer may not use an endorsement to a policy form to
which Article 5.35 of this code or Article 5.143 of this code
applies that reduces the amount of coverage, unless requested by
the insured, that would otherwise be provided under the policy
unless the insurer provides the policyholder with a written
explanation of the change made by the endorsement before the
effective date of the change.
SECTION 10.42. Subsection (b), Article 5.39, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined, and hearings related to those rates are conducted, as
provided by Subchapter Q [M] of this chapter, and rates for other
lines of insurance subject to this subchapter are determined as
provided by Article 5.13-2 of this code.
SECTION 10.43. Subsection (d), Article 5.40, Insurance
Code, is amended to read as follows:
(d) Notwithstanding Subsections (a)-(c) of this article, on
and after the effective date of Subchapter Q of this chapter
[March 1, 1992], rates for homeowners and residential fire and
residential allied lines insurance coverage under this subchapter
are determined, and hearings related to those rates are conducted,
as provided by Subchapter Q [M] of this chapter, and rates for other
lines of insurance subject to this subchapter are determined as
provided by Article 5.13-2 of this code.
SECTION 10.44. Subsection (b), Article 5.41, Insurance
Code, is amended to read as follows:
(b) Notwithstanding Subsection (a) of this article, on and
after the effective date of Subchapter Q of this chapter [March 1,
1992], rates for homeowners and residential fire and residential
allied lines insurance coverage under this subchapter are
determined as provided by Subchapter Q [M] of this chapter, and
rates for other lines of insurance subject to this subchapter are
determined as provided by Article 5.13-2 of this code.
SECTION 10.45. Subsection (g), Article 5.53, 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 program created under Subchapter M of this
chapter does not apply to this article.]
SECTION 10.46. Subsection (a-1), Article 5.96, 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 Q [M] of this chapter.
SECTION 10.47. (a) Section 5, Article 17.25, Insurance
Code, as effective until June 1, 2003, is amended to read as
follows:
Sec. 5. POLICY FORMS PRESCRIBED. Each county mutual
insurance company shall be subject to the provisions of Articles
[Article] 5.06, [and Article] 5.35, and 5.143 of this code [Code].
County [The Board of Insurance Commissioners pursuant to Article
5.35 may in its discretion make, promulgate and establish uniform
policies for county] mutual insurance companies shall file policy
forms under Article 5.143 of this code or continue to use the
standard policy forms and endorsements promulgated under Articles
5.06 and 5.35 of this code on notification to the commissioner in
writing that the forms will continue to be used [different from the
uniform policies made, promulgated and established for use by
companies other than county mutual insurance companies, and shall
prescribe the conditions under which such policies may be adopted
and used by county mutual insurance companies, and the conditions
under which such companies shall adopt and use the same forms and no
others as are prescribed for other companies].
(b) Section 912.152, Insurance Code, as effective June 1,
2003, is amended to read as follows:
Sec. 912.152. POLICY FORMS. (a) A county mutual insurance
company is subject to Articles 5.06, [and] 5.35, and 5.143.
(b) County [The commissioner, in accordance with Article
5.35, may adopt for use by county] mutual insurance companies shall
file policy forms under Article 5.143 or continue to use the
standard policy forms and endorsements promulgated under Articles
5.06 and 5.35 on notification to the commissioner in writing that
the forms will continue to be used [uniform policy forms that differ
from the forms adopted for use by other companies and shall
prescribe the conditions under which a county mutual insurance
company:
[(1) may use the policy forms adopted under this
subsection; or
[(2) shall use the policy forms adopted for other
companies].
SECTION 10.48. (a) Section 6, Article 17.25, Insurance
Code, as effective until June 1, 2003, is amended to read as
follows:
Sec. 6. FILE OF SCHEDULE OF CHARGES. As part of the rate
filings required under Article 5.142 of this code, a county mutual
insurance company [Such companies] shall file with the department
[Board] a schedule of its rates, the amount of policy fee,
inspection fee, membership fee, or initial charge by whatever name
called, proposed to be charged to its policyholders or those
applying for policies. The filing of this information shall be in
accordance with the requirements of Article 5.142 of this code.
(b) Section 912.201, Insurance Code, as effective June 1,
2003, is amended to read as follows:
Sec. 912.201. SCHEDULE OF CHARGES. As part of the rate
filings required under Article 5.142, a [A] county mutual insurance
company shall file with the department a schedule of the amounts the
company proposes to charge [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." The filing of this
information shall be in accordance with the requirements of Article
5.142.
SECTION 10.49. Section 8, Article 21.77, Insurance Code, is
amended to read as follows:
Sec. 8. POLICY FORMS. All policy forms for insurance
written under this article shall be prescribed by the commissioner
[board] as provided in Article 5.06 of this code or filed and in
effect as provided in Article 5.143 of this code[, Insurance Code].
SECTION 10.50. (a) Section 912.002, Insurance Code, as
effective June 1, 2003, is amended by amending Subsection (a) and
adding Subsection (c) to read as follows:
(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.
(c) Rate regulation for a personal automobile insurance
policy written by a county mutual insurance company is subject to
Subchapter Q, Chapter 5. Rate regulation for a residential
property insurance policy written by a county mutual insurance
company is subject to Subchapter Q, Chapter 5. The commissioner may
adopt rules as necessary to implement this subsection.
(b) Subsection (b), Article 17.22, Insurance Code, as
effective until June 1, 2003, is amended to read as follows:
(b) Rate regulation for a personal automobile insurance
policy written by a county mutual insurance company is subject to
Subchapter Q, Chapter 5 of this code. Rate regulation for a
residential property insurance policy written by a county mutual
insurance company is subject to Subchapter 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].
SECTION 10.51. Section 912.152, Insurance Code, as
effective June 1, 2003, is amended to read as follows:
Sec. 912.152. POLICY FORMS. (a) A county mutual insurance
company is subject to Articles 5.06, [and] 5.35, and 5.143.
(b) County [The commissioner, in accordance with Article
5.35, may adopt for use by county] mutual insurance companies shall
file policy forms under Article 5.143 or continue to use the
standard policy forms and endorsements promulgated under Articles
5.06 and 5.35 on notification to the commissioner in writing in the
manner prescribed by Article 5.143 that those forms will continue
to be used [uniform policy forms that differ from the forms adopted
for use by other companies and shall prescribe the conditions under
which a county mutual insurance company:
[(1) may use the policy forms adopted under this
subsection; or
[(2) shall use the policy forms adopted for other
companies].
SECTION 10.52. (a) Subsection (b), Section 941.003,
Insurance Code, as effective June 1, 2003, is amended to read as
follows:
(b) A Lloyd's plan is subject to:
(1) Section 5, Article 1.10;
(2) Article 1.15A;
(3) Subchapter A, Chapter 5;
(4) Articles 5.35, 5.38, 5.39, 5.40, [and] 5.49,
5.142, and 5.143;
(5) Articles 21.21 and 21.49-8; and
(6) Sections 822.203, 822.205, 822.210, and 822.212.
(b) Article 18.23, Insurance Code, as effective until
June 1, 2003, is amended by adding Subsection (c) to read as
follows:
(c) Rate regulation for a personal automobile insurance
policy written by a Lloyd's plan is subject to Subchapter Q, Chapter
5 of this code. Rate regulation for a residential property
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.
SECTION 10.53. (a) Subsection (b), Section 942.003,
Insurance Code, as effective June 1, 2003, is amended to read as
follows:
(b) An exchange is subject to:
(1) Section 5, Article 1.10;
(2) Articles 1.15, 1.15A, and 1.16;
(3) Subchapter A, Chapter 5;
(4) Articles 5.35, 5.37, 5.38, 5.39, [and] 5.40,
5.142, and 5.143;
(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.
(b) Article 19.12, Insurance Code, as effective until
June 1, 2003, is amended by adding Subsection (c) to read as
follows:
(c) Rate regulation for a personal automobile insurance
policy written by a reciprocal or interinsurance exchange is
subject to Subchapter Q, Chapter 5 of this code. Rate regulation
for a residential property 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.
SECTION 10.54. Subsection (d), Section 502.153,
Transportation Code, is amended to read as follows:
(d) A personal automobile policy used as evidence of
financial responsibility under this section must comply with
Article 5.06 or 5.143, Insurance Code.
SECTION 10.55. Subsection (c), Section 521.143,
Transportation Code, is amended to read as follows:
(c) A personal automobile insurance policy used as evidence
of financial responsibility under this section must comply with
Article 5.06 or 5.143, Insurance Code.
SECTION 10.56. The following laws are repealed:
(1) Subsection (h), Article 5.26, and Articles 5.50,
5.101, and 40.061, Insurance Code;
(2) as effective June 1, 2003, Subsection (c), Section
941.003, and Subsection (c), Section 942.003, Insurance Code; and
(3) Section 4C, Article 5.73, Insurance Code.
ARTICLE 11. LEGISLATIVE OVERSIGHT COMMITTEE
SECTION 11.01. Subchapter E, Chapter 21, Insurance Code, is
amended by adding Article 21.49-20 to read as follows:
Art. 21.49-20. PROPERTY AND CASUALTY LEGISLATIVE OVERSIGHT
COMMITTEE. (a) In this section, "committee" means the property
and casualty insurance legislative oversight committee.
(b) The committee is composed of seven members as follows:
(1) the chair of the Senate Business and Commerce
Committee and the chair of the House Committee on Insurance, who
shall serve as joint chairs of the committee;
(2) two members of the senate appointed by the
lieutenant governor;
(3) two members of the house of representatives
appointed by the speaker of the house of representatives; and
(4) the public insurance counsel.
(c) An appointed member of the committee serves at the
pleasure of the appointing official. In making appointments to the
committee, the appointing officials shall attempt to appoint
persons who represent the gender composition, minority
populations, and geographic regions of the state.
(d) The committee is subject to Chapter 325, Government Code
(Texas Sunset Act). Unless continued in existence as provided by
that chapter, the committee is abolished September 1, 2007.
(e) The committee shall:
(1) meet at least annually with the commissioner;
(2) receive information about rules relating to
property and casualty insurance proposed by the department, and may
submit comments to the commissioner on those proposed rules;
(3) monitor the progress of property and casualty
insurance regulation reform, including the fairness of rates,
underwriting guidelines, and rating manuals, the availability of
coverage, the effect of rate rollbacks, credit scoring, and
regulation of homeowners and automobile insurance markets; and
(4) review recommendations for legislation proposed
by the department.
(f) The committee may request reports and other information
from the department as necessary to carry out this section.
(g) Not later than November 15 of each even-numbered year,
the committee shall report to the governor, lieutenant governor,
and speaker of the house of representatives on the committee's
activities under Subsection (e). The report shall include:
(1) an analysis of any problems caused by property and
casualty insurance regulation reform; and
(2) recommendations of any legislative action
necessary to address those problems and to foster stability,
availability, and competition within the property and casualty
insurance industry.
ARTICLE 12. GENERAL TRANSITION; SEVERABILITY; EFFECTIVE DATE
SECTION 12.01. The amendment of statutory provisions by
this Act does not affect the repeal of those provisions by Section
31, Chapter 1419, Acts of the 77th Legislature, Regular Session,
2001.
SECTION 12.02. Except as provided by Section 3.04 of this
Act, this Act applies to an insurance policy that is delivered,
issued for delivery, or renewed on or after the effective date of
this Act. A policy delivered, issued for delivery, or renewed
before the effective date of this Act 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 12.03. If any provision of this Act or its
application to any person or circumstance is held invalid, the
invalidity does not affect other provisions or applications of this
Act that can be given effect without the invalid provision or
application, and to this end the provisions of this Act are declared
to be severable.
SECTION 12.04. 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.