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.