79R6738 KCR-D
By: Rose H.B. No. 2822
A BILL TO BE ENTITLED
AN ACT
relating to the regulation of personal automobile insurance and
residential property insurance in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RATE REGULATION FOR PERSONAL AUTOMOBILE AND RESIDENTIAL
PROPERTY INSURANCE
SECTION 1.01. Article 5.13-2, Insurance Code, is amended by
adding Sections 17, 18, and 19 to read as follows:
Sec. 17. TRANSITIONAL RATE REGULATION FOR LINES OF PERSONAL
INSURANCE. (a) The definitions under Section 18 of this article
apply to this section.
(b) Notwithstanding any other law, from September 1, 2006,
through August 31, 2007, this section governs rates for lines of
personal insurance.
(c) An insurer may not use a rate for a line of personal
insurance other than a rate filed and approved under Section 4,
Article 5.14, of this code or issued under Section 5, Article 5.14,
of this code unless the rate has been filed with the department and
approved by the commissioner under Section 5A of this article.
(d) This section expires September 1, 2007. The expiration
of this section does not affect an action or proceeding against an
insurer subject to this article for failure to comply with this
section before the expiration of this section, regardless of when
the action or proceeding was commenced, and this section is
continued in effect only for that purpose.
Sec. 18. BENCHMARK RATE REGULATION FOR LINES OF PERSONAL
INSURANCE; OPERATION. (a) In this section:
(1) "Benchmark rate" means the rate promulgated
biennially by the commissioner under Subsection (c) of this section
by line for personal insurance, relative to which the flexibility
bands apply.
(2) "Flexibility band" means the range of rates below
and above the benchmark rates set by the commissioner by line,
within which an insurer, during the two-year period for which a
benchmark rate is in effect, may increase or decrease the rates used
by the insurer without prior approval by the commissioner.
(3) "Personal insurance" means personal automobile
insurance as defined by Article 5.145 of this code and residential
property insurance.
(b) Notwithstanding any other law, on and after September 1,
2007, rates used by an insurer in lines of personal insurance are
determined under this section through the application of
flexibility bands to benchmark rates and, except as provided by
this section, are implemented on a file and use basis.
(c) The commissioner, subject to Section 19 of this article,
shall promulgate by rule a benchmark rate and a flexibility band for
each line of personal insurance. A benchmark rate and the
flexibility band accompanying the benchmark rate promulgated under
this subsection are in effect from September 1 of the odd-numbered
year in which the benchmark rate and the flexibility band are
promulgated through August 31 of the next odd-numbered year. The
commissioner shall set a benchmark rate and a flexibility band to
produce a range that:
(1) promotes stability in a line of insurance; and
(2) produces rates that:
(A) comply with Section 4(d) of this article; and
(B) are not confiscatory.
(d) In promulgating a benchmark rate or flexibility band,
the commissioner shall consider the rate standards under Section
4(b) of this article that an insurer must consider in setting rates.
(e) An insurer that changes a rate used by the insurer that
is established within the flexibility band:
(1) shall file, in accordance with Section 5 of this
article, the changed rate and all other information required under
Section 5 of this article with the department in the manner
prescribed by rule by the commissioner; and
(2) may use the filed rate beginning on the date
specified by the insurer in the filing.
(f) An insurer that changes a rate used by the insurer that
is established outside the upper and lower limits of the
flexibility band shall file the changed rate and all other
information required under Section 5 of this article with the
department in the manner prescribed by rule by the commissioner and
may not use the filed rate without the prior approval of the
commissioner. Except as provided by this subsection and Subsection
(g) of this section, a filing made by an insurer under this
subsection is considered approved by the commissioner unless the
commissioner disapproves the filing not later than the 60th day
after the date of the filing. The commissioner shall disapprove a
filing under this subsection only if the filing does not produce
rates that are just, reasonable, adequate, and not excessive for
the risks to which the rates apply. If the commissioner requests
additional information regarding the filing, the commissioner
shall act not later than the 60th day after the date the response to
that request is received by the department.
(g) An insurer, the public insurance counsel, and any other
interested person may request, within 30 days of a filing under
Subsection (f) of this section, that the commissioner hold a
hearing on an insurer's prior approval filing. The commissioner
shall conduct a hearing requested under this subsection in
accordance with Chapter 2001, Government Code. After a hearing
under this subsection, the commissioner has 60 days to disapprove a
filing or the filing is deemed approved.
(h) In seeking approval of an insurer's filing for a rate
outside the flexibility band, the burden of proof is on the insurer
making the filing to show, by clear and convincing evidence, that,
if the rate proposed by the insurer:
(1) exceeds the upper limit of the flexibility band,
the rates available within the flexibility band are confiscatory or
will cause a lack of availability in the relevant market; or
(2) is less than the lower limit of the flexibility
band, approval of the filing will not adversely affect the
financial condition of the insurer.
(i) An approved rate outside the flexibility band takes
effect, after approval, on the date specified by the insurer, but
not later than the 60th day after the date of the approval.
(j) A person aggrieved by an order of the commissioner
setting benchmark rates or flexibility bands, not later than the
30th day after the date on which the commissioner issued the order,
may appeal the order. An appeal of an order under this subsection
must be made in accordance with Subchapter D, Chapter 36, of this
code.
(k) An insurer that writes insurance in a line of personal
insurance is subject to the rate standards described by Section 4 of
this article.
(l) Chapter 2001, Government Code, applies to all hearings
conducted under this section.
(m) Notwithstanding any other law, Sections 5(c) and (d) of
this article and any other provision of this article that conflicts
with this section do not apply to a hearing held under this section.
Sec. 19. BENCHMARK RATE REGULATION FOR LINES OF PERSONAL
INSURANCE; ESTABLISHMENT OF BENCHMARK RATE AND FLEXIBILITY BAND;
LEGISLATIVE OVERSIGHT. (a) On or before September 1 of each
even-numbered year, the commissioner shall hold hearings, conduct
studies, and adopt rules as necessary to formulate the benchmark
rates and flexibility bands to be presented to the legislature for
approval or modification under Subsection (c) of this section.
(b) On or before January 15 of each odd-numbered year, the
commissioner shall present a report to the governor, the lieutenant
governor, the speaker of the house, and each member of the
legislature:
(1) summarizing the commissioner's conclusions
following the hearings and studies under Subsection (a) of this
section; and
(2) proposing benchmark rates and flexibility bands to
be used for lines of personal insurance during the two years
beginning on the September 1 immediately following the regular
legislative session.
(c) After receiving the commissioner's report under
Subsection (b) of this section, the legislature may, through a
bill, approve or modify the proposed benchmark rates and
flexibility bands. If no bill approving or modifying the proposed
benchmark rates and flexibility bands takes effect, the proposed
benchmark rates and flexibility bands take effect on the September
1 immediately following the regular legislative session.
(d) On or before September 1 of each odd-numbered year, the
commissioner shall adopt rules as necessary to promulgate the
benchmark rates and flexibility bands that will be in effect from
September 1 of the odd-numbered year in which the benchmark rates
and flexibility bands are promulgated through August 31 of the next
odd-numbered year.
SECTION 1.02. The change in law made this article applies
only to a policy of personal insurance that is delivered, issued for
delivery, or renewed on or after September 1, 2006. An insurance
policy that is delivered, issued for delivery, or renewed before
September 1, 2006, is covered by the law in effect at the time the
policy was delivered, issued for delivery, or renewed, and that law
is continued in effect for that purpose.
SECTION 1.03. This article takes effect September 1, 2006.
ARTICLE 2. RATE FILING AND RATE ASSESSMENT
SECTION 2.01. Subchapter B, Chapter 5, Insurance Code, is
amended by adding Article 5.14 to read as follows:
Article 5.14. FILING OF RESIDENTIAL PROPERTY AND PERSONAL
AUTOMOBILE INSURANCE RATES FOR RATE ASSESSMENT
Sec. 1. APPLICABILITY; DEFINITIONS. (a) This article
applies only to residential property and personal automobile
insurance.
(b) The definitions under Article 5.13-2 of this code apply
to this article.
Sec. 2. CONSTRUCTION WITH OTHER LAW. (a) Notwithstanding
any other law, rates for residential property and personal
automobile insurance are governed by this article from the
effective date of this article until the completion of the rate
assessment under this article and any resulting hearings or other
proceedings under this article.
(b) When the rate assessment and any resulting hearings or
other proceedings under this article are completed, rates for
residential property and personal automobile insurance are
governed by Sections 17, 18, and 19, Article 5.13-2, of this code.
Sec. 3. RATE STANDARDS. (a) A rate filed by an insurer
under Section 4 of this article or a rate ordered by the
commissioner following a rate hearing under Section 5 of this
article may not be excessive, inadequate, unfairly discriminatory,
or unreasonable.
(b) A rate ordered by the commissioner following a rate
hearing under Section 5 of this article must comply with the rate
standards described by Subsection (a) of this section and may not be
confiscatory.
Sec. 4. RATE FILING; RATE ASSESSMENT. (a) Not later than
the 20th day after the effective date of this article, each insurer
writing residential property or personal automobile insurance that
is also subject to Article 5.13-2 of this code shall file with the
commissioner the insurer's rates, supporting information, and
supplementary rating information. If the insurer has made a rate
filing under Article 5.13-2 of this code not more than 30 days
before the effective date of this article, the insurer may:
(1) notify the department that the insurer is using
the rate filing submitted under Article 5.13-2 of this code to
comply with the requirements of this article; or
(2) file an update to the material filed under Article
5.13-2 of this code.
(b) If, after reviewing a filing under Subsection (a) of
this section, the commissioner determines that the filing does not
contain information sufficient to allow the commissioner to
determine if the filed rate meets all rate standards under Section 3
of this article, not later than the 10th day after the insurer makes
the filing, the commissioner may request in writing any specific
additional information from the insurer necessary to make the
determination.
(c) Not later than the 30th day after the date the
department receives an insurer's filing under Subsection (a) of
this section, the commissioner shall:
(1) if the filed rate meets all rate standards under
Section 3 of this article, approve the filed rate; or
(2) if the filed rate fails to meet any rate standard
under Section 3 of this article, disapprove the filed rate and issue
an order specifying in what respects the filed rate fails to comply
with the rate standards.
Sec. 5. HEARING. If the commissioner disapproves a rate
under Section 4(c)(2) of this article, the department shall hold a
rate hearing and the commissioner shall issue an order in
accordance with Chapter 40 of this code.
Sec. 6. JUDICIAL REVIEW. (a) Not later than the 10th day
after the date an insurer receives the commissioner's order issued
under Section 5 of this article, the 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 an appeal under this section, the
insurer may charge either the insurer's existing rates or the rate
ordered by the commissioner under Section 5 of this article.
Sec. 7. REFUND. If on final appeal a court upholds the
commissioner's order issued under Section 5 of this article, the
insurer shall refund the difference in overcharged premium, if any,
plus interest to each policyholder. The interest rate is the prime
rate for the calendar year in which the refund is issued, plus six
percent.
Sec. 8. EXPIRATION. (a) This article expires September 1,
2006.
(b) The expiration of this article does not affect an action
or proceeding against an insurer subject to this article for a
failure to comply with this article before the expiration of this
article, regardless of when the action or proceeding was commenced,
and this article is continued in effect only for that purpose.
SECTION 2.02. (a) Article 5.14, Insurance Code, as added by
this article, applies to an insurer who is writing residential
property or personal automobile insurance in this state on the
effective date of this Act.
(b) This article applies to a residential property or
personal automobile insurance policy that is delivered, issued for
delivery, or renewed on or after the effective date of this Act and
to rates for such a policy. A residential property or personal
automobile insurance policy delivered, issued for delivery, or
renewed before the effective date of this Act and the rates for such
a policy are 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 3. CONFORMING AMENDMENTS
SECTION 3.01. Section 5A, Article 5.13-2, Insurance Code,
is amended by adding Subsection (a-1) to read as follows:
(a-1) The commissioner by order shall require an insurer to
file with the commissioner all rates, supplementary rate
information, and any supporting information as prescribed by this
section if an insurer subject to Section 17 of this article intends
to use a rate other than a rate filed and approved under Section 4,
Article 5.14, of this code or issued under Section 5, Article 5.14,
of this code. This subsection expires September 1, 2007.
SECTION 3.02. Section 7, Article 5.12-3, Insurance Code, is
amended by adding Subsection (d) to read as follows:
(d) Notwithstanding any other law, this section does not
apply to a rate regulated under Section 18 of this article.
SECTION 3.03. Section 13, Article 5.13-2, Insurance Code,
is repealed.
ARTICLE 4. EFFECTIVE DATE
SECTION 4.01. This Act takes effect September 1, 2005.