79R11219 KCR-F

By:  Wentworth                                                    S.B. No. 1822



A BILL TO BE ENTITLED

AN ACT

relating to competition in certain insurance markets.                         
	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:                        
	SECTION 1.  Article 1.02, Insurance Code, is amended by 
amending Subsection (c) and adding Subsection (d) to read as 
follows:
	(c)  Except as otherwise provided by this code and subject to 
Subsection (d) of this article, for [For] purposes of this code
[article], a rate is:
		(1)  excessive if the rate is likely to produce a 
long-term profit that is unreasonably high in relation to the 
insurance coverage provided;
		(2)  inadequate if the rate is insufficient to sustain 
projected losses and expenses to which the rate applies, and 
continued use of the rate:
			(A)  endangers the solvency of an insurer using 
the rate; or               
			(B)  has the effect of substantially lessening 
competition or creating a monopoly within any market; or
		(3)  unfairly discriminatory if the rate:                                     
			(A)  is not based on sound actuarial principles;                             
			(B)  does not bear a reasonable relationship to 
the expected loss and expense experience among risks; or
			(C)  is based in whole or in part on the race, 
creed, color, ethnicity, or national origin of the policyholder or 
an insured.
	(d)  For purposes of Subsection (c)(1) of this article and 
subject to Article 1.03 of this code, rates for a particular line of 
insurance are presumed not to be excessive, unless the commissioner 
has determined that the market for that line of insurance is 
noncompetitive under Article 1.03.  In a noncompetitive market, 
rates are excessive if:
		(1)  the rates produce or are likely to produce a 
long-term profit that is unreasonably high in relation to the 
insurance coverage provided; or
		(2)  expenses associated with the insurance coverage 
provided are unreasonably high in relation to services rendered or 
coverage provided.
	SECTION 2.  Chapter 1, Insurance Code, is amended by adding 
Article 1.03 to read as follows:
	Art. 1.03.  MARKET COMPETITIVENESS.  (a)  This article 
applies only to a line of insurance for which rates are regulated 
under this code.
	(b)  The department shall periodically evaluate the 
competitiveness of the market for each line of insurance described 
by Subsection (a) of this article to determine whether a sufficient 
degree of market competition exists within each line to give 
consumers a reasonable choice in obtaining insurance coverage in 
that line of insurance.  In determining whether a sufficient degree 
of market competition exists, the department shall presume a market 
to be competitive and shall consider all factors relevant to market 
competition, including:
		(1)  the number, market share, and concentration of 
insurers actively engaged in writing business in that line of 
insurance;
		(2)  the existence of rate differentials in that line 
of insurance;  
		(3)  ease of entry into the market for that line of 
insurance; and   
		(4)  whether the long-term profitability of insurers in 
that line of insurance is unreasonable in relation to the risks 
covered.
	(c)  After the department has evaluated the competitiveness 
of the market for a particular line of insurance, the commissioner 
may, after notice and hearing, issue an order stating that the 
market for the particular line of insurance is noncompetitive.
	(d)  An order issued under Subsection (c) of this article 
expires on the first anniversary of the date on which the order is 
issued, unless, before the order expires, the commissioner holds a 
subsequent hearing and determines that the market for that 
particular line of insurance remains noncompetitive, in which case 
the order expires on the first anniversary of the subsequent 
hearing.
	SECTION 3.  Section 4(d), Article 5.13-2, Insurance Code, is 
amended to read as follows:
	(d)  Rates established under this article may not be 
excessive, inadequate, unreasonable, or unfairly discriminatory 
for the risks to which they apply.  For purposes of this article, 
Articles 1.02(c) and (d) and Article 1.03 of this code govern 
whether a rate is excessive.
	SECTION 4.  The changes in law made by this Act apply only to 
a rate in effect on or after January 1, 2006.  A rate in effect 
before January 1, 2006, is governed by the law in effect immediately 
before the effective date of this Act, and that law is continued in 
effect for that purpose.
	SECTION 5.  This Act takes effect September 1, 2005.