80R8398 DLF-D

By: West, Royce S.B. No. 828

A BILL TO BE ENTITLED

AN ACT

relating to the collection and use of certain information by insurers and related entities.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subtitle G, Title 5, Insurance Code, is amended by adding Chapter 752 to read as follows: CHAPTER 752. DATA MINING AND PATTERN RECOGNITION

Sec. 752.001. DEFINITION. In this chapter, "regulated entity" means each insurer or other organization regulated by the department, including:

(1) a domestic or foreign, stock or mutual, life, health, or accident insurance company;

(2) a domestic or foreign, stock or mutual, fire or casualty insurance company;

(3) a Mexican casualty company;

(4) a domestic or foreign Lloyd's plan;

(5) a domestic or foreign reciprocal or interinsurance exchange;

(6) a domestic or foreign fraternal benefit society;

(7) a domestic or foreign title insurance company;

(8) an attorney's title insurance company;

(9) a stipulated premium company;

(10) a nonprofit legal service corporation;

(11) a health maintenance organization;

(12) a statewide mutual assessment company;

(13) a local mutual aid association;

(14) a local mutual burial association;

(15) an association exempt under Section 887.102;

(16) a nonprofit hospital, medical, or dental service corporation, including a company subject to Chapter 842;

(17) a county mutual insurance company; and

(18) a farm mutual insurance company.

Sec. 752.002. COLLECTION OF INFORMATION CONCERNING DATA MINING AND PATTERN RECOGNITION TECHNOLOGY. (a) The commissioner by rule may require a regulated entity to report to the department concerning:

(1) technologies used by the entity to identify relationships among variables that are used to predict differences in expected losses of covered persons or applicants for coverage or that are otherwise used in activities of regulated entities; and

(2) the manner in which the regulated entity uses the technologies described by Subdivision (1) in:

(A) underwriting and creating and defining risk classifications;

(B) setting rates and premiums;

(C) detecting fraudulent claims;

(D) identifying subrogation opportunities;

(E) improving marketing; or

(F) performing other activities identified by the commissioner.

(b) In exercising the commissioner's authority under this section, the commissioner may require that regulated entities report with respect to selected lines of insurance or selected segments of the market and may limit the reporting to specific uses of relationships derived from the technologies.

(c) Underwriting guidelines and related information obtained by the commissioner under this section are subject to Section 38.002 or 38.003, as appropriate. Disclosure of other information obtained under this section is governed by Chapter 552, Government Code.

Sec. 752.003. OVERSIGHT OF DATA MINING AND PATTERN RECOGNITION TECHNOLOGY. (a) The commissioner may limit the use of relationships derived from a technology described in Section 752.002 if the commissioner finds that technology incorporates any factor not previously used by the regulated entity in underwriting or establishing rates or rating tiers.

(b) The limitations adopted under Subsection (a) may:

(1) require regulated entities that file classifications of risks, rates, or rating tier differentials to phase in, over two or more renewal periods, the application or use of the classifications, rates, or rating tier differentials;

(2) include limitations on the number of rating classifications or prohibit specified classifications, as necessary or appropriate to preserve a reasonable level of risk transfer;

(3) require tests for covariance among classifications or rating variables to avoid overlap among the classifications or rating variables;

(4) require assignment of a greater weight to classifications or rating variables that:

(A) promote loss prevention; or

(B) promote the availability of insurance in underserved areas; or

(5) require periodic reconfirmation of the assignment of rating classifications or rating variables over time.

Sec. 752.004. REPORT TO LEGISLATURE. The department shall include in its biennial report to the legislature under Section 32.022 information concerning the use of relationships derived from technologies described by Section 752.002(a)(1) by regulated entities. The report must describe the impact that the use of those relationships has on insurance and other coverage for covered persons and applicants for coverage in this state, and may include recommendations for proposed legislation appropriate to regulate these technologies.

SECTION 2. 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, 2007.