81R14635 TJS-D

By: McClendon H.B. No. 3258

A BILL TO BE ENTITLED

AN ACT

relating to automobile insurance loss ratios and premiums, and the collection and use of certain data by insurers regarding automobile insurance; providing administrative penalties.

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

SECTION 1. Chapter 1953, Insurance Code, is amended by adding Subchapter D to read as follows:

SUBCHAPTER D. DATA MINING AND PATTERN RECOGNITION

Sec. 1953.151. APPLICABILITY OF SUBCHAPTER. This subchapter applies to an insurer writing automobile insurance in this state, including an insurance company, reciprocal or interinsurance exchange, county mutual insurance company, farm mutual insurance company, Lloyd's plan, or other insurer.

Sec. 1953.152. COLLECTION OF INFORMATION CONCERNING DATA MINING AND PATTERN RECOGNITION. (a) The commissioner by rule may require an insurer to report to the department concerning:

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

(2) the manner in which the insurer intends to use the relationships derived from the technologies described by Subdivision (1) in:

(A) underwriting and creating and defining risk classifications;

(B) setting rates and premiums, as applicable;

(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 insurers report with respect to 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 38.003. Other information obtained under this section is commercial information not subject to the disclosure requirements of Chapter 552, Government Code.

Sec. 1953.153. ADMINISTRATIVE PENALTIES. If the department determines that an insurer has violated this chapter or a rule adopted under this chapter, the department shall assess administrative penalties against the insurer in the manner provided by Chapter 84. The amount of an administrative penalty imposed under this section shall be based on:

(1) the seriousness of the violation, including the nature, circumstances, extent, or gravity of the violation; and

(2) the economic harm caused by the violation.

Sec. 1953.154. 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 the technologies described by Section 1953.152 by insurers. The information must include the impact of the use of those relationships on insurance and other coverage to covered persons and applicants for coverage in this state. The report must include, as applicable, recommendations for proposed legislation appropriate to regulate the use of relationships derived from the technologies and means to facilitate availability of insurance in underserved markets.

SECTION 2. Subtitle C, Title 10, Insurance Code, is amended by adding Chapter 1956 to read as follows:

CHAPTER 1956. AUTOMOBILE INSURANCE LOSS RATIO AND PREMIUMS

Sec. 1956.001. DEFINITIONS. In this chapter:

(1) "Direct losses incurred" means the sum of direct losses paid plus an estimate of losses to be paid in the future for all claims arising from the current reporting period and all prior periods, minus the corresponding estimate made at the close of business for the preceding period. This amount does not include home office and overhead costs, advertising costs, commissions and other acquisition costs, taxes, capital costs, administrative costs, or claims processing costs.

(2) "Direct losses paid" means the sum of all payments made during the period for claimants under a policy to which this chapter applies before any reinsurance has been ceded or assumed. This amount does not include home office and overhead costs, advertising costs, commissions and other acquisition costs, taxes, capital costs, administrative costs, or claims processing costs.

(3) "Direct premiums earned" means the amount of premium attributable to the coverage already provided in a given period before reinsurance has been ceded or assumed.

(4) "Loss ratio" means direct losses incurred divided by direct premiums earned.

Sec. 1956.002. APPLICABILITY OF CHAPTER. This chapter applies to an insurer writing automobile insurance in this state, including an insurance company, reciprocal or interinsurance exchange, county mutual insurance company, farm mutual insurance company, Lloyd's plan, or other insurer.

Sec. 1956.003. LOSS RATIO REPORTING. The commissioner by rule shall require each insurer to which this chapter applies to report at least annually the insurer's loss ratio for the preceding year for each policy issued.

Sec. 1956.004. REVIEW OF PREMIUMS. (a) The commissioner by rule shall establish a minimum loss ratio below which a policy's premiums are excessive for the benefits provided under the policy.

(b) If the commissioner determines that a policy's loss ratio falls below the minimum established under Subsection (a), the commissioner may order an insurer to:

(1) implement a premium rate adjustment;

(2) issue appropriate rebates to policyholders;

(3) file with the department an actuarial memorandum, prepared by a qualified actuary, in accordance with rules adopted to implement this section; or

(4) take any other remedial action the commissioner determines is appropriate.

(c) The commissioner shall adopt rules as necessary to implement this section, including rules regarding the frequency and form of reporting loss ratios.

SECTION 3. This Act takes effect September 1, 2009.