By: Hegar S.B. No. 1007

A BILL TO BE ENTITLED

AN ACT

relating to the continuation and operation of the Texas Department of Insurance and the operation of certain insurance programs; imposing administrative penalties.

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

ARTICLE 1. GENERAL PROVISIONS

SECTION 1.001. Section 31.002, Insurance Code, is amended to read as follows:

Sec. 31.002. DUTIES OF DEPARTMENT. In addition to the other duties required of the Texas Department of Insurance, the department shall:

(1) regulate the business of insurance in this state;

(2) administer the workers' compensation system of this state as provided by Title 5, Labor Code; [and]

(3) ensure that this code and other laws regarding insurance and insurance companies are executed;

(4) protect and ensure the fair treatment of consumers; and

(5) ensure fair competition in the insurance industry in order to foster a competitive market.

SECTION 1.002. Subsection (a), Section 31.004, Insurance Code, is amended to read as follows:

(a) The Texas Department of Insurance is subject to Chapter 325, Government Code (Texas Sunset Act). Unless continued in existence as provided by that chapter, the department is abolished September 1, 2015 [2009].

SECTION 1.003. Section 33.004, Insurance Code, is amended to read as follows:

Sec. 33.004. TRADE ASSOCIATIONS. (a) In this section, "Texas trade association" means a cooperative and voluntarily joined statewide association of business or professional competitors in this state designed to assist its members and its industry or profession in dealing with mutual business or professional problems and in promoting their common interest.

(b) A person may not be the commissioner and may not be a department employee employed in a "bona fide executive, administrative, or professional capacity," as that phrase is used for purposes of establishing an exemption to the overtime provisions of the federal Fair Labor Standards Act of 1938 (29 U.S.C. Section 201 et seq.), if:

(1) the person is an officer, employee, or paid consultant of a Texas trade association in the field of insurance; or

(2) the person's spouse is an officer, manager, or paid consultant of a Texas trade association in the field of insurance.

(c) A person may not be the commissioner or act as the general counsel to the commissioner or the department if the person is required to register as a lobbyist under Chapter 305, Government Code, because of the person's activities for compensation on behalf of a profession related to the operation of the department [A person who is an officer, employee, or paid consultant of a trade association in the field of insurance may not be:

[(1) the commissioner; or

[(2) an employee of the department who is exempt from the state's position classification plan or is compensated at or above the amount prescribed by the General Appropriations Act for step 1, salary group A17, of the position classification salary schedule].

[(b) A person who is the spouse of an officer, manager, or paid consultant of a trade association in the field of insurance may not be:

[(1) the commissioner; or

[(2) an employee of the department who is exempt from the state's position classification plan or is compensated at or above the amount prescribed by the General Appropriations Act for step 1, salary group A17, of the position classification salary schedule.

[(c) In this section, "trade association" means a nonprofit, cooperative, and voluntarily joined association of business or professional competitors designed to assist its members and its industry or profession in dealing with mutual business or professional problems and in promoting their common interest.]

SECTION 1.004. Section 521.003, Insurance Code, is amended to read as follows:

Sec. 521.003. COMPLAINTS [NOTIFICATION OF COMPLAINT STATUS]. (a) The department shall maintain a system to promptly and efficiently act on complaints filed with the department. The department shall maintain information about parties to the complaint, the subject matter of the complaint, a summary of the results of the review or investigation of the complaint, and its disposition.

(b) The department shall make information available describing its procedures for complaint investigation and resolution.

(c) The department shall periodically notify the complaint parties of the status of the complaint until final disposition. [If a written complaint is filed with the department, the department, at least quarterly and until final disposition of the complaint, shall notify each party to the complaint of the complaint's status unless the notice would jeopardize an undercover investigation.]

SECTION 1.005. Subchapter B, Chapter 36, Insurance Code, is amended by adding Sections 36.110 and 36.111 to read as follows:

Sec. 36.110. USE OF TECHNOLOGY. The commissioner shall implement a policy requiring the department to use appropriate technological solutions to improve the department's ability to perform its functions. The policy must ensure that the public is able to interact with the department on the Internet.

Sec. 36.111. NEGOTIATED RULEMAKING AND ALTERNATIVE DISPUTE RESOLUTION POLICY. (a) The commissioner shall develop and implement a policy to encourage the use of:

(1) negotiated rulemaking procedures under Chapter 2008, Government Code, for the adoption of department rules; and

(2) appropriate alternative dispute resolution procedures under Chapter 2009, Government Code, to assist in the resolution of internal and external disputes under the department's jurisdiction.

(b) The department's procedures relating to alternative dispute resolution must conform, to the extent possible, to any model guidelines issued by the State Office of Administrative Hearings for the use of alternative dispute resolution by state agencies.

(c) The commissioner shall designate a trained person to:

(1) coordinate the implementation of the policy adopted under Subsection (a);

(2) serve as a resource for any training needed to implement the procedures for negotiated rulemaking or alternative dispute resolution; and

(3) collect data concerning the effectiveness of those procedures, as implemented by the department.

SECTION 1.006. Sections 33.005 and 521.004, Insurance Code, are repealed.

ARTICLE 2. CERTAIN ADVISORY BOARDS, COMMITTEES, AND COUNCILS AND

RELATED TECHNICAL CORRECTIONS

SECTION 2.001. Chapter 32, Insurance Code, is amended by adding Subchapter E to read as follows:

SUBCHAPTER E. RULES REGARDING USE OF ADVISORY COMMITTEES

Sec. 32.151. RULEMAKING AUTHORITY. (a) The commissioner shall adopt rules, in compliance with Section 39.003 of this code and Chapter 2110, Government Code, regarding the purpose, structure, and use of advisory committees by the commissioner, the state fire marshal, or department staff, including rules governing an advisory committee's:

(1) purpose, role, responsibility, and goals;

(2) size and quorum requirements;

(3) qualifications for membership, including experience requirements and geographic representation;

(4) appointment procedures;

(5) terms of service;

(6) training requirements; and

(7) duration.

(b) An advisory committee must be structured and used to advise the commissioner, the state fire marshal, or department staff. An advisory committee may not be responsible for rulemaking or policymaking.

Sec. 32.152. PERIODIC EVALUATION. The commissioner shall by rule establish a process by which the department shall periodically evaluate an advisory committee to ensure its continued necessity. The department may retain or develop committees as appropriate to meet changing needs.

Sec. 32.153. COMPLIANCE WITH OPEN MEETINGS ACT. A department advisory committee must comply with Chapter 551, Government Code.

SECTION 2.002. Section 843.441, Insurance Code, is transferred to Subchapter L, Chapter 843, Insurance Code, renumbered as Section 843.410, Insurance Code, and amended to read as follows:

Sec. 843.410 [843.441]. ASSESSMENTS. (a) To provide funds for the administrative expenses of the commissioner regarding rehabilitation, liquidation, supervision, conservatorship, or seizure [conservation] of a [an impaired] health maintenance organization in this state that is placed in supervision or conservatorship under Chapter 441 or in a delinquency proceeding under Chapter 443 and is found by the commissioner to have insufficient funds to pay the total amount of health care claims and the administrative[, including] expenses incurred by the commissioner regarding the rehabilitation, liquidation, supervision, conservatorship, or seizure, the commissioner [acting as receiver or by a special deputy receiver, the committee, at the commissioner's direction,] shall assess each health maintenance organization in the proportion that the gross premiums of the health maintenance organization that were written in this state during the preceding calendar year bear to the aggregate gross premiums that were written in this state by all health maintenance organizations, as found [provided to the committee by the commissioner] after review of annual statements and other reports the commissioner considers necessary.

(b) [(c)] The commissioner may abate or defer an assessment in whole or in part if, in the opinion of the commissioner, payment of the assessment would endanger the ability of a health maintenance organization to fulfill its contractual obligations. If an assessment is abated or deferred in whole or in part, the amount of the abatement or deferral may be assessed against the remaining health maintenance organizations in a manner consistent with the calculations made by the commissioner under Subsection (a) [basis for assessments provided by the approved plan of operation].

(c) [(d)] The total of all assessments on a health maintenance organization may not exceed one-fourth of one percent of the health maintenance organization's gross premiums in any one calendar year.

(d) [(e)] Notwithstanding any other provision of this subchapter, funds derived from an assessment made under this section may not be used for more than 180 consecutive days for the expenses of administering the affairs of a [an impaired] health maintenance organization the surplus of which is impaired and that is [while] in supervision[, rehabilitation,] or conservatorship [conservation for more than 150 days]. The commissioner [committee] may extend the period during which the commissioner [it] makes assessments for the administrative expenses [of an impaired health maintenance organization as it considers appropriate].

SECTION 2.003. Section 1660.004, Insurance Code, is amended to read as follows:

Sec. 1660.004. GENERAL RULEMAKING. The commissioner may adopt rules as necessary to implement this chapter[, including rules requiring the implementation and provision of the technology recommended by the advisory committee].

SECTION 2.004. Subsection (b), Section 1660.102, Insurance Code, is amended to read as follows:

(b) The commissioner may consider [the] recommendations [of the advisory committee] or any other information provided in response to a department-issued request for information relating to electronic data exchange, including identification card programs, before adopting rules regarding:

(1) information to be included on the identification cards;

(2) technology to be used to implement the identification card pilot program; and

(3) confidentiality and accuracy of the information required to be included on the identification cards.

SECTION 2.005. Subsection (a), Section 2154.052, Occupations Code, is amended to read as follows:

(a) The commissioner:

(1) shall administer this chapter through the state fire marshal; and

(2) may issue rules to administer this chapter [in compliance with Section 2154.054].

SECTION 2.006. Subsection (a), Section 4001.009, Insurance Code, is amended to read as follows:

(a) As referenced in Section 4001.003(9), a reference to an agent in the following laws includes a subagent without regard to whether a subagent is specifically mentioned:

(1) Chapters 281, 402, 421-423, 441, 444, 461-463, [523,] 541-556, 558, 559, 702, 703, 705, 821, 823-825, 827, 828, 844, 963, 1108, 1205-1209, 1211, 1213, 1214 [1211-1214], 1352, 1353, 1357, 1358, 1360-1363, 1369, 1453-1455, 1503, 1550, 1801, 1803, 2151-2154, 2201-2203, 2205-2213, 3501, 3502, 4007, 4102, and 4201-4203;

(2) Chapter 403, excluding Section 403.002;

(3) Subchapter A, Chapter 491;

(4) Subchapter C, Chapter 521;

(5) Subchapter A, Chapter 557;

(6) Subchapter B, Chapter 805;

(7) Subchapters D, E, and F, Chapter 982;

(8) Subchapter D, Chapter 1103;

(9) Subchapters B, C, D, and E, Chapter 1204, excluding Sections 1204.153 and 1204.154;

(10) Subchapter B, Chapter 1366;

(11) Subchapters B, C, and D, Chapter 1367, excluding Section 1367.053(c);

(12) Subchapters A, C, D, E, F, H, and I, Chapter 1451;

(13) Subchapter B, Chapter 1452;

(14) Sections 551.004, 841.303, 982.001, 982.002, 982.004, 982.052, 982.102, 982.103, 982.104, 982.106, 982.107, 982.108, 982.110, 982.111, 982.112, and 1802.001; and

(15) Chapter 107, Occupations Code.

SECTION 2.007. Section 4102.005, Insurance Code, is amended to read as follows:

Sec. 4102.005. CODE OF ETHICS. The commissioner[, with guidance from the public insurance adjusters examination advisory committee,] by rule shall adopt:

(1) a code of ethics for public insurance adjusters that fosters the education of public insurance adjusters concerning the ethical, legal, and business principles that should govern their conduct;

(2) recommendations regarding the solicitation of the adjustment of losses by public insurance adjusters; and

(3) any other principles of conduct or procedures that the commissioner considers necessary and reasonable.

SECTION 2.008. The following laws are repealed:

(1) Chapter 523, Insurance Code;

(2) Section 524.004, Insurance Code;

(3) Subdivision (2), Section 1660.002, Insurance Code;

(4) Subsection (c), Section 1660.101, Insurance Code;

(5) Sections 4002.004, 4004.002, 4101.006, and 4102.059, Insurance Code;

(6) Subsections (c) and (d), Section 4201.003, Insurance Code;

(7) Sections 843.435, 843.436, 843.437, 843.438, 843.439, and 843.440, Insurance Code;

(8) Subchapter B, Chapter 1660, Insurance Code;

(9) Subchapter G, Chapter 2210, Insurance Code;

(10) Subchapter C, Chapter 6001, Insurance Code;

(11) Subchapter C, Chapter 6002, Insurance Code;

(12) Subchapter C, Chapter 6003, Insurance Code;

(13) Chapter 1212, Insurance Code;

(14) the heading to Subchapter M, Chapter 843, Insurance Code;

(15) Section 2154.054, Occupations Code; and

(16) Subsection (c), Section 2154.055, Occupations Code.

SECTION 2.009. (a) The following boards, committees, councils, and task forces are abolished on the effective date of this Act:

(1) the advisory council on continuing education for insurance agents;

(2) the fire detection and alarm devices advisory council;

(3) the fire extinguisher advisory council;

(4) the fire protection advisory council;

(5) the fireworks advisory council;

(6) the health maintenance organization solvency surveillance committee;

(7) the insurance adjusters examination advisory board;

(8) the technical advisory committee on claims processing;

(9) the technical advisory committee on electronic data exchange;

(10) the health coverage public awareness and education program task force;

(11) the executive committee of the residential property insurance market assistance program; and

(12) the windstorm building code advisory committee on specifications and maintenance.

(b) All powers, duties, obligations, rights, contracts, funds, records, and real or personal property of a board, committee, council, or task force listed under Subsection (a) of this section shall be transferred to the Texas Department of Insurance not later than February 28, 2010.

SECTION 2.010. The changes in law made by this Act by repealing Sections 523.003 and 843.439, Insurance Code, apply only to a cause of action that accrues on or after the effective date of this Act. A cause of action that accrues before the effective date of this Act is governed by the law in effect immediately before that date, and that law is continued in effect for that purpose.

ARTICLE 3. REGULATION OF PREFERRED PROVIDER ORGANIZATIONS

SECTION 3.001. Subtitle D, Title 8, Insurance Code, is amended by adding Chapter 1302 to read as follows:

CHAPTER 1302. REGULATION OF INDEPENDENT PREFERRED PROVIDER

ORGANIZATIONS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 1302.001. DEFINITIONS. In this chapter:

(1) "Person" means an individual, corporation, association, or other legal entity.

(2) "Preferred provider organization" means an insurer, third-party administrator, or other person that contracts with physicians or health care providers regarding reimbursements to be accepted prospectively by the physicians and health care providers in providing health care services to enrollees of benefit plans contractually entitled to benefit from the reimbursement agreements.

Sec. 1302.002. APPLICABILITY. (a) This chapter does not apply to a self-funded health benefit plan exempt from regulation by this state as an employee welfare benefit plan under the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.).

(b) Except as specifically provided by this chapter, a reference in Chapter 1301 to a duty imposed under Chapter 1301 on a preferred provider organization contracting with a preferred provider benefit plan applies to a preferred provider organization that contracts with a preferred provider benefit plan under a certificate of authority issued under Subchapter B but that is not an insurer or third-party administrator under this code.

Sec. 1302.003. RULES. The commissioner shall adopt rules as necessary to implement this chapter.

Sec. 1302.004. COMPLAINTS. The department shall track and analyze complaints made against preferred provider organizations regulated under this chapter.

[Sections 1302.005-1302.050 reserved for expansion]

SUBCHAPTER B. REGULATION OF PREFERRED PROVIDER ORGANIZATIONS

Sec. 1302.051. CERTIFICATE OF AUTHORITY REQUIRED; EXCEPTION. (a) Except as provided by Subsection (b), a person may not organize or operate as a preferred provider organization in this state, or sell or offer to sell or solicit offers to purchase or receive consideration in conjunction with a preferred provider benefit plan, without holding a certificate of authority under this chapter.

(b) An insurer that holds a certificate of authority to engage in the business of insurance in this state or is otherwise authorized under this code to engage in the business of insurance in this state is not required to obtain an additional certificate of authority under this subchapter to operate a proprietary preferred provider organization.

Sec. 1302.052. USE OF CERTAIN TERMS. A person may not use the term "preferred provider organization" or "PPO" in the course of operation unless the person:

(1) complies with this chapter and rules adopted by the commissioner under this chapter; and

(2) holds a certificate of authority under this chapter.

Sec. 1302.053. DURATION OF CERTIFICATE OF AUTHORITY. A certificate of authority issued under this chapter continues in effect:

(1) while the certificate holder meets the requirements of this chapter and rules adopted under this chapter; or

(2) until the commissioner suspends or revokes the certificate or the commissioner terminates the certificate at the request of the certificate holder.

[Sections 1302.054-1302.100 reserved for expansion]

SUBCHAPTER C. APPLICATION; ISSUANCE OF CERTIFICATE

Sec. 1302.101. APPLICATION. (a) A person may apply to the department for and obtain a certificate of authority to organize and operate a preferred provider organization.

(b) An application for a certificate of authority must:

(1) be on a form prescribed by rules adopted by the commissioner; and

(2) be verified by the applicant or an officer or other authorized representative of the applicant.

Sec. 1302.102. CONTENTS OF APPLICATION. (a) An application for a certificate of authority must include:

(1) a copy of the applicant's basic organizational document, if any, such as the articles of incorporation, articles of association, partnership agreement, trust agreement, or other applicable documents;

(2) all amendments to the applicant's basic organizational document; and

(3) a copy of the bylaws, rules and regulations, or similar documents, if any, regulating the conduct of the applicant's internal affairs.

(b) An application for a certificate of authority must include a list of the names, addresses, and official positions of the persons responsible for the conduct of the applicant's affairs, including:

(1) each member of the board of directors, board of trustees, executive committee, or other governing body or committee;

(2) the principal officer, if the applicant is a corporation; and

(3) each partner or member, if the applicant is a partnership or association.

(c) An application for a certificate of authority must include a template of any contract made or to be made between the applicant and any physician or health care provider.

(d) The commissioner may adopt rules under which a preferred provider organization is required to update the information submitted in an application for a certificate of authority.

Sec. 1302.103. APPLICATION FEE. (a) An applicant for a certificate of authority under this chapter shall pay to the department a filing fee not to exceed $1,000 for processing an original application for a certificate of authority for a preferred provider organization.

(b) The commissioner shall deposit a fee collected under this section to the credit of the Texas Department of Insurance operating account.

Sec. 1302.104. REQUIREMENTS FOR APPROVAL OF APPLICATION. The commissioner shall approve an application for a certificate of authority to engage in business in this state as a preferred provider organization on payment of the application fee prescribed by Section 1302.103 and if the commissioner is satisfied that:

(1) granting the application would not violate a federal or state law;

(2) the applicant has not attempted to obtain the certificate of authority through fraud or bad faith;

(3) the applicant has complied with this chapter and rules adopted by the commissioner under this chapter; and

(4) the name under which the applicant will engage in business in this state is not so similar to that of another preferred provider organization that it is likely to mislead the public.

Sec. 1302.105. DENIAL OF APPLICATION. (a) If the commissioner is unable to approve an application for a certificate of authority under this chapter, the commissioner shall:

(1) provide the applicant with written notice specifying each deficiency in the application; and

(2) offer the applicant the opportunity for a hearing to address each reason and circumstance for possible denial of the application.

(b) The commissioner must provide an opportunity for a hearing before the commissioner finally denies an application.

(c) At the hearing, the applicant has the burden to produce sufficient competent evidence on which the commissioner can make the determinations required by Section 1302.104.

[Sections 1302.106-1302.150 reserved for expansion]

SUBCHAPTER D. ENFORCEMENT

Sec. 1302.151. GROUNDS FOR DENIAL, SUSPENSION, OR REVOCATION OF CERTIFICATE OF AUTHORITY. The denial, suspension, or revocation of a certificate of authority under this chapter to act as a preferred provider organization is subject to:

(1) Subchapter C, Chapter 4005; and

(2) Chapter 82.

SECTION 3.002. Not later than November 1, 2009, the commissioner of insurance shall adopt rules as necessary to implement Chapter 1302, Insurance Code, as added by this Act.

SECTION 3.003. (a) Except as provided by Subsections (b) and (c) of this section, a preferred provider organization that is operating before the effective date of this Act and that has not previously submitted an application for a certificate of authority under the Insurance Code must apply for a certificate of authority under Chapter 1302, Insurance Code, as added by this Act, not later than the 60th day after the effective date of this Act.

(b) A preferred provider organization operating in this state that, as of August 31, 2009, holds a certificate of authority as an insurer under Chapter 801, Insurance Code, or a certificate of authority as a third-party administrator under Chapter 4151, Insurance Code, is not required to obtain a certificate of authority under Chapter 1302, Insurance Code, as added by this Act.

(c) A preferred provider organization in this state that has not applied for or does not hold, as of the effective date of this Act, a certificate of authority under Chapter 801 or 4151, Insurance Code, and that applies for a certificate of authority under Chapter 1302, Insurance Code, as added by this Act, may continue to operate, if the applicant otherwise complies with applicable law, until the commissioner of insurance acts on the application.

ARTICLE 4. RATE REGULATION

SECTION 4.001. Section 2251.101, Insurance Code, is amended to read as follows:

Sec. 2251.101. RATE FILINGS AND SUPPORTING INFORMATION. (a) Except as provided by Subchapter D, for risks written in this state, each insurer shall file with the commissioner all rates, applicable rating manuals, supplementary rating information, and additional information as required by the commissioner. An insurer may use a rate filed under this subchapter on and after the date the rate is filed.

(b) The commissioner by rule shall:

(1) determine the information required to be included in the filing, including:

(A) [(1)] categories of supporting information and supplementary rating information;

(B) [(2)] statistics or other information to support the rates to be used by the insurer, including information necessary to evidence that the computation of the rate does not include disallowed expenses; and

(C) [(3)] information concerning policy fees, service fees, and other fees that are charged or collected by the insurer under Section 550.001 or 4005.003; and

(2) prescribe the process through which the department requests supplementary rating information and supporting information under this section, including:

(A) the number of times the department may make a request for information; and

(B) the types of information the department may request when reviewing a rate filing.

SECTION 4.002. Section 2251.103, Insurance Code, is amended to read as follows:

Sec. 2251.103. COMMISSIONER ACTION CONCERNING [DISAPPROVAL OF RATE IN] RATE FILING NOT YET IN EFFECT; HEARING AND ANALYSIS. (a) Not later than the earlier of the date the rate takes effect or the 30th day after the date a rate is filed with the department under Section 2251.101, the [The] commissioner shall disapprove the [a] rate if the commissioner determines that the rate [filing made under this chapter] does not comply with the requirements of this chapter [meet the standards established under Subchapter B].

(b) Except as provided by Subsection (c), if a rate has not been disapproved by the commissioner before the expiration of the 30-day period described by Subsection (a), the rate is not considered disapproved under this section.

(c) For good cause, the commissioner may, on the expiration of the 30-day period described by Subsection (a), extend the period for disapproval of a rate for one additional 30-day period. The commissioner and the insurer may not by agreement extend the 30-day period described by Subsection (a) or this subsection.

(d) If the commissioner disapproves a rate under this section [filing], the commissioner shall issue an order specifying in what respects the rate [filing] fails to meet the requirements of this chapter.

(e) An insurer that files a rate that is disapproved under this section [(c) The filer] is entitled to a hearing on written request made to the commissioner not later than the 30th day after the date the order disapproving the rate [filing] takes effect.

(f) The department shall track, compile, and routinely analyze the factors that contribute to the disapproval of rates under this section.

SECTION 4.003. Subchapter C, Chapter 2251, Insurance Code, is amended by adding Section 2251.1031 to read as follows:

Sec. 2251.1031. REQUESTS FOR ADDITIONAL INFORMATION. (a) If the department determines that the information filed by an insurer under this subchapter or Subchapter D is incomplete or otherwise deficient, the department may request additional information from the insurer.

(b) If the department requests additional information from the insurer during the 30-day period described by Section 2251.103(a) or 2251.153(a) or under a second 30-day period described by Section 2251.103(c) or 2251.153(c), as applicable, the time between the date the department submits the request to the insurer and the date the department receives the information requested is not included in the computation of the first 30-day period or the second 30-day period, as applicable.

(c) For purposes of this section, the date of the department's submission of a request for additional information is the earlier of:

(1) the date of the department's electronic mailing or documented telephone call relating to the request for additional information; or

(2) the postmarked date on the department's letter relating to the request for additional information.

(d) The department shall track, compile, and routinely analyze the volume and content of requests for additional information made under this section to ensure that all requests for additional information are fair and reasonable.

SECTION 4.004. The heading to Section 2251.104, Insurance Code, is amended to read as follows:

Sec. 2251.104. COMMISSIONER DISAPPROVAL OF RATE IN EFFECT; HEARING.

SECTION 4.005. Section 2251.107, Insurance Code, is amended to read as follows:

Sec. 2251.107. PUBLIC [INSPECTION OF] INFORMATION. (a) Each filing made, and any supporting information filed, under this chapter is open to public inspection as of the date of the filing.

(b) Each year the department shall make available to the public information concerning the department's general process and methodology for rate review under this chapter, including factors that contribute to the disapproval of a rate. Information provided under this subsection must be general in nature and may not reveal proprietary or trade secret information of any insurer.

SECTION 4.006. Section 2251.151, Insurance Code, is amended by adding Subsections (c-1) and (f) and amending Subsection (e) to read as follows:

(c-1) If the commissioner requires an insurer to file the insurer's rates under this section, the commissioner shall periodically assess whether the conditions described by Subsection (a) continue to exist. If the commissioner determines that the conditions no longer exist, the commissioner shall issue an order excusing the insurer from filing the insurer's rates under this section.

(e) If the commissioner requires an insurer to file the insurer's rates under this section, the commissioner shall issue an order specifying the commissioner's reasons for requiring the rate filing and explaining any steps the insurer must take and any conditions the insurer must meet in order to be excused from filing the insurer's rates under this section. An affected insurer is entitled to a hearing on written request made to the commissioner not later than the 30th day after the date the order is issued.

(f) The commissioner by rule shall define:

(1) the financial conditions and rating practices that may subject an insurer to this section under Subsection (a)(1); and

(2) the process by which the commissioner determines that a statewide insurance emergency exists under Subsection (a)(2).

SECTION 4.007. Section 2251.156, Insurance Code, is amended to read as follows:

Sec. 2251.156. RATE FILING DISAPPROVAL BY COMMISSIONER; HEARING. (a) If the commissioner disapproves a rate filing under Section 2251.153(a)(2), the commissioner shall issue an order disapproving the filing in accordance with Section 2251.103(d) [2251.103(b)].

(b) An insurer whose rate filing is disapproved is entitled to a hearing in accordance with Section 2251.103(e) [2251.103(c)].

(c) The department shall track precedents related to disapprovals of rates under this subchapter to ensure uniform application of rate standards by the department.

SECTION 4.008. Subsection (a), Section 2254.003, Insurance Code, is amended to read as follows:

(a) This section applies to a rate for personal automobile insurance or residential property insurance filed on or after the effective date of Chapter 206, Acts of the 78th Legislature, Regular Session, 2003.

SECTION 4.009. Section 2254.003, Insurance Code, is amended by adding Subsections (a-1), (a-2), and (a-3) to read as follows:

(a-1) If the department provides an insurer with formal written notice that a rate is excessive or unfairly discriminatory, then the insurer may file a new rate or take other corrective action to substantially address the department's concerns. The new rate or other corrective action must be filed on or before the 60th day following the date of formal written notice. At the commissioner's discretion, the commissioner may extend the deadline to file by an additional 30 days. If the department accepts the new rate or other corrective action, then the insurer shall, according to commissioner order, refund or issue a premium discount directly to each affected policyholder on the portion of the premium found to be excessive or unfairly discriminatory, plus interest on that amount. The interest rate to be paid on refunds under this subsection is the sum of six percent and the prime rate for the calendar year in which formal written notice is given. For purposes of this subsection, the prime rate is the prime rate as published in The Wall Street Journal for the first day of the calendar year that is not a Saturday, Sunday, or legal holiday.

(a-2) If the insurer does not file, or the department does not accept, a new rate or other corrective action as provided under Subsection (a-1), and the commissioner issues an order finding that the rate is excessive or unfairly discriminatory under Section 2251.104, then the insurer must refund or issue a premium discount directly to each affected policyholder the portion of the premium found to be excessive or unfairly discriminatory, plus interest on that amount. The interest rate to be paid on such refunds under this subsection is 18 percent. An insurer shall not be required to pay any interest penalty if the insurer prevails in an appeal of the commissioner's order under Subchapter D, Chapter 36.

(a-3) The period for the refund and interest begins on the date the department first provides the insurer with formal written notice that the insurer's filed rate is excessive or unfairly discriminatory, and interest continues to accrue until the refund is paid.

SECTION 4.010. Section 2251.154 and Subsection (c), Section 2254.003, Insurance Code, are repealed.

SECTION 4.011. Section 2251.103, Insurance Code, as amended by this Act, and Section 2251.1031, Insurance Code, as added by this Act, apply only to a rate filing made on or after the effective date of this Act. A rate filing made before the effective date of this Act is governed by the law in effect at the time the filing was made, and that law is continued in effect for that purpose.

SECTION 4.012. Subsection (c-1), Section 2251.151, Insurance Code, as added by this Act, applies to an insurer that is required to file the insurer's rates for approval under Section 2251.151, Insurance Code, on or after the effective date of this Act, regardless of when the order requiring the insurer to file the insurer's rates for approval under that section is first issued.

SECTION 4.013. Subsection (e), Section 2251.151, Insurance Code, as amended by this Act, applies only to an order issued by the commissioner of insurance on or after the effective date of this Act. An order of the commissioner issued before the effective date of this Act is governed by the law in effect on the date the order was issued, and that law is continued in effect for that purpose.

ARTICLE 5. STATE FIRE MARSHAL'S OFFICE

SECTION 5.001. Section 417.008, Government Code, is amended by adding Subsection (f) to read as follows:

(f) The commissioner by rule shall prescribe a reasonable fee for an inspection performed by the state fire marshal that may be charged to a property owner or occupant who requests the inspection, as the commissioner considers appropriate. In prescribing the fee, the commissioner shall consider the overall cost to the state fire marshal to perform the inspections, including the approximate amount of time the staff of the state fire marshal needs to perform an inspection, travel costs, and other expenses.

SECTION 5.002. Section 417.0081, Government Code, is amended to read as follows:

Sec. 417.0081. INSPECTION OF CERTAIN STATE-OWNED OR STATE-LEASED BUILDINGS. (a) The state fire marshal, at the commissioner's direction, shall periodically inspect public buildings under the charge and control of the Texas Facilities [General Services] Commission and buildings leased for the use of a state agency by the Texas Facilities Commission.

(b) For the purpose of determining a schedule for conducting inspections under this section, the commissioner by rule shall adopt guidelines for assigning potential fire safety risk to state-owned and state-leased buildings. Rules adopted under this subsection must provide for the inspection of each state-owned and state-leased building to which this section applies, regardless of how low the potential fire safety risk of the building may be.

(c) On or before January 1 of each year, the state fire marshal shall report to the governor, lieutenant governor, speaker of the house of representatives, and appropriate standing committees of the legislature regarding the state fire marshal's findings in conducting inspections under this section.

SECTION 5.003. Section 417.0082, Government Code, is amended to read as follows:

Sec. 417.0082. PROTECTION OF CERTAIN STATE-OWNED OR STATE-LEASED BUILDINGS AGAINST FIRE HAZARDS. (a) The state fire marshal, under the direction of the commissioner, shall take any action necessary to protect a public building under the charge and control of the Texas Facilities [Building and Procurement] Commission, and the building's occupants, and the occupants of a building leased for the use of a state agency by the Texas Facilities Commission, against an existing or threatened fire hazard. The state fire marshal and the Texas Facilities [Building and Procurement] Commission shall include the State Office of Risk Management in all communication concerning fire hazards.

(b) The commissioner, the Texas Facilities [Building and Procurement] Commission, and the risk management board shall make and each adopt by rule a memorandum of understanding that coordinates the agency's duties under this section.

SECTION 5.004. Section 417.010, Government Code, is amended to read as follows:

Sec. 417.010. DISCIPLINARY AND ENFORCEMENT ACTIONS; ADMINISTRATIVE PENALTIES [ALTERNATE REMEDIES]. (a) This section applies to each person and firm licensed, registered, or otherwise regulated by the department through the state fire marshal, including:

(1) a person regulated under Title 20, Insurance Code; and

(2) a person licensed under Chapter 2154, Occupations Code.

(b) The commissioner by rule shall delegate to the state fire marshal the authority to take disciplinary and enforcement actions, including the imposition of administrative penalties in accordance with this section on a person regulated under a law listed under Subsection (a) who violates that law or a rule or order adopted under that law. In the rules adopted under this subsection, the commissioner shall:

(1) specify which types of disciplinary and enforcement actions are delegated to the state fire marshal; and

(2) outline the process through which the state fire marshal may, subject to Subsection (e), impose administrative penalties or take other disciplinary and enforcement actions.

(c) The commissioner by rule shall adopt a schedule of administrative penalties for violations subject to a penalty under this section to ensure that the amount of an administrative penalty imposed is appropriate to the violation. The department shall provide the administrative penalty schedule to the public on request. The amount of an administrative penalty imposed under this section must be based on:

(1) the seriousness of the violation, including:

(A) the nature, circumstances, extent, and gravity of the violation; and

(B) the hazard or potential hazard created to the health, safety, or economic welfare of the public;

(2) the economic harm to the public interest or public confidence caused by the violation;

(3) the history of previous violations;

(4) the amount necessary to deter a future violation;

(5) efforts to correct the violation;

(6) whether the violation was intentional; and

(7) any other matter that justice may require.

(d) In [The state fire marshal, in] the enforcement of a law that is enforced by or through the state fire marshal, the state fire marshal may, in lieu of cancelling, revoking, or suspending a license or certificate of registration, impose on the holder of the license or certificate of registration an order directing the holder to do one or more of the following:

(1) cease and desist from a specified activity;

(2) pay an administrative penalty imposed under this section [remit to the commissioner within a specified time a monetary forfeiture not to exceed $10,000 for each violation of an applicable law or rule]; or [and]

(3) make restitution to a person harmed by the holder's violation of an applicable law or rule.

(e) The state fire marshal shall impose an administrative penalty under this section in the manner prescribed for imposition of an administrative penalty under Subchapter B, Chapter 84, Insurance Code. The state fire marshal may impose an administrative penalty under this section without referring the violation to the department for commissioner action.

(f) An affected person may dispute the imposition of the penalty or the amount of the penalty imposed in the manner prescribed by Subchapter C, Chapter 84, Insurance Code. Failure to pay an administrative penalty imposed under this section is subject to enforcement by the department.

ARTICLE 6. TITLE INSURANCE

SECTION 6.001. Section 2602.107, Insurance Code, is amended by adding Subsection (d) to read as follows:

(d) The association shall pay, from the guaranty fee account, fees and reasonable and necessary expenses that the department incurs in an examination of a title agent or direct operation under Subchapter H, Chapter 2651.

SECTION 6.002. Subchapter D, Chapter 2651, Insurance Code, is amended by adding Section 2651.1511 and amending Sections 2651.153 and 2651.155 to read as follows:

Sec. 2651.1511. ANNUAL AUDIT OF OPERATING ACCOUNTS: TITLE INSURANCE AGENTS AND DIRECT OPERATIONS. (a) Each title insurance agent and direct operation shall submit to the department an annual audit of operating accounts that is verified by an officer of:

(1) the audited title insurance agent; or

(2) the audited direct operation.

(b) The title insurance agent or direct operation shall pay for an audit of operating accounts under this section.

(c) Not later than the 90th day after the date of the end of the agent's or direct operation's fiscal year, the agent or direct operation shall send by certified mail, postage prepaid, to the department one copy of the audit report with a transmittal letter.

(d) Notwithstanding Subsection (a), the commissioner may exempt a title insurance agent or direct operation with an annual premium volume of less than $100,000 from the requirements of Subsections (a)-(c).

Sec. 2651.153. RULES. The commissioner by rule shall adopt:

(1) the standards for an audit conducted under this subchapter; [and]

(2) the form of the required audit report; and

(3) a process to exempt a title insurance agent or direct operation under Section 2651.1511(d).

Sec. 2651.155. CONFIDENTIALITY OF AUDIT. (a) The commissioner may classify an audit report that is filed with the department by a title insurance company under this subchapter as confidential and privileged.

(b) Information obtained in an audit of the operating accounts of a title insurance agent or direct operation under this subchapter is confidential and not subject to disclosure under this code or Chapter 552, Government Code.

SECTION 6.003. Chapter 2651, Insurance Code, is amended by adding Subchapter H to read as follows:

SUBCHAPTER H. EXAMINATION OF TITLE INSURANCE AGENTS AND DIRECT

OPERATIONS

Sec. 2651.351. EXAMINATION OF TITLE INSURANCE AGENTS AND DIRECT OPERATIONS. (a) The department shall examine each title insurance agent and direct operation licensed in this state as provided by this subchapter.

(b) The department shall:

(1) examine the title insurance agent's or direct operation's:

(A) financial condition;

(B) trust, escrow, and operating accounts;

(C) ability to meet its liabilities; and

(D) compliance with the laws of this state and rules adopted by the commissioner that affect the business conduct of the title insurance agent or direct operation; and

(2) verify the data reported for rate promulgation.

(c) The department shall conduct the examination at the principal office of the title insurance agent or direct operation, but may access any other offices or business locations of the title insurance agent or direct operation for purposes of conducting the examination. The department may conduct the examination alone or with representatives of the insurance supervising departments of other states.

(d) Subject to Subsection (e), the department shall examine a title insurance agent or direct operation as frequently as the department considers necessary. At a minimum, the department shall examine a title insurance agent or direct operation not less frequently than once every three years.

(e) The commissioner shall adopt rules governing the frequency of examinations of a title insurance agent or direct operation licensed for less than three years.

Sec. 2651.352. EXAMINATION PERIOD. Unless the department requests that an examination cover a longer period, the examination must cover the period beginning on the last day covered by the most recent examination and ending on December 31 of the year preceding the year in which the examination is being conducted.

Sec. 2651.353. POWERS RELATED TO EXAMINATION. The department or the examiner appointed by the department:

(1) has free access, and may require the title insurance agent or direct operation to provide free access, to all books and papers of the title insurance agent or direct operation that relate to the business and affairs of the title insurance agent or direct operation; and

(2) has the authority to summon and examine under oath, if necessary, an officer, agent, or employee of the title insurance agent or direct operation or any other person in relation to the affairs and condition of the title insurance agent or direct operation.

Sec. 2651.354. EFFECT OF SUBCHAPTER ON AUTHORITY TO USE INFORMATION. (a) This subchapter does not limit the department's authority to:

(1) use a final or preliminary examination report, the work papers of an examiner, title insurance agent, or direct operation, or other documents, or any other information discovered or developed during an examination in connection with a legal or regulatory action; or

(2) release a final or preliminary examination report, the work papers of an examiner, title insurance agent, or direct operation, or other documents, or any other information discovered or developed during an examination, to a law enforcement agency, an attorney regulatory authority, or an agency of this state, another state, or the United States if the disclosure is necessary or proper for the enforcement of the laws of this state, another state, or the United States, as determined by the commissioner.

(b) A release by the commissioner under Subsection (a) of a final or preliminary examination report, the work papers of an examiner, title insurance agent, or direct operation, or other documents, or any other information discovered or developed during an examination, does not make the report, work papers, documents, or information public information under Chapter 552, Government Code.

Sec. 2651.355. CONFIDENTIALITY OF REPORTS AND RELATED INFORMATION. (a) A final or preliminary examination report and any information obtained during an examination are confidential and are not subject to disclosure under Chapter 552, Government Code.

(b) Subsection (a) applies if the examined title insurance agent or direct operation is under supervision or conservatorship.

(c) Subsection (a) does not apply to an examination conducted in connection with a liquidation or receivership under this code or another insurance law of this state.

Sec. 2651.356. DISCIPLINARY ACTION FOR FAILURE TO COMPLY WITH SUBCHAPTER. A title insurance agent or direct operation is subject to disciplinary action under Chapter 82 for failure or refusal to comply with:

(1) this subchapter or a rule adopted under this subchapter; or

(2) a request by the department or an appointed examiner to be examined or to provide information requested as part of an examination.

SECTION 6.004. Subsection (c), Section 2703.153, Insurance Code, is amended to read as follows:

(c) Not less frequently than once every five years, the commissioner shall evaluate the information required under this section to determine whether the department needs additional or different information or no longer needs certain information to promulgate rates. If the department requires a title insurance company or title insurance agent to include new or different information in the statistical report, that information may be considered by the commissioner in fixing premium rates if the information collected is reasonably credible for the purposes for which the information is to be used.

SECTION 6.005. Subsections (b), (c), and (d), Section 2602.103, Insurance Code, are repealed.

ARTICLE 7. TEXAS WINDSTORM INSURANCE ASSOCIATION

SECTION 7.001. Subsections (a) and (d), Section 2210.052, Insurance Code, are amended to read as follows:

(a) Each member of the association shall participate in the assessments [writings, expenses, profits, and losses] of the association in the proportion that the net direct premiums of that member during the preceding calendar year bears to the aggregate net direct premiums by all members of the association, as determined using the information provided under Subsection (b).

(d) Notwithstanding Subsection (a), a member, in accordance with the plan of operation, is entitled to receive credit for similar insurance voluntarily written in an area designated by the commissioner. The member's participation in the assessments [writings] of the association shall be reduced in accordance with the plan of operation.

SECTION 7.002. Subsection (c), Section 2210.060, Insurance Code, is amended to read as follows:

(c) Subsection (a) does not authorize the association to indemnify a member of the association for participating in the assessments made by [writings, expenses, profits, and losses of] the association in the manner provided by this chapter.

SECTION 7.003. Subchapter C, Chapter 2210, Insurance Code, is amended by adding Section 2210.1015 to read as follows:

Sec. 2210.1015. PRIMARY DUTY OF BOARD MEMBERS. The primary duty of each member of the board of directors is to the association, as specified in the plan of operation.

SECTION 7.004. Section 2210.102, Insurance Code, is amended to read as follows:

Sec. 2210.102. COMPOSITION. (a) The board of directors is composed of 11 [the following nine] members appointed by the commissioner as follows:

(1) five representatives of different insurers who are members of the association[, elected by the members as provided by the plan of operation];

(2) four [two] public representatives [who are nominated by the office of public insurance counsel and] who, as of the date of the appointment:

(A) reside in a catastrophe area; and

(B) are policyholders of the association; and

(3) two property and casualty agents, each of whom must:

(A) have demonstrated experience in the association;

(B) maintain the agent's principal office, as of the date of the appointment, in a catastrophe area; and

(C) hold a license under Chapter 4051 as a general property and casualty agent or a personal lines property and casualty agent.

(b) Insurers who are members of the association shall nominate, from among those members, persons to fill any vacancy in the five board of director seats reserved for insurers. The board of directors shall solicit nominations from the members and submit the nominations to the commissioner. The nominee slate submitted to the commissioner under this subsection must include at least four more names than the number of vacancies. The commissioner shall appoint replacement insurer members from the nominee slate.

(c) The persons appointed under Subsections (a)(2) and (3) must be from different counties.

(d) Notwithstanding Section 2210.103, a member of the board of directors serves at the pleasure of the commissioner. The commissioner shall appoint a replacement for a member who leaves or is removed from the board of directors in the manner provided by this section.

SECTION 7.005. Subsection (a), Section 2210.103, Insurance Code, is amended to read as follows:

(a) Members of the board of directors serve three-year staggered terms, with the terms of three members or four members, as applicable, expiring on the third Tuesday of March of each year.

SECTION 7.006. Section 2210.104, Insurance Code, is amended to read as follows:

Sec. 2210.104. OFFICERS. The board of directors shall elect from the board's membership an executive committee consisting of a presiding officer, assistant presiding officer, and secretary-treasurer. At least one of the officers must be a member appointed under Section 2210.102(a)(2) or (3). The board of directors may elect other officers from the board's membership as considered necessary to conduct the duties of the board.

SECTION 7.007. Subsection (a), Section 2210.152, Insurance Code, is amended to read as follows:

(a) The plan of operation must:

(1) provide for the efficient, economical, fair, and nondiscriminatory administration of the association; and

(2) include:

(A) a plan for the equitable assessment of the members of the association to defray losses and expenses;

(B) underwriting standards;

(C) procedures for accepting and ceding reinsurance;

(D) procedures for determining the amount of insurance to be provided to specific risks;

(E) time limits and procedures for processing applications for insurance; [and]

(F) a plan for property inspections for windstorm and hail insurance; and

(G) other provisions as considered necessary by the department to implement the purposes of this chapter.

SECTION 7.008. Subsection (a), Section 2210.202, Insurance Code, is amended to read as follows:

(a) A person who has an insurable interest in insurable property may apply to the association for insurance coverage provided under the plan of operation and an inspection of the property, subject to any rules, including any inspection fee, established by the board of directors and approved by the commissioner. The association shall make insurance available to each applicant in the catastrophe area whose property is insurable property but who, after diligent efforts, is unable to obtain property insurance covering damages from wind and hail through the voluntary market, as evidenced by two declinations, cancellations, or a combination of declinations and cancellations from insurers authorized to engage in the business of, and writing, property insurance covering damages from wind and hail in this state. For purposes of this section, "declination" has the meaning assigned by the plan of operation and may include a refusal to offer coverage and the inability to obtain coverage. Notwithstanding Section 2210.203(c), evidence of two declinations or other comparable evidence is required with an application for renewal of an association policy unless the association has evidence that comparable voluntary market coverage is not available in the area of the property to be insured for the same class of risk.

SECTION 7.009. Section 2210.251, Insurance Code, is amended by amending Subsections (a), (c), (f), and (g) and adding Subsections (i), (j), and (k) to read as follows:

(a) Except as provided by this section, to be considered insurable property eligible for windstorm and hail insurance coverage from the association, a structure that is constructed or repaired or to which additions are made on or after January 1, 1988, must be inspected or approved by the association [department] for compliance with the plan of operation.

(c) After January 1, 2004, a person must submit a notice of a windstorm inspection to the association [unit responsible for certification of windstorm inspections at the department] before beginning to construct, alter, remodel, enlarge, or repair a structure.

(f) The association [department] shall issue a certificate of compliance for each structure that qualifies for coverage. The certificate is evidence of insurability of the structure by the association.

(g) The association [department] may enter into agreements and contracts as necessary to implement this section.

(i) The association may charge a reasonable fee for each inspection in an amount set by commissioner rule. The association may use fees collected under this section for operating expenses.

(j) Without limitation of the department's authority to otherwise enforce this chapter, the department shall monitor the association's compliance with this subchapter. To facilitate the department's oversight of the inspection program, the association shall report to the department quarterly, in the manner prescribed by the commissioner, regarding:

(1) the number of inspections performed;

(2) the number of structures inspected;

(3) the number and a general description of the type of inspection deficiencies discovered through the inspection program; and

(4) any actions taken to resolve problems with inspections.

(k) The commissioner may adopt rules in the manner prescribed by Subchapter A, Chapter 36, as necessary to implement this section.

SECTION 7.010. Subsections (a) and (c), Section 2210.254, Insurance Code, are amended to read as follows:

(a) For purposes of this chapter, a "qualified inspector" includes:

(1) a person determined by the association [department] to be qualified because of training or experience to perform building inspections;

(2) a licensed professional engineer who meets the requirements specified by the association [commissioner rule] for appointment to conduct windstorm inspections; and

(3) an inspector who:

(A) is certified by the International Code Council, the Building Officials and Code Administrators International, Inc., the International Conference of Building Officials, or the Southern Building Code Congress International, Inc.;

(B) has certifications as a buildings inspector and coastal construction inspector; and

(C) complies with other requirements specified by the board of directors [commissioner rule].

(c) Before performing building inspections, a qualified inspector must enter into a contract with the association [be approved and appointed or employed by the department].

SECTION 7.011. Subchapter F, Chapter 2210, Insurance Code, is amended by adding Section 2210.2541 to read as follows:

Sec. 2210.2541. ASSOCIATION INSPECTION PROGRAM. (a) The association shall develop an inspection program to perform inspections for windstorm and hail insurance as required by this subchapter.

(b) The association shall adopt inspection standards and regulations regarding the operation of the inspection program, including:

(1) inspection training and education requirements, as determined necessary by the association, for licensed engineers who contract with the association under Section 2210.255;

(2) guidelines for inspection fees assessed under Section 2210.251(i) and for fees collected by inspectors under this subchapter; and

(3) procedures for handling complaints made to the association regarding inspectors.

(c) The association shall include in the inspection program an oversight process that includes regular reinspections by the association to ensure that association inspectors perform duties under this subchapter appropriately.

(d) The association shall report possible licensing violations by an inspector selected under Sections 2210.254 and 2210.255 to perform inspections under this subchapter to the Texas Board of Professional Engineers.

(e) The association shall establish procedures as part of the inspection program as necessary to issue certificates of compliance under Section 2210.251(f).

(f) As part of the report required under Section 2210.251(j), the association shall report to the department regarding the operation of the inspection program.

SECTION 7.012. Section 2210.255, Insurance Code, is amended to read as follows:

Sec. 2210.255. CONTRACT WITH [APPOINTMENT OF] LICENSED ENGINEER AS INSPECTOR. (a) On request of an engineer licensed by the Texas Board of Professional Engineers, the association may enter into a contract with [commissioner shall appoint] the engineer under which the engineer serves as an inspector under this subchapter. The association may enter into a contract under this subsection only on receipt of information satisfactory to the board [not later than the 10th day after the date the engineer delivers to the commissioner information demonstrating] that the engineer is qualified to perform windstorm inspections under this subchapter.

(b) The association shall consult with the commissioner regarding [shall adopt rules establishing] the information to be considered in contracting with [appointing] engineers under this section.

SECTION 7.013. Subchapter F, Chapter 2210, Insurance Code, is amended by adding Section 2210.2565 to read as follows:

Sec. 2210.2565. PROCEDURES REGARDING CONTRACTING WITH INSPECTORS. The board of directors shall develop procedures for contracting with and oversight of inspectors selected under Sections 2210.254 and 2210.255, including procedures relating to the grounds for the suspension, modification, or revocation of a contract under this subchapter with an inspector.

SECTION 7.014. Subsection (c), Section 2210.452, Insurance Code, is amended to read as follows:

(c) At the end of each calendar year or policy year, the association shall pay the net gain from operations of the association to the trust fund. For purposes of this subsection:

(1) "Net gain from operations" includes [equity of a member, including] all premium and other revenue of the association in excess of incurred losses and operating expenses.

(2) "Operating expenses" includes the cost of any reinsurance[, to the trust fund or a reinsurance program approved by the commissioner].

SECTION 7.015. Subsection (b), Section 2210.454, Insurance Code, is amended to read as follows:

(b) Each state fiscal year, the department may fund the mitigation and preparedness plan using the investment income of the trust fund in an amount not less than $1 million and not more than 10 percent of the investment income of the prior fiscal year. [From that amount and as part of that plan, the department may use in each fiscal year $1 million for the windstorm inspection program established under Section 2210.251.]

SECTION 7.016. The following laws are repealed:

(1) Subsection (d), Section 2210.254, Insurance Code; and

(2) Sections 2210.256 and 2210.257, Insurance Code.

SECTION 7.017. (a) The board of directors of the Texas Windstorm Insurance Association established under Section 2210.102, Insurance Code, as that section existed before amendment by this Act, is abolished effective January 1, 2010.

(b) Not later than December 31, 2009, the commissioner of insurance shall appoint the members of the board of directors of the Texas Windstorm Insurance Association under Section 2210.102, Insurance Code, as amended by this Act.

(c) The term of a person who is serving as a member of the board of directors of the Texas Windstorm Insurance Association immediately before the abolition of that board under Subsection (a) of this section expires on January 1, 2010. Such a person is eligible for appointment by the commissioner of insurance to the new board of directors of the Texas Windstorm Insurance Association under Section 2210.102, Insurance Code, as amended by this Act.

SECTION 7.018. Section 2210.202, Insurance Code, as amended by this Act, applies only to an insurance policy delivered, issued for delivery, or renewed on or after January 1, 2010. A policy delivered, issued for delivery, or renewed before January 1, 2010, 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 8. ELECTRONIC TRANSACTIONS

SECTION 8.001. Subtitle A, Title 2, Insurance Code, is amended by adding Chapter 35 to read as follows:

CHAPTER 35. ELECTRONIC TRANSACTIONS

Sec. 35.001. DEFINITIONS. In this chapter:

(1) "Conduct business" includes engaging in or transacting any business in which a regulated entity is authorized to engage or is authorized to transact under the law of this state.

(2) "Regulated entity" means each insurer or other organization regulated by the department, including:

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

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

(C) a Mexican casualty company;

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

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

(F) a domestic or foreign fraternal benefit society;

(G) a domestic or foreign title insurance company;

(H) an attorney's title insurance company;

(I) a stipulated premium company;

(J) a nonprofit legal service corporation;

(K) a health maintenance organization;

(L) a statewide mutual assessment company;

(M) a local mutual aid association;

(N) a local mutual burial association;

(O) an association exempt under Section 887.102;

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

(Q) a county mutual insurance company; and

(R) a farm mutual insurance company.

Sec. 35.002. CONSTRUCTION WITH OTHER LAW. (a) Notwithstanding any other provision of this code, a regulated entity may conduct business electronically in accordance with this chapter and the rules adopted under Section 35.004.

(b) To the extent of any conflict between another provision of this code and a provision of this chapter, the provision of this chapter controls.

Sec. 35.003. ELECTRONIC TRANSACTIONS AUTHORIZED. A regulated entity may conduct business electronically to the same extent that the entity is authorized to conduct business otherwise if before the conduct of business each party to the business agrees to conduct the business electronically.

Sec. 35.004. RULES. (a) The commissioner shall adopt rules necessary to implement and enforce this chapter.

(b) The rules adopted by the commissioner under this section must include rules that establish minimum standards with which a regulated entity must comply in the entity's electronic conduct of business with other regulated entities and consumers.

SECTION 8.002. Chapter 35, Insurance Code, as added by this Act, applies only to business conducted on or after the effective date of this Act. Business conducted before the effective date of this Act is governed by the law in effect on the date the business was conducted, and that law is continued in effect for that purpose.

ARTICLE 9. DATA COLLECTION

SECTION 9.001. Chapter 38, Insurance Code, is amended by adding Subchapter I to read as follows:

SUBCHAPTER I. DATA COLLECTION RELATING TO CERTAIN PERSONAL LINES

OF INSURANCE

Sec. 38.401. APPLICABILITY OF SUBCHAPTER. This subchapter applies only to an insurer who writes personal automobile insurance or residential property insurance in this state.

Sec. 38.402. FILING OF CERTAIN CLAIMS INFORMATION. (a) The commissioner shall require each insurer described by Section 38.401 to file with the commissioner aggregate personal automobile insurance and residential property insurance claims information for the period covered by the filing, including the number of claims:

(1) filed during the reporting period;

(2) pending on the last day of the reporting period, including pending litigation;

(3) closed with payment during the reporting period;

(4) closed without payment during the reporting period; and

(5) carrying over from the reporting period immediately preceding the current reporting period.

(b) An insurer described by Section 38.401 must file the information described by Subsection (a) on an annual basis. The information filed must be broken down by quarter.

Sec. 38.403. PUBLIC INFORMATION. (a) The department shall post the data contained in claims information filings under Section 38.402 on the department's Internet website. The commissioner by rule may establish a procedure for posting data under this subsection that includes a description of the data that must be posted and the manner in which the data must be posted.

(b) Information provided under this section must be aggregate data by line of insurance for each insurer and may not reveal proprietary or trade secret information of any insurer.

Sec. 38.404. RULES. The commissioner may adopt rules necessary to implement this subchapter.

SECTION 9.002. 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 entities" means insurers or other organizations regulated by the department, including:

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

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

(3) a county mutual insurance company;

(4) a farm mutual insurance company;

(5) a domestic or foreign title insurance company; and

(6) an attorney's title insurance company.

Sec. 752.002. STUDY OF INFORMATION CONCERNING DATA MINING AND PATTERN RECOGNITION. (a) The commissioner by rule shall require regulated entities to report to the department concerning:

(1) technologies used by the entities 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 entities use 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 shall 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. Other information obtained under this section is commercial information not subject to disclosure requirements of Chapter 552, Government Code.

Sec. 752.003. REPORT TO THE 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 752.002 by regulated entities.

ARTICLE 10. STUDY ON RATE FILING AND APPROVAL

REQUIREMENTS FOR CERTAIN INSURERS WRITING IN

UNDERSERVED AREAS; UNDERSERVED AREA DESIGNATION

SECTION 10.001. Section 2004.002, Insurance Code, is amended by amending Subsection (b) and adding Subsections (c) and (d) to read as follows:

(b) In determining which areas to designate as underserved, the commissioner shall consider:

(1) whether residential property insurance is not reasonably available to a substantial number of owners of insurable property in the area; [and]

(2) whether access to the full range of coverages and policy forms for residential property insurance does not reasonably exist; and

(3) any other relevant factor as determined by the commissioner.

(c) The commissioner shall determine which areas to designate as underserved under this section not less than once every six years.

(d) The commissioner shall conduct a study concerning the accuracy of current designations of underserved areas under this section for the purpose of increasing and improving access to insurance in those areas not less than once every six years.

SECTION 10.002. Subchapter F, Chapter 2251, Insurance Code, is amended by adding Section 2251.253 to read as follows:

Sec. 2251.253. REPORT. (a) The commissioner shall conduct a study concerning the impact of increasing the percentage of the total amount of premiums collected by insurers for residential property insurance under Section 2251.252.

(b) The commissioner shall report the results of the study in the biennial report required under Section 32.022.

(c) This section expires September 1, 2011.

ARTICLE 11. CANCELLATION OR RESCISSION

SECTION 11.001. Subchapter B, Chapter 541, Insurance Code, is amended by adding Section 541.062 to read as follows:

Sec. 541.062. BAD FAITH CANCELLATION OR RESCISSION. It is an unfair method of competition or an unfair or deceptive act or practice for a health benefit plan issuer to:

(1) set cancellation or rescission goals, quotas, or targets;

(2) pay compensation of any kind, including a bonus or award, that varies according to the number of cancellations or rescissions;

(3) set, as a condition of employment, a number or volume of cancellations or rescissions to be achieved; or

(4) set a performance standard, for employees or by contract with another entity, based on the number or volume of cancellations or rescissions.

SECTION 11.002. Chapter 1202, Insurance Code, is amended by adding Subchapter C to read as follows:

SUBCHAPTER C. NOTICE REQUIRED FOR CERTAIN CANCELLATION OR

RESCISSION DECISIONS

Sec. 1202.101. APPLICABILITY. (a) This subchapter applies only to a health benefit plan, including a small or large employer health benefit plan written under Chapter 1501, that provides benefits for medical or surgical expenses incurred as a result of a health condition, accident, or sickness, including an individual, group, blanket, or franchise insurance policy or insurance agreement, a group hospital service contract, or an individual or group evidence of coverage or similar coverage document that is offered by:

(1) an insurance company;

(2) a group hospital service corporation operating under Chapter 842;

(3) a fraternal benefit society operating under Chapter 885;

(4) a stipulated premium company operating under Chapter 884:

(5) a reciprocal exchange operating under Chapter 942;

(6) a Lloyd's plan operating under Chapter 941;

(7) a health maintenance organization operating under Chapter 843;

(8) a multiple employer welfare arrangement that holds a certificate of authority under Chapter 846; or

(9) an approved nonprofit health corporation that holds a certificate of authority under Chapter 844.

(b) This subchapter does not apply to:

(1) a health benefit plan that provides coverage:

(A) only for a specified disease of for another limited benefit other than an accident policy;

(B) only for accidental death or dismemberment;

(C) for wages or payments in lieu of wages for a period during which an employee is absent from work because of sickness or injury;

(D) as a supplement to a liability insurance policy;

(E) for credit insurance;

(F) only for dental or vision care;

(G) only for hospital expenses; or

(H) only for indemnity for hospital confinement;

(2) a Medicare supplemental policy as defined by Section 1882(g)(1), Social Security Act (42 U.S.C. Section 1395ss), as amended;

(3) a workers' compensation insurance policy;

(4) medical payment insurance coverage provided under a motor vehicle insurance policy; or

(5) a long-term care insurance policy, including a nursing home fixed indemnity policy, unless the commissioner determines that the policy provides benefit coverage so comprehensive that the policy is a health benefit plan described by Subsection (a).

Sec. 1202.102. NOTICE OF INTENT TO CANCEL OR RESCIND. (a) A health benefit plan issuer may not cancel or rescind a health benefit plan on the basis of a misrepresentation or a preexisting condition without first notifying an affected individual in writing 60 days before the issuer's intent to cancel or rescind the health benefit plan.

(b) The notice required under Subsection (a) must include, as applicable:

(1) the principal reasons for the decision to cancel or rescind the health benefit plan;

(2) the clinical basis for a determination that a preexisting condition exists;

(3) a description of any general screening criteria used to evaluate issued health benefit plans and determine eligibility for a decision to cancel or rescind; and

(4) notice that the individual may file a complaint with the department if the individual believes the cancellation or rescission is inappropriate.

Sec. 1202.103. RULES. The commissioner shall adopt rules to implement and administer this subchapter.

ARTICLE 12. TRANSITION; EFFECTIVE DATE

SECTION 12.001. Except as otherwise provided by this Act, this Act applies only to an insurance policy, contract, or evidence of coverage that is delivered, issued for delivery, or renewed on or after January 1, 2010. A policy, contract, or evidence of coverage delivered, issued for delivery, or renewed before January 1, 2010, 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 12.002. This Act takes effect September 1, 2009.