82R1563 TRH-F

By: Torres H.B. No. 3156

A BILL TO BE ENTITLED

AN ACT

relating to the regulation of property and casualty insurance rates.

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

SECTION 1. Section 560.002, Insurance Code, is amended by adding Subsection (d) to read as follows:

(d) Subsection (b)(2)(B) does not apply to a rate filed under Chapter 2251.

SECTION 2. Section 2251.001, Insurance Code, is amended to read as follows:

Sec. 2251.001. PURPOSE. The purposes of this subchapter and Subchapters B, C, D, and E are to:

(1) promote the public welfare by regulating insurance rates to prohibit [excessive,] inadequate[,] or unfairly discriminatory rates;

(2) promote the availability of insurance by reducing regulatory costs;

(3) promote [price] competition among insurers to provide rates and premiums that are responsive to competitive market conditions;

(4) prohibit price-fixing agreements and other anticompetitive behavior by insurers; and

(5) provide regulatory procedures for the maintenance of appropriate information reporting systems.

SECTION 3. Section 2251.003(c), Insurance Code, is amended to read as follows:

(c) Sections 2251.008, 2251.052, 2251.101, 2251.102, [2251.103,] 2251.104, 2251.105, and 2251.107 do not apply to a Lloyd's plan or a reciprocal or interinsurance exchange with respect to commercial property insurance, inland marine insurance, rain insurance, or hail insurance on farm crops.

SECTION 4. Section 2251.051, Insurance Code, is amended to read as follows:

Sec. 2251.051. [EXCESSIVE,] INADEQUATE[,] AND UNFAIRLY DISCRIMINATORY RATES. (a) A rate is [excessive,] inadequate[,] or unfairly discriminatory for purposes of this chapter as provided by this section.

(b) [A rate is excessive if the rate is likely to produce a long-term profit that is unreasonably high in relation to the insurance coverage provided.

[(c)] A rate is inadequate if:

(1) the rate is insufficient to sustain projected losses and expenses to which the rate applies; and

(2) 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 in a market.

(c) [(d)] A rate is unfairly discriminatory if the rate:

(1) is not based on sound actuarial principles;

(2) does not bear a reasonable relationship to the expected loss and expense experience among risks; or

(3) is based wholly or partly on the race, creed, color, ethnicity, or national origin of the policyholder or an insured.

SECTION 5. Section 2251.052(b), Insurance Code, is amended to read as follows:

(b) A rate may not be [excessive,] inadequate, unreasonable, or unfairly discriminatory for the risks to which the rate applies.

SECTION 6. Section 2251.104(a), Insurance Code, is amended to read as follows:

(a) The commissioner may disapprove only a rate that is in effect, and may disapprove the rate only after a hearing. The commissioner shall provide the filer at least 20 days' written notice.

SECTION 7. Section 2251.151(a), Insurance Code, is amended to read as follows:

(a) The commissioner by order may require an insurer to file with the department for the commissioner's approval all rates, supplementary rating information, and any supporting information in accordance with this subchapter if the commissioner determines that:

(1) the insurer's rates require supervision because of the insurer's financial condition [or rating practices]; or

(2) a statewide insurance emergency exists.

SECTION 8. Section 2251.155(a), Insurance Code, is amended to read as follows:

(a) The commissioner shall approve a rate filing under this subchapter if the proposed rate is adequate[, not excessive,] and not unfairly discriminatory.

SECTION 9. 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 specifying in what respects the filing fails to meet the requirements of this chapter [disapproving the filing in accordance with Section 2251.103(b)].

(b) An insurer whose rate filing is disapproved 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 [in accordance with Section 2251.103(c)].

SECTION 10. The heading to Section 2254.003, Insurance Code, is amended to read as follows:

Sec. 2254.003. REFUND OR DISCOUNT BASED ON [EXCESSIVE OR] UNFAIRLY DISCRIMINATORY PREMIUM RATES.

SECTION 11. Sections 2254.003(b) and (c), Insurance Code, are amended to read as follows:

(b) Except as provided by Section 2254.004(c), if the commissioner determines that an insurer has charged a rate for personal automobile insurance or residential property insurance that is [excessive or] unfairly discriminatory, as described by Section 2251.051, the commissioner may:

(1) order the insurer to refund directly to each affected policyholder the portion of the premium, plus interest on that amount, that is [excessive or] unfairly discriminatory, if that portion of the premium is at least 7.5 percent of the total premium charged for the coverage; or

(2) if that portion of the premium is less than 7.5 percent of the total premium, order the insurer to provide, to each affected policyholder:

(A) who renews the policy, a future premium discount equal to the amount of the [excessive or] unfairly discriminatory portion of the premium, plus interest on that amount; and

(B) who does not renew or whose coverage is otherwise terminated, a refund in the amount described by Subdivision (1).

(c) The rate for interest assessed under Subsection (b) is the lesser of 18 percent or the sum of six percent and the prime rate for the calendar year in which the commissioner's order finding that the rate is [excessive or] unfairly discriminatory is issued. 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. 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. An insurer may 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.

SECTION 12. Section 2254.004(a), Insurance Code, is amended to read as follows:

(a) Not later than the 20th day after the date of an order under Section 2254.003, the insurer may request that the State Office of Administrative Hearings conduct a rate hearing to determine whether the rate that is subject to the order is [excessive or] unfairly discriminatory.

SECTION 13. The following sections of the Insurance Code are repealed:

(1) Section 2251.103; and

(2) Section 2251.151(a-1).

SECTION 14. This Act applies only to an insurance policy or contract that is delivered, issued for delivery, or renewed on or after January 1, 2012. An insurance policy or contract delivered, issued for delivery, or renewed before January 1, 2012, 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 15. 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, 2011.