82R7664 TJS-F
 
  By: Davis S.B. No. 1064
 
 
 
A BILL TO BE ENTITLED
 
AN ACT
  relating to the collection and use of certain information by
  certain insurers; providing administrative penalties.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  Subtitle A, Title 10, Insurance Code, is amended
  by adding Chapter 1811 to read as follows:
  CHAPTER 1811. DATA MINING AND PATTERN RECOGNITION
         Sec. 1811.001.  DEFINITIONS.  In this chapter, "insurer," 
  "personal automobile insurance," and "residential property
  insurance" have the meanings assigned by Section 2301.051.
         Sec. 1811.002.  COLLECTION OF INFORMATION CONCERNING DATA
  MINING AND PATTERN RECOGNITION. (a)  The commissioner by rule
  shall require an insurer that writes personal automobile insurance
  or residential property insurance in this state 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 and perils or applicants for
  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 shall require that insurers report
  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. 1811.003.  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. 1811.004.  REPORT TO LEGISLATURE. The department shall
  include in its biennial report to the legislature under Section
  32.022 information concerning the use of relationships derived from
  the technologies described by Section 1811.002 by insurers. The
  information must include the impact of the use of those
  relationships on insurance and other coverage to covered persons
  and perils 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.  (a)  In this section, "department" means the
  Texas Department of Insurance.
         (b)  The department shall conduct a study of:
               (1)  technologies such as statistical techniques,
  devices, or models that may be used by or on behalf of an insurer
  that writes personal automobile insurance or residential property
  insurance in this state to establish new classifications or to
  change methods of classification for rating, tiering, or
  underwriting; and
               (2)  the manner in which insurers use the relationships
  derived from the technologies described by Subdivision (1) in:
                     (A)  predicting differences in expected losses of
  covered persons and perils or applicants for coverage;
                     (B)  underwriting and creating and defining risk
  classifications or changing a method of classification;
                     (C)  setting or determining rates and premiums; or
                     (D)  using classifications or a change in a method
  of classification to deny coverage, limit coverage, or refuse to
  renew or cancel coverage under personal automobile or residential
  property insurance policies.
         (c)  The department shall include the results of the study
  conducted under this section in the biennial report to the 83rd
  Legislature made under Section 32.022, Insurance Code. The report
  must describe the impact that the use of the relationships derived
  from technologies described by Subsection (b) of this section has
  on insurance, policyholders, and applicants for insurance in this
  state, and may include recommendations for proposed legislation
  appropriate to regulate or mitigate the use of those technologies.
         SECTION 3.  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.