BILL ANALYSIS

H.B. 1731

By: McClendon

Insurance

Committee Report (Unamended)

BACKGROUND AND PURPOSE

Current law requires a person to obtain motor vehicle liability insurance or provide other acceptable forms of proof of financial responsibility in order to operate a motor vehicle in Texas.  However, according to some estimates, approximately one out of every five drivers in Texas are currently driving uninsured vehicles. Industry experts observe that the cost of vehicle liability insurance coverage is generally based on underwriting criteria such as the owner's claims history or the value of the vehicle, but mileage driven during a policy period is not always a factor.  Interested parties contend that because insurers estimate that the likelihood of a collision tends to increase with the total number of miles driven, mile-based automobile insurance could serve as a lower cost alternative to traditional automobile insurance plans for lower-mileage drivers.  The availability of such plans could also contribute to a greater number of motorists meeting the financial responsibility requirement under state law.

The purpose of H.B. 1731 is to allow insurers to make mile-based automobile insurance available to consumers in an effort to help provide an alternative insurance product for persons who travel a low number of miles during a policy coverage period and to reduce the number of uninsured drivers in Texas.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the commissioner of insurance in SECTION 1 of this bill.

ANALYSIS

H.B. 1731 amends the Insurance Code to authorize an insurer authorized to write personal automobile insurance in Texas to write mile-based automobile insurance in Texas. The bill defines "mile-based automobile insurance" as personal automobile insurance that is rated using a rating plan for which a unit of exposure is one mile driven by the insured. The bill authorizes an insurer that writes mile-based automobile insurance in Texas to also write personal automobile insurance in Texas using a rating plan for which a unit of exposure is a unit other than the number of miles driven by the insured and that complies with statutory provisions related to property and casualty insurance rates. The bill authorizes an insurer to require a person purchasing personal automobile insurance to use the same type of rating plan for all vehicles covered under the person's personal automobile insurance policy. The bill makes specified statutory provisions relating to rates, rate filings, and prior approval for rates applicable to mile-based automobile insurance. The bill requires an insurer to make separate rate filings for mile-based automobile insurance and other automobile insurance written in Texas.

H.B. 1731 requires the commissioner of insurance to compile information regarding the number of insurers writing mile-based automobile insurance in Texas, the geographic areas of Texas in which mile-based automobile insurance is written, and the premium rates for mile-based automobile insurance compared to personal automobile insurance rated on another basis. The bill requires the commissioner to adopt rules as necessary or appropriate to govern the use of mile-based automobile insurance, including rules regarding prepayment arrangements, proof of financial responsibility, and auditing of the odometer of a vehicle for the purpose of determining coverage and number of miles driven.

H.B. 1731 prohibits a mile-based automobile insurance policy that is written for fewer than 1,000 miles from being used to obtain an original or renewal driver's license, an automobile registration or license plates, or a motor vehicle inspection certificate. The bill requires such a policy to contain a specified statement regarding that prohibition and requires an agent or insurer to make a written disclosure regarding that prohibition to an applicant or insured before accepting any premium or fee for such a policy.

H.B. 1731 adds information compiled by the commissioner concerning mile-based automobile insurance policies to the information that must be included on the Internet website established and maintained by the commissioner in conjunction with the office of public insurance counsel that provides information to enable consumers to make informed decisions relating to the purchase of residential property insurance and personal automobile insurance.

H.B. 1731 applies only to a personal automobile insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2014.

EFFECTIVE DATE

September 1, 2013.