BILL ANALYSIS

C.S.H.B. 3388

By: Paul

Insurance

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Currently, Texas only permits an insurer to write commercial group property insurance for a group of businesses that constitutes a large risk. The bill author has informed the committee that the statute governing such insurance does not expressly allow for group casualty, does not allow for personal lines, and lacks clarity in relation to other existing state statutes allowing personal lines that are limited in scope. Furthermore, the statute lacks clarity on its applicability to surplus lines insurers according to the Texas Department of Insurance. C.S.H.B. 3388 seeks to expand and clarify the regulations surrounding group property and casualty insurance policies in Texas. The bill allows for both casualty and liability coverage incidental to property risks, establishes clearer definitions and conditions for permitted groups, and sets explicit standards for surplus lines agents regarding diligent effort and reporting requirements. It ensures consumer protection by prohibiting shared claim limits among policyholders, applying individual insurance laws to group policy certificates, and mandating timely disclosures to policyholders.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that rulemaking authority is expressly granted to the commissioner of insurance in SECTIONS 2 and 3 of this bill.

ANALYSIS

C.S.H.B. 3388 amends the Insurance Code to revise statutory provisions regarding commercial group property insurance and to set out new provisions regarding personal lines group property and casualty insurance.

Commercial Group Property Insurance

Disclosures Required

C.S.H.B. 3388 does the following with respect to a commercial group property insurance policy:

· requires an insurer, during an application for such a policy, to provide to each applicant a written disclosure of whether the policy has a shared aggregate limit and, if applicable, the amount of the limit; and

· requires an insurer, not later than the 30th day after the date the insurer issues, delivers, or renews such a policy, to deliver a copy of the certificate of insurance and a copy of the policy to each member covered by the policy.

Incidental Casualty and Liability Coverage

C.S.H.B. 3388 authorizes a commercial group property insurance policy to contain casualty and liability coverage that is incidental to the property risk covered under the policy.

Applicability to Surplus Lines

C.S.H.B. 3388 subjects eligible surplus lines insurers to provisions relating to commercial group property insurance other than the provisions relating to policy form filings, rate filings, and the required identification of the insured. The bill establishes the following:

· a surplus lines agent is required to make a diligent effort, as described by applicable state law relating to surplus lines insurance, only with respect to an issued commercial group property insurance policy and only on an annual basis, rather than individually for each group member added during the policy period; and

· a surplus lines agent is required to report to and file with the Surplus Lines Stamping Office of Texas only the group policy issued, rather than each certificate or evidence of insurance issued to the group members.

Definition of "Member"

C.S.H.B. 3388 defines "member," for purposes of provisions relating to commercial group property insurance policies, as an owner or person with an insurable interest in a property covered under such a policy.

Rulemaking

C.S.H.B. 3388 authorizes the commissioner of insurance to adopt rules to implement and administer provisions governing commercial group property insurance.

Personal Lines Group Property and Casualty Insurance

Group Insurance Authorized

C.S.H.B. 3388 authorizes an insurer to provide a personal lines property and casualty insurance policy to a permitted group, on a group basis, under the following conditions:

· the issuance of the policy results in economies of scale in administrative, marketing, or brokerage costs;

· the benefits provided under the policy are reasonable to the premiums charged; and

· the policy does not contain a shared aggregate limit.

The bill defines "permitted group" as a group of 10 or more certificate holders who have a preexisting relationship to each other through a common trade, an association, an affiliation, or any other relationship that is separate and distinct from any group insurance arrangement of the group.

C.S.H.B. 3388 prohibits an insurance policy that provides personal lines property and casualty insurance coverage on a group basis under the bill's provisions from including a provision under which the payment of a certificate holder's claims is limited by the claims or losses incurred by another certificate holder. The bill prohibits an insurer from renewing an insurance policy that provides such coverage to a group that includes fewer than 10 certificate holders as part of the group at the time of renewal.

Applicability of Bill Provisions

C.S.H.B. 3388 makes its provisions relating to personal lines group property and casualty insurance, other than those relating to rate and form filings, applicable to an eligible surplus lines insurer. The bill excludes from the applicability of those bill provisions an insurance policy issued under and in accordance with statutory provisions relating to any of the following:

· group marketing of automobile insurance for persons over 55 years of age;

· commercial group property insurance;

· risk retention groups and purchasing groups;

· identity theft insurance coverage;

· the authorization for the issuance of personal automobile group insurance or residential property group insurance in an underserved area as designated by the commissioner of insurance; or

· travel insurance.

Applicability of Insurance Laws

C.S.H.B. 3388 establishes that, except as otherwise provided by the bill, certain Insurance Code provisions apply to each certificate issued under a group policy for personal lines property and casualty insurance as if the certificate is an insurance policy and the certificate holder is an insured, if the provisions would apply to the policy if the policy was issued on an individual basis. The applicable Insurance Code provisions are those relating to the following:

· delivery of insurance policies;

· prohibited unfair claim settlement practices;

· extension of deadlines;

· a written statement of reasons for declination, cancellation, or nonrenewal;

· renewal of a standard fire, homeowners, or farm or ranch owners insurance policy;

· applicability of the refund of an unearned premium;

· policy forms or endorsements making a material change to a policy;

· notice of renewal for a homeowners insurance policy, fire and residential allied lines insurance policy, farm and ranch owners insurance policy, or farm and ranch insurance policy;

· notice of rate increase for residential property insurance policies; and

· refunds or discounts based on excessive or unfairly discriminatory premium rates.

Rate and Form Filings

C.S.H.B. 3388 requires an insurer to comply with all applicable rate and form filing requirements under provisions relating to property and casualty insurance for a personal lines group property and casualty insurance policy.

Incidental Liability Coverage

C.S.H.B. 3388 authorizes a personal lines group property and casualty insurance policy to contain liability coverage that is incidental to the property risk covered under the policy.

Surplus Lines Requirements

C.S.H.B. 3388 establishes the following with respect to the application of surplus lines requirements for personal lines group property and casualty insurance:

· that a surplus lines agent is required to make a diligent effort, as described by applicable state law relating to surplus lines insurance, only with respect to an issued personal lines group property and casualty insurance policy and only on an annual basis, rather than individually for each group member added during the policy period; and

· that a surplus lines agent is required to report to and file with the Surplus Lines Stamping Office of Texas only the group policy issued, rather than each certificate or evidence of insurance issued to the group members.

Disclosures Required

C.S.H.B. 3388 requires an insurer, not later than the 30th day after the date the insurer issues, delivers, or renews a personal lines group property and casualty insurance policy, to deliver a copy of the certificate of insurance and a copy of the policy to each member covered by the policy.

Group Enroller Exemption

C.S.H.B. 3388 establishes that a person who secures and furnishes information for the purpose of enrolling entities or individuals under a personal lines group property and casualty insurance policy, issues certificates or evidences of insurance under the policy, or otherwise assists in administering the policy, including by collecting and remitting premiums, is not required to be licensed as an insurance agent under state law, provided that the person does not receive a commission with respect to the sale of the policy or any related enrollments.

Rulemaking

C.S.H.B. 3388 authorizes the commissioner of insurance to adopt rules to implement and administer the bill's provisions relating to personal lines group property and casualty insurance.

Transition Provision

C.S.H.B. 3388 applies only to an insurance policy delivered, issued for delivery, or renewed on or after the bill's effective date.

EFFECTIVE DATE

On passage, or, if the bill does not receive the necessary vote, September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

While C.S.H.B. 3388 may differ from the introduced in minor or nonsubstantive ways, the following summarizes the substantial differences between the introduced and committee substitute versions of the bill.

Commercial Group Property Insurance

Whereas the introduced authorized a commercial group property insurance policy to contain casualty coverage that is incidental to the property risk covered under the policy, the substitute authorizes such a policy to contain casualty and liability coverage that is incidental to the property risk covered under the policy.

The substitute includes the following provisions absent from the introduced relating to the application of surplus lines requirement for commercial group property insurance:

· a provision establishing that a surplus lines agent is required to make a diligent effort only with respect to an issued commercial group property insurance policy and only on an annual basis, rather than individually for each group member added during the policy period; and

· a provision establishing that a surplus lines agent is required to report to and file with the Surplus Lines Stamping Office of Texas only the group policy issued, rather than each certificate or evidence of insurance issued to the group members.

Personal Lines Group Property and Casualty Insurance

Whereas the introduced defined "permitted group" as a group of 10 or more insureds who have certain preexisting relationships with each other, the substitute defines that term as a group of 10 or more certificate holders who have such preexisting relationships.

The substitute includes the following provisions absent from the introduced:

· a prohibition against a personal lines group property and casualty insurance policy including a provision under which the payment of a certificate holder's claims is limited by the claims or losses incurred by another certificate holder;

· a provision establishing that specified Insurance Code provisions apply to each certificate issued under a group policy for personal lines property and casualty insurance as if the certificate is an insurance policy and the certificate holder is an insured, if the provision would apply to the policy if the policy was issued on an individual basis;

· an authorization for a personal lines group property and casualty insurance policy to contain liability coverage that is incidental to the property risk covered under the policy;

· provisions establishing the following with respect to surplus lines:

o that a surplus lines agent is required to make a diligent effort only with respect to an issued personal lines group property and casualty insurance policy and only on an annual basis, rather than individually for each group member added during the policy period; and

o that a surplus lines agent is required to report to and file with the Surplus Lines Stamping Office of Texas only the group policy issued, rather than each certificate or evidence of insurance issued to the group members;

· a requirement for an insurer, not later than the 30th day after the date the insurer issues, delivers, or renews a personal lines group property and casualty insurance policy, to deliver a copy of the certificate of insurance and a copy of the policy to each member covered by the policy; and

· a provision establishing that a person who secures and furnishes information for purposes of enrolling entities or individuals under a personal lines group property and casualty insurance policy, or otherwise assists in administering the policy, is not required to be licensed as an insurance agent under state law, provided that the person does not receive a commission with respect to the sale of the policy or any related enrollments.