81R14635 TJS-D
By: McClendon H.B. No. 3258
A BILL TO BE ENTITLED
AN ACT
relating to automobile insurance loss ratios and premiums, and the
collection and use of certain data by insurers regarding automobile
insurance; providing administrative penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Chapter 1953, Insurance Code, is amended by
adding Subchapter D to read as follows:
SUBCHAPTER D. DATA MINING AND PATTERN RECOGNITION
Sec. 1953.151. APPLICABILITY OF SUBCHAPTER. This
subchapter applies to an insurer writing automobile insurance in
this state, including an insurance company, reciprocal or
interinsurance exchange, county mutual insurance company, farm
mutual insurance company, Lloyd's plan, or other insurer.
Sec. 1953.152. COLLECTION OF INFORMATION CONCERNING DATA
MINING AND PATTERN RECOGNITION. (a) The commissioner by rule may
require an insurer 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 or applicants for automobile
insurance 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 may require that insurers report with
respect to 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 38.003. Other information obtained under this section is
commercial information not subject to the disclosure requirements
of Chapter 552, Government Code.
Sec. 1953.153. 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. 1953.154. 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 1953.152 by insurers. The
information must include the impact of the use of those
relationships on insurance and other coverage to covered persons
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. Subtitle C, Title 10, Insurance Code, is amended
by adding Chapter 1956 to read as follows:
CHAPTER 1956. AUTOMOBILE INSURANCE LOSS RATIO AND PREMIUMS
Sec. 1956.001. DEFINITIONS. In this chapter:
(1) "Direct losses incurred" means the sum of direct
losses paid plus an estimate of losses to be paid in the future for
all claims arising from the current reporting period and all prior
periods, minus the corresponding estimate made at the close of
business for the preceding period. This amount does not include
home office and overhead costs, advertising costs, commissions and
other acquisition costs, taxes, capital costs, administrative
costs, or claims processing costs.
(2) "Direct losses paid" means the sum of all payments
made during the period for claimants under a policy to which this
chapter applies before any reinsurance has been ceded or assumed.
This amount does not include home office and overhead costs,
advertising costs, commissions and other acquisition costs, taxes,
capital costs, administrative costs, or claims processing costs.
(3) "Direct premiums earned" means the amount of
premium attributable to the coverage already provided in a given
period before reinsurance has been ceded or assumed.
(4) "Loss ratio" means direct losses incurred divided
by direct premiums earned.
Sec. 1956.002. APPLICABILITY OF CHAPTER. This chapter
applies to an insurer writing automobile insurance in this state,
including an insurance company, reciprocal or interinsurance
exchange, county mutual insurance company, farm mutual insurance
company, Lloyd's plan, or other insurer.
Sec. 1956.003. LOSS RATIO REPORTING. The commissioner by
rule shall require each insurer to which this chapter applies to
report at least annually the insurer's loss ratio for the preceding
year for each policy issued.
Sec. 1956.004. REVIEW OF PREMIUMS. (a) The commissioner by
rule shall establish a minimum loss ratio below which a policy's
premiums are excessive for the benefits provided under the policy.
(b) If the commissioner determines that a policy's loss
ratio falls below the minimum established under Subsection (a), the
commissioner may order an insurer to:
(1) implement a premium rate adjustment;
(2) issue appropriate rebates to policyholders;
(3) file with the department an actuarial memorandum,
prepared by a qualified actuary, in accordance with rules adopted
to implement this section; or
(4) take any other remedial action the commissioner
determines is appropriate.
(c) The commissioner shall adopt rules as necessary to
implement this section, including rules regarding the frequency and
form of reporting loss ratios.
SECTION 3. This Act takes effect September 1, 2009.