81R11364 KCR-D
By: Herrero H.B. No. 3858
A BILL TO BE ENTITLED
AN ACT
relating to the writing of and rate regulation for residential
property insurance in this state.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
ARTICLE 1. RATE FILING AND RATE ASSESSMENT FOR RESIDENTIAL
PROPERTY INSURANCE
SECTION 1.01. Subtitle H, Title 10, Insurance Code, is
amended by adding Chapter 2255 to read as follows:
CHAPTER 2255. FILING OF RESIDENTIAL PROPERTY INSURANCE RATES FOR
RATE ASSESSMENT
Sec. 2255.001. APPLICABILITY; DEFINITIONS. (a) This
chapter applies only to residential property insurance.
(b) The definitions under Chapter 2251 apply to this
chapter.
Sec. 2255.002. CONSTRUCTION WITH OTHER LAW. (a)
Notwithstanding any other law, rates for residential property
insurance are governed by this chapter from the effective date of
this chapter until the completion of the rate assessment under this
chapter and any resulting hearings or other proceedings under this
chapter.
(b) When the rate assessment and any resulting hearings or
other proceedings under this chapter are completed, rates for
residential property insurance are regulated as provided by Section
2251.1511.
Sec. 2255.003. RATE STANDARDS. (a) A rate filed by an
insurer under Section 2255.004 or a rate ordered by the
commissioner following a rate hearing under Section 2255.005 may
not be excessive, inadequate, unfairly discriminatory, or
unreasonable.
(b) A rate ordered by the commissioner following a rate
hearing under Section 2255.005 must comply with the rate standards
described by Subsection (a) and may not be confiscatory.
Sec. 2255.004. RATE FILING; RATE ASSESSMENT. (a) Not later
than the 20th day after the effective date of this chapter, each
insurer writing residential property insurance shall file with the
commissioner the insurer's rates, supporting information, and
supplementary rating information. If the insurer has made a rate
filing under Chapter 2251 not more than 30 days before the effective
date of this chapter, the insurer may:
(1) notify the department that the insurer is using
the rate filing submitted under Chapter 2251 to comply with the
requirements of this chapter; or
(2) file an update to the material filed under Chapter
2251.
(b) If, after reviewing a filing under Subsection (a), the
commissioner determines that the filing does not contain
information sufficient to allow the commissioner to determine if
the filed rate meets all rate standards under Section 2255.003, not
later than the 10th day after the insurer makes the filing, the
commissioner may request in writing any specific additional
information from the insurer necessary to make the determination.
(c) Not later than the 30th day after the date the
department receives an insurer's filing under Subsection (a), the
commissioner shall:
(1) if the filed rate meets all rate standards under
Section 2255.003, approve the filed rate; or
(2) if the filed rate fails to meet any rate standard
under Section 2255.003, disapprove the filed rate and issue an
order specifying in what respects the filed rate fails to comply
with the rate standards.
Sec. 2255.005. HEARING. If the commissioner disapproves a
rate under Section 2255.004(c)(2), the department shall hold a rate
hearing and the commissioner shall issue an order in accordance
with Chapter 40.
Sec. 2255.006. JUDICIAL REVIEW. (a) Not later than the
10th day after the date an insurer receives the commissioner's
order issued under Section 2255.005, the insurer may file a
petition for judicial review in a district court of Travis County.
The standard of review of the commissioner's order is substantial
evidence.
(b) During the pendency of an appeal under this section, the
insurer may charge either the insurer's existing rates or the rate
ordered by the commissioner under Section 2255.005.
Sec. 2255.007. REFUND. If on final appeal a court upholds
the commissioner's order issued under Section 2255.005, the insurer
shall refund the difference in overcharged premium, if any, plus
interest to each policyholder. The interest rate is the prime rate
for the calendar year in which the refund is issued, plus six
percent.
Sec. 2255.008. CERTAIN SETTLEMENTS PROHIBITED. If an
insurer files a petition for judicial review under Section
2255.006, the department may not agree to a settlement of the
lawsuit in any amount that is less than the amount of the refund,
including interest, that the insurer would be obligated to pay
under Section 2255.007.
Sec. 2255.009. EXPIRATION. (a) This chapter expires
September 1, 2010.
(b) The expiration of this chapter does not affect an action
or proceeding against an insurer subject to this chapter for a
failure to comply with this chapter before the expiration of this
chapter, regardless of when the action or proceeding was commenced,
and this chapter is continued in effect only for that purpose.
SECTION 1.02. This article applies to a residential
property insurance policy that is delivered, issued for delivery,
or renewed on or after the effective date of this Act and to rates
for such a policy. A residential property insurance policy
delivered, issued for delivery, or renewed before the effective
date of this Act and the rates for such a policy are 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.
ARTICLE 2. RATE REGULATION FOR RESIDENTIAL PROPERTY INSURANCE
SECTION 2.01. Subchapter D, Chapter 2251, Insurance Code,
is amended by adding Section 2251.1511 to read as follows:
Sec. 2251.1511. PRIOR APPROVAL FOR CERTAIN RESIDENTIAL
PROPERTY INSURANCE RATES. (a) An insurer may not use a rate for
residential property insurance until the rate and all other
information required by Section 2251.101 have been filed with the
department and the rate has been approved by the commissioner.
(b) Sections 2251.151(b) and (d) apply to rates filed under
this section.
(c) Section 2251.152 does not apply to rates for which prior
approval is required by this section.
SECTION 2.02. Section 2251.156(a), Insurance Code, is
amended to read as follows:
(a) If the commissioner disapproves a rate filing under
Section 2251.153(a)(2) or Section 2251.1511, the commissioner
shall issue an order disapproving the filing in accordance with
Section 2251.103(b).
SECTION 2.03. The change in law made by this article applies
only to rates for residential property insurance that is delivered,
issued for delivery, or renewed on or after January 1, 2010. Rates
for residential property insurance delivered, issued for delivery,
or renewed before January 1, 2010, are 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.
ARTICLE 3. WITHDRAWAL PLANS; RESUMPTION OF WRITING INSURANCE
SECTION 3.01. Section 827.001, Insurance Code, is amended
by adding Subdivision (3) to read as follows:
(3) "Residential property insurance" has the meaning
assigned by Section 2254.001.
SECTION 3.02. Section 827.003, Insurance Code, is amended
to read as follows:
Sec. 827.003. WITHDRAWAL PLAN REQUIRED; NOTICE. (a) An
insurer shall file with the commissioner a plan for orderly
withdrawal if the insurer proposes to:
(1) reduce the insurer's total annual premium volume
by 50 percent or more;
(2) reduce the insurer's annual premium by 75 percent
or more in a line of insurance in this state; or
(3) reduce in this state, or in any applicable rating
territory, the insurer's total annual premium volume in a line of
personal automobile or residential property insurance by 50 percent
or more.
(b) An insurer that files a withdrawal plan under Subsection
(a) must provide notice to each of the insurer's policyholders of
the intention to reduce the insurer's total annual premium volume
in this state or in any applicable rating territory in this state.
The insurer must provide the notice required by this subsection, in
the manner prescribed by the commissioner by rule, not later than
the 90th day before the date the withdrawal plan is scheduled to be
implemented by the insurer.
SECTION 3.03. Section 827.006, Insurance Code, is amended
to read as follows:
Sec. 827.006. [RESUMPTION OF] WRITING INSURANCE AFTER
COMPLETE WITHDRAWAL. An insurer that withdraws from writing
residential property [all lines of] insurance in this state may not
write any line of [, without the approval of the commissioner,
resume writing] insurance in this state before the third [fifth]
anniversary of the date of withdrawal unless the commissioner
approves the insurer to write a particular line of insurance after
determining that the line of insurance is not available to a
substantial number of policyholders or potential policyholders in a
rating territory in this state at an affordable rate.
SECTION 3.04. The change in law made by this article applies
only to a withdrawal plan filed with the Texas Department of
Insurance on or after the effective date of this Act. A withdrawal
plan filed with the Texas Department of Insurance before the
effective date of this Act is covered by the law in effect at the
time the withdrawal plan was filed, and that law is continued in
effect for that purpose.
ARTICLE 4. CREDIT SCORING
SECTION 4.01. Subchapter B, Chapter 559, Insurance Code, is
amended by adding Section 559.0511 to read as follows:
Sec. 559.0511. USE OF CREDIT INFORMATION IN WRITING CERTAIN
POLICIES PROHIBITED. (a) Notwithstanding any other provision of
this subchapter, in writing a residential property insurance
policy, an insurer may not:
(1) use an underwriting guideline that is based,
wholly or partly, on the credit information, credit report, or
credit score of an applicant for insurance coverage or any other
person other than the applicant who would be insured under a policy
of personal insurance;
(2) refuse to underwrite, cancel, or nonrenew the
policy based, wholly or partly, on the credit information, credit
report, or credit score of an applicant for insurance coverage or
any other person other than the applicant who would be insured under
the policy;
(3) take an action that results in an adverse effect
against a consumer because the consumer does not have a credit card
account;
(4) charge an applicant for the policy a higher
premium than otherwise would be charged based, wholly or partly, on
the credit information, credit report, or credit score of the
applicant or any other person other than the applicant who would be
insured under the policy;
(5) rate a risk based, wholly or partly, on the credit
information, credit report, or credit score of the applicant or any
other person other than the applicant who would be insured under the
policy, including:
(A) providing or removing a discount;
(B) assigning the applicant to a rating tier; or
(C) placing the applicant with an affiliated
company; or
(6) require a particular payment plan based, wholly or
partly, on the credit information, credit report, or credit score
of the applicant or any other person other than the applicant who
would be insured under the policy.
(b) An insurer may not consider an absence of credit
information or an inability to determine credit information for an
applicant for an insurance policy described by Subsection (a) or
insured as a factor in underwriting or rating the policy.
SECTION 4.02. (a) The changes in law made by this article
in adding Section 559.0511, Insurance Code, apply only to a
residential property insurance policy:
(1) that is delivered, issued for delivery, or renewed
on or after January 1, 2010;
(2) the application for which is submitted on or after
January 1, 2010; or
(3) that is subject to determination of denial,
cancellation, or nonrenewal on or after January 1, 2010.
(b) A residential property insurance policy delivered,
issued for delivery, or renewed before January 1, 2010, or the
application for which is submitted before January 1, 2010, is
governed by the law as it existed immediately before January 1,
2010, and that law is continued in effect for that purpose.
ARTICLE 5. EFFECTIVE DATE
SECTION 5.01. This Act takes effect September 1, 2009.