S.B. No. 833
AN ACT
relating to consideration by insurers of certain prohibited
criteria for ratemaking.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subtitle C, Title 5, Insurance Code, is amended
by adding Chapter 565 to read as follows:
CHAPTER 565. PROHIBITED RATING CRITERIA
Sec. 565.001. PURPOSE. (a) The purpose of this chapter is
to regulate the use of environmental, social, or governance models,
scores, factors, or standards to define acts or practices that may
be unfair discrimination in the business of insurance in this
state.
(b) The legislature finds that there are numerous entities
that have developed different environmental, social, or governance
models, scores, factors, or standards that are used to:
(1) evaluate financial risks for investments in
certain businesses or industries; or
(2) encourage or discourage business dealings or
investments with certain types of businesses or industries.
(c) To the extent that the use of such models, scores,
factors, or standards are not based on sound actuarial principles,
or do not bear a reasonable relationship to the expected loss and
expense experience related to insurance risks, the rating of
certain businesses or risks in this state without an ordinary
insurance business purpose may adversely affect the economy, a
sector of the economy, productivity, competition, jobs, the
environment, or the public health and safety of this state or a
portion of this state.
Sec. 565.002. DEFINITION. In this chapter, "insurer" means
an insurance company or other entity authorized to engage in the
business of insurance in this state. The term includes:
(1) a stock or mutual property and casualty insurance
company;
(2) a Lloyd's plan;
(3) a reciprocal or interinsurance exchange;
(4) a county mutual insurance company;
(5) a farm mutual insurance company;
(6) any insurer writing a line of insurance regulated
by Title 10;
(7) all life, health, and accident insurance companies
regulated by the department, including:
(A) a stock or mutual life, health, or accident
insurance company;
(B) a fraternal benefit society;
(C) a nonprofit hospital, medical, or dental
service corporation, including a group hospital service
corporation operating under Chapter 842; and
(D) a stipulated premium company; and
(8) a health maintenance organization operating under
Chapter 843.
Sec. 565.003. APPLICABILITY OF CHAPTER. (a) Except as
provided by this section, this chapter applies only to insurance
policies issued and delivered by an insurer in this state.
(b) This chapter does not require the filing of rates for
any line, type of insurer, or type of insurance business that is not
specifically required by statute to file rates with the department.
(c) This chapter does not apply to:
(1) fidelity, guaranty, and surety bonds; or
(2) crop insurance.
Sec. 565.004. CONSTRUCTION OF CHAPTER. (a) This chapter
shall be construed and applied to promote the underlying purposes
as provided by Section 565.001.
(b) This chapter may not be construed or applied to require:
(1) an insurer to write any line or type of business
that the insurer does not write; or
(2) a material change in the insurer's current
business plans.
(c) Nothing in this chapter is intended to create any type
of private cause of action or independent basis in a civil or
criminal proceeding.
(d) Nothing in this chapter is intended to prohibit the use
of information that is relevant and related to the risk being
insured even if that information may also be used or considered in
developing an environmental, social, or governance model, score,
factor, or standard.
Sec. 565.005. PROHIBITED CRITERIA. Except as provided by
Section 565.006, an insurer may not use an environmental, social,
or governance model, score, factor, or standard to charge a rate
different than the rate charged to another business or risk in the
same class for essentially the same hazard.
Sec. 565.006. EXCEPTION. An insurer does not violate
Section 565.005 if the insurer's actions are based on an ordinary
insurance business purpose, including the use of sound actuarial
principles, or financial solvency considerations reasonably
related to loss experience for the different types of risks and
coverages made available by a particular insurer.
Sec. 565.007. REGULATORY ACTION. Nothing in this chapter
is intended to authorize the department to adopt any rule, model, or
standard requiring an insurer to use any environmental, social, or
governance model law, regulation, or other standard that has not
been specifically authorized by statute, including:
(1) a rule, model, or standard required under any
federal law that does not preempt state law under the
McCarran-Ferguson Act (15 U.S.C. Section 1012(b)); or
(2) a rule, model, or standard required by any
national organization, including the National Association of
Insurance Commissioners, that has not been specifically authorized
by statute.
SECTION 2. Chapter 565, Insurance Code, as added by this
Act, applies only to an insurance policy that is delivered, issued
for delivery, or renewed in this state on or after January 1, 2024.
SECTION 3. This Act takes effect September 1, 2023.
______________________________ ______________________________
President of the Senate Speaker of the House
I hereby certify that S.B. No. 833 passed the Senate on
May 11, 2023, by the following vote: Yeas 20, Nays 11.
______________________________
Secretary of the Senate
I hereby certify that S.B. No. 833 passed the House on
May 24, 2023, by the following vote: Yeas 86, Nays 54, one
present not voting.
______________________________
Chief Clerk of the House
Approved:
______________________________
Date
______________________________
Governor