HBA-TYH H.B. 1092 76(R)    BILL ANALYSIS


Office of House Bill AnalysisH.B. 1092
By: Burnam
Insurance
3/9/1999
Introduced



BACKGROUND AND PURPOSE 

Currently, the benchmark with flex band system provides insurers with
substantial pricing flexibility. The benchmark rate is the rate set
annually by the commissioner of insurance (commissioner) for particular
types of insurance and the flexibility band (flex band) is the range of
rates, plus or minus 30 percent of the benchmark, within which an insurer
may offer rates.  The limits on rate increases protect consumers because
insurers have in the past  reacted to catastrophic events by increasing
rates.  The limits imposed by the flex band provide the commissioner  with
the ability to maintain orderly markets.  At the same time, most insurers
will not be affected by the flex band limitations. The benchmark ratemaking
hearings provide the public an opportunity to present testimony and file
information concerning auto and property rates each year. 

H.B. 1092 sets out two provisions regarding flex-rating for county mutuals.
First, the commissioner will set separate, presumably higher, benchmark
rates for county mutuals.  This recognizes the higher losses of the
non-standard market and ensures the ability to file and use within the
county mutual flex bands.  Second, the proposal retains the county mutuals'
ability to offer several rating tiers or programs within one company, which
may be useful for serving the non-standard market. 

H.B. 1092 requires the commissioner to establish a separate benchmark for
county mutual auto insurance and requires county mutuals to file and use
rates within 30 percent of the benchmark. County mutuals could continue to
use multiple rating tiers and rating programs.  The bill also requires
Lloyd's associations and  reciprocal and interinsurance exchanges to  file
and use within the current benchmark. 

RULEMAKING AUTHORITY

It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution. 

SECTION BY SECTION ANALYSIS

SECTION 1.  Amends Article 5.101, Insurance Code, by adding Section 6, as
follows: 

Sec. 6.  APPLICATION OF FLEX-RATING TO COUNTY MUTUAL INSURANCE COMPANIES,
LLOYD'S ASSOCIATIONS, AND RECIPROCAL AND INTERINSURANCE EXCHANGES.  (a)
Provides that this article applies to a county mutual insurance company, an
underwriter at a Lloyd's, and a reciprocal or interinsurance exchange.  

(b) Provides that each county mutual insurance company, underwriter at a
Lloyd's, and reciprocal or interinsurance exchange is subject to the rate
and rating manual filing requirements of Section 3 of this article, except
as provided by Subsection (c) of this section.  

(c)  Requires the commissioner of insurance (commissioner) to establish
separate benchmark rates for county mutual insurance companies.  Requires
the commissioner, in promulgating benchmark rates applicable to county
mutual insurance companies, to consider the factors described by Section
3(c) of this article based only on the experience  of county mutual
insurance companies.  Authorizes a county mutual insurance company to use
multiple rating tiers or rating programs within that company only if it
makes a separate filing for each rating tier or rating program.  

SECTION 2.  Amends Article 17.22, Insurance Code, as follows:

Art. 17.22.  New Title: APPLICATION OF INSURANCE LAWS.  Provides that in
addition to any laws made applicable under Subsection (a) of this article,
rather than Code, county mutual insurance companies are subject to Article
5.101, in addition to various other specified articles of this code.
Deletes the original Subsection (b) which provides that the flexible rating
program created under Subchapter M, Chapter 5 (Flexible Rating Program for
Certain Insurance Lines), of this code does not apply to county mutual
insurance companies. Creates Subsection (b) from existing text of
Subsection (a).  Makes conforming and nonsubstantive changes. 

SECTION 3.  Amends Article 18.23 (b), Insurance Code, to make conforming
and nonsubstantive changes. 

SECTION 4.  Amends Article 19.12 (b), Insurance Code, to make conforming
and nonsubstantive changes. 

SECTION 5.  Provides that this Act applies only to rates for an insurance
policy that is delivered, issued for delivery, or renewed on or after
January 1, 2000.  Provides that rates for a policy that is delivered,
issued for delivery, or renewed before January 1, 2000, 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.  

SECTION 6.  Effective date: September 1, 1999.

SECTION 7.  Emergency clause.