HBA-ATS H.B. 2903 76(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 2903 By: Counts Insurance 4/4/1999 Introduced BACKGROUND AND PURPOSE Texas has always regulated auto insurance rates. Before 1991, state law required the State Board of Insurance (board) to determine and set the premium rates. That changed with the enactment of Article 5.101, Insurance Code, in 1991. Article 5.101 requires the commissioner of insurance (the successor to the board) to set a benchmark rate and allow companies to compete within a specific range, whether above or below the benchmark. Currently, most insurance companies set their own rates, within a range of 30 percent above or below the rate. County mutual insurance companies are the exception. They set their own rates without limitations, and because most of them specialize in high-risk drivers, they generally charge more. In fact, county mutual rates are generally higher than those charged by the Texas Automobile Insurance Plan Association (TAIPA), the risk-assignment plan available for drivers unable to find basic liability coverage elsewhere. County mutual insurers are not subject to assignments from TAIPA. Seizing on these facts, some insurers that are subject to rate regulation under the flexible rating program have transferred some of their automobile insurance business to county mutual insurers they control or with which they have an affiliation, to circumvent rate regulation. H.B. 2903 prohibits a county mutual insurer, to avoid the circumvention of the flexible rating program, from writing private passenger automobile insurance for any insured at a rate that, after the application of any discount available to the insured under Texas Department of Insurance rules, is lower than the highest rate allowed under the flexibility band for that insured. 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 Section 3, Article 5.101, Insurance Code, by adding Subsection (r), as follows: (r) Prohibits a county mutual insurance company (county mutual), to avoid the circumvention of the flexible rating program, from writing private passenger automobile insurance for any insured at a rate that, after the application of any discount available to the insured under Texas Department of Insurance rules, is lower than the highest rate allowed under the flexibility band for that insured. Requires a county mutual to make any filing necessary to comply with this subsection by the 60th day after the effective date of a benchmark rate. Continues in effect the rates of the county mutual that are in effect on the effective date of the benchmark rate until the filing is made. Sets forth that this subsection does not apply to single interest insurance or insurance on mobile homes, motor homes, travel trailers, or motorcycles. SECTION 2. Makes application of this Act prospective for an insurance policy that is delivered, issued for delivery, or renewed on or after September 1, 1999. SECTION 3. Effective date: September 1, 1999. SECTION 4. Emergency clause.