HBA-TBM C.S.H.B. 1195 77(R)BILL ANALYSIS Office of House Bill AnalysisC.S.H.B. 1195 By: Brimer Insurance 4/6/2001 Committee Report (Substituted) BACKGROUND AND PURPOSE Current law requires the commissioner of insurance to develop a mandatory commercial automobile insurance rate, a process that is both inefficient and costly. As a result, rates are often three years old by the time they are adopted. Current law also requires commercial auto insurers to utilize forms developed by the Texas Department of Insurance, which may prevent consumers from receiving insurance policies individually tailored to the consumers' specific needs. Texas is the only state in the country to develop its own commercial auto rates and forms. C.S.H.B. 1195 requires commercial automobile insurance coverage to be developed and regulated for a period of 4 years under the same system currently used for other commercial lines. RULEMAKING AUTHORITY It is the opinion of the Office of House Bill Analysis that rulemaking authority is expressly delegated to the commissioner of insurance in SECTION 1.04 (Section 11, Art. 5.13-2, Insurance Code) of this bill. ANALYSIS C.S.H.B. 1195 amends the Insurance Code to exclude commercial automobile liability insurance from the flexible rating program and to include it in the general liability and commercial property insurance coverage. The bill removes the requirement that commercial property coverage include farm and ranch owners and farm and ranch policies (Secs. 1 and 2, Art. 5.13-2; Art. 5.96(a-1); and Sec. 1, Art. 5.101). The bill provides that an insurer is not required to report rating information to the commissioner of insurance (commissioner) for an insurance policy sold to a large commercial automobile risk. The bill prohibits the use of a commercial automobile insurance rate without the prior approval of the commissioner and sets forth criteria for approval or disapproval (Sec. 5, Art. 5.13-2). The bill modifies the definition of "large risk" and its application and specifies the contents, form, and attachments of a commercial automobile insurance policy delivered or issued for delivery in this state (Sec. 8, Art. 5.13-2). The bill authorizes the commissioner to adopt rules necessary to implement rates for general liability and commercial property insurance coverage (Sec. 11, Art. 5.13-2). The bill prohibits the rate of assessment of a maintenance tax from exceeding one-fifth of one percent of the correctly reported gross premiums of all insurers writing commercial automobile insurance in this state (Art. 5.24). The administrative procedure governing changes in manual rules, classification plans, statistical plans, and policy and endorsement forms and for certain rates and rating plans does not apply to commercial automobile insurance (Art. 5.96(a-1)). The bill provides that these amendments expire and the predecessor provisions are reenacted on September 1, 2005, applicable to all insurance policies delivered, issued for delivery, or renewed on or after January 1, 2006. Upon the reenactment of the predecessor legislation, the bill provides that information filed by an insurer for the purpose of determining rates is filed to the Texas Department of Insurance rather than the State Board of Insurance (Art. 5.01B). The bill prohibits rates for commercial automobile insurance from being increased for a period of two years after the effective date of the reenactment (SECTION 2.17). EFFECTIVE DATE September 1, 2001. The bill applies only to an insurance policy that is delivered, issued for delivery, or renewed on or after January 1, 2002. COMPARISON OF ORIGINAL TO SUBSTITUTE C.S.H.B. 1195 differs from the original by amending the Insurance Code to remove the requirement that commercial property coverage include farm and ranch owners and policies and by adding provisions relating to large commercial automobile risk policies, use of rates without approval, commissioner approval or disapproval of rates, large risk policies, policy content, form, and attachments, and rules (Secs. 1,5,8, and 11, Art. 5.13-2). The bill provides that these amendments expire and the predecessor provisions are reenacted September 1, 2005, applicable to all insurance policies delivered, issued for delivery, or renewed on or after January 1, 2006 (SECS. 2.01-2.18). Upon the reenactment of the predecessor legislation, the bill provides that information filed by an insurer for the purpose of determining rates is filed to the Texas Department of Insurance rather than the State Board of Insurance (Art. 5.01B). The bill prohibits rates for commercial automobile insurance from being increased for a period of two years after the effective date of the reenactment (SECTION 2.17).