HBA-TBM H.B. 1408 77(R)BILL ANALYSIS Office of House Bill AnalysisH.B. 1408 By: Junell Insurance 57/17/2001 Enrolled BACKGROUND AND PURPOSE Prior to the 77th Legislative Session, when a person who purchases insurance paid the premium on a quarterly basis, the person ran the risk of paying for coverage that would not be used if the person canceled the policy prior to the end of the prepaid, four-month period. The premium payments made for the months that were not covered were usually not automatically reimbursed by an insurer, as an insurance company had the discretion to either keep those premium payments or reimburse the insured. The state of Texas did not have any laws that required the insurer to reimburse the insured for unearned premium payments. House Bill 1408 requires all insurance companies to promptly reimburse to the insured all unearned premium payments. 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 (Article 21.29, Insurance Code) in this bill. ANALYSIS House Bill 1408 amends the Insurance Code to require a guaranty association to promptly refund to a special assigned deputy receiver an unearned premium. If an insurer issues a policy of insurance that requires the insurer to maintain an unearned premium reserve for the portion of the written policy premium applicable to the unexpired or unused part of the policy period for which the premium has been paid and the policy is canceled or terminated by the insured or the insurer before the end of the policy term with a remaining unearned premium reserve on the policy, the insurer is required to promptly refund to the policyholder the appropriate portion of the unearned premium. The bill also requires a guaranty association to promptly refund any unearned premium. The commissioner of insurance is required to adopt rules necessary to implement these provisions. The bill provides that nothing in this article affects the obligation of an insurer to pay an unearned premium to a premium finance company. EFFECTIVE DATE September 1, 2001. The provisions in this bill apply only to an insurance premium paid to an insurer on or after January 1, 2002.