HBA-TBM C.S.H.B. 1408 77(R)BILL ANALYSIS


Office of House Bill AnalysisC.S.H.B. 1408
By: Junell
Insurance
4/18/2001
Committee Report (Substituted)
BACKGROUND AND PURPOSE 

When a person who purchases insurance pays the premium on a quarterly
basis, the person runs the risk of paying for coverage that will not be
used if the person cancels the policy prior to the end of the prepaid,
four-month period.  The premium payments made for the months that are not
covered are usually not automatically reimbursed by an insurer, as an
insurance company has the discretion to either keep those premium payments
or reimburse the insured.  Presently,  the state of Texas does not have any
laws that require the insurer to reimburse the insured for unearned premium
payments.  C.S.H.B. 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

C.S.H.B. 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 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.   

The provisions in this bill apply only to an insurance premium paid to an
insurer on or after January 1, 2002.  

EFFECTIVE DATE

September 1, 2001. 

COMPARISON OF ORIGINAL TO SUBSTITUTE

C.S.H.B. 1408 differs from the original by providing that 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 substitute requires the commissioner to adopt rules necessary to
provide appropriate guidelines for determining the portion of an unearned
premium that must be refunded to a policyholder.  The substitute also
provides that nothing in this article affects the obligation of an insurer
to pay an unearned premium to a premium finance company.  The substitute
provides that only a guaranty association is required to promptly refund an
unearned premium.