HBA-KSM H.B. 2752 76(R)    BILL ANALYSIS
        

Office of House Bill AnalysisH.B. 2752
By: Smithee
Insurance
4/13/1999
Introduced



BACKGROUND AND PURPOSE 

Section 1, Article 5.73 (Advisory Organizations), Insurance Code,
authorizes an insurer to subscribe to an advisory organization from which
it may receive statistical plans, historical data, prospective loss costs,
supplementary rating information, policy forms and endorsements, research
and performance of inspections except final rates or recommendations
regarding profit or expense provisions, other than loss adjustment
expenses.  Premium comparison information is listed in the statute.
Insurers must obtain this information from private vendors and Texas
Department of Insurance files.  H.B. 2752 permits an insurer to submit to
and receive from an advisory organization rates of individual insurers that
are effective at the time the information is submitted or received or that
have been effective among the information.  In addition, this bill deletes
final rates as a piece of information that an insurer is not permitted to
submit to and receive from an organization. 

Section 4A, Article 5.73, Insurance Code, prohibits an advisory
organization from receiving from or supplying to insurers statistical
plans, historical data, prospective loss costs, supplementary rating
information, policy forms and endorsements, research and performance of
inspections except final rates or recommendations regarding profit or
expense provisions, other than loss adjustment expenses, unless the
advisory organization establishes a subsidiary.  The subsidiary must be
domiciled in this state, have an office in this state, and have a governing
board composed of an ex officio member appointed by the commissioner of
insurance (commissioner) and five representatives of property and casualty
insurers licensed in this state who subscribe to or purchase products from
the advisory organization.  This requirement has created an unnecessary
expense.  H.B. 2752 deletes the prohibition against an organization
supplying information to insurers unless it had first established a
subsidiary. 

Section 4B, Article 5.73, Insurance Code, provides that each insurer
relying on prospective loss costs provided by an advisory organization must
justify, by expert evidence, its need for that information on the grounds
of insufficiency of that insurer's data and experience.  An insurer unable
to demonstrate its need for prospective loss costs provided by an advisory
organization is prohibited from filing or using that information. Although
an actuarial justification is acceptable, it may be unnecessary and
burdensome for an insurance company to duplicate the efforts of the
organization. H.B. 2752 deletes the requirement that an insurer relying on
prospective loss costs provided by an organization must justify its need
for that information.   This bill authorizes the commissioner to review the
rate filing of an insurer that relies on the prospective loss costs
provided by an organization and to require the insurer to provide the
insurer's actual data and loss experience in addition to the information
provided by an organization.  

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 1, Article 5.73, Insurance Code, to include
rates of individual insurers  
that are effective at the time the information is submitted or received or
that have been effective among the information an insurer is permitted to
submit to and receive from an advisory organization.  Deletes final rates
as a piece of information that an insurer is not permitted to submit  to
and receive from an organization.  Provides an exception.  Makes a
nonsubstantive change. 

SECTION 2.  Amends Section 4A, Article 5.73, Insurance Code, as follows:

(a) Authorizes an advisory organization (organization) to file prospective
loss costs, supplementary rating information, and policy forms with the
commissioner of insurance (commissioner).  Authorizes an insurer that
subscribes to an organization to use this information and to incorporate
the information into the insurer's filings.  Subjects a filing made by an
organization to the provisions of this code or the other insurance laws of
this state governing rate filings.  Deletes the prohibition against an
organization supplying information to insurers unless it had first
established a subsidiary. 

(b) Authorizes a corporation, unincorporated association, partnership, or
individual to apply to the commissioner for a license as an organization
for the types of insurance specified in the application.  Includes a
statement of the applicant's qualifications to act as an organization and a
fee of $100 among the things that an applicant, rather than an
organization, must, rather than is required to, file with the commissioner.
Makes nonsubstantive and conforming changes. 

(c) Prohibits an insurer from submitting information to or receiving
information from an organization unless the organization holds a license
issued under this article. 

(d) Requires the commissioner to issue a license to an applicant, without
regard to the state of domicile or residence of the applicant or the
location of the applicant's place of business if the commissioner
determines that the applicant is qualified. 
 
(e) Requires the commissioner to grant or deny a license to an applicant on
or before the 60th day after the date the commissioner receives the
application. 
 
(f) Sets forth that a license issued under this article remains in effect
until the commissioner suspends or revokes the license. 

Makes conforming changes.

SECTION 3.  Amends Section 4B, Article 5.73, Insurance Code, to authorize
the commissioner to review the rate filing of an insurer that relies on the
prospective loss costs provided by an organization and to require the
insurer to provide the insurer's actual data and loss experience in
addition to the information provided by an organization.  Deletes the
requirement that an insurer relying on prospective loss costs provided by
an organization must justify its need for that information. 

SECTION 4.  (a) Effective date: September 1, 1999.

(b) Authorizes an organization that is in existence and operating as an
advisory organization on the effective date of this Act to provide the
described information pending issuance or denial of a license. 

SECTION 5.  Emergency clause.