HBA-ATS S.B. 984 76(R)BILL ANALYSIS Office of House Bill AnalysisS.B. 984 By: Madla Insurance 4/29/1999 Committee Report (Amended) BACKGROUND AND PURPOSE Under Article 21.49-2 (Declination, Cancellation, and Nonrenewal of Certain Policies), Insurance Code, the State Board of Insurance (board) must require an insurer to give the policyholder or applicant, upon request by the policyholder or applicant, a written statement of the reason or reasons for declination, cancellation, or nonrenewal of all insurance policies, other than policies subject to Section 21.49-2A (Cancellation and Nonrenewal of Certain Liability Insurance Coverage) or 21.49-2B (Cancellation and Nonrenewal of Certain Property and Casualty Policies) of this code or marine insurance policies other than inland marine, regulated by the board pursuant to Chapter 5, Insurance Code. Because the Insurance Code does not prescribe the type of information that needs to be disclosed, the statements provided by the insurers may be general and may not provide enough information. S.B. 984 expands the types of insurance policies to include those encompassed by Articles 21.49-2A and 21.49-2B, Insurance Code, in addition to Article 21.49-2, Insurance Code, for which an insurer's statement informing a person of a decision to cancel, decline, or renew any of these policies is required to fully explain a decision which adversely affects an applicant or policyholder by denying the applicant or policyholder coverage or continued coverage. The statement must: refer to a specific underwriting guideline or guidelines on file with or available to the Texas Department of Insurance and the office of public insurance counsel; state the precise risk factor or factors of the applicant or policyholder that violate the guideline or guidelines; state the source of information the insurer relied on regarding the risk factor or factors; and specify any other information deemed relevant by the commissioner of insurance. 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 21.49-2E, Insurance Code) of this bill. SECTION BY SECTION ANALYSIS SECTION 1. Amends Chapter 21, Insurance Code, by adding Article 21.49-2E, as follows: Art. 21.49-2E. REQUIREMENTS FOR WRITTEN STATEMENT OF REASON FOR CANCELLATION, DECLINATION, OR NONRENEWAL. (a) Requires an insurer's statement informing a person of a decision to cancel, decline, or renew an insurance policy required by Articles 21.49-2, 21.49-2A, and 21.49-2B, Insurance Code, to fully explain a decision which adversely affects an applicant or policyholder by denying the applicant or policyholder coverage or continued coverage. Requires the statement to: _refer to a specific underwriting guideline or guidelines on file with or available to the Texas Department of Insurance and the office of public insurance counsel; _state the precise risk factor or factors of the applicant or policyholder that violate the guideline or guidelines; _state the source of information the insurer relied on regarding the risk factor or factors; and _specify any other information deemed relevant by the commissioner of insurance (commissioner). (b) Authorizes and directs the commissioner to issue rules necessary to implement this article. SECTION 2.Effective date: September 1, 1999. Makes application of this Act prospective, beginning January 1, 2000. SECTION 3.Emergency clause. EXPLANATION OF AMENDMENTS Amendment No. 1: Amends S.B. 984 in SECTION 1 (proposed Article 21.49-2E(a)) by removing the provision that an insurer's statement informing a person of a decision to cancel, decline, or renew an insurance policy must refer to a specific underwriting guideline or guidelines on file with or available to the Texas Department of Insurance and the office of public insurance counsel. Amends S.B. 984 in SECTION 1 (proposed Article 21.49-2E(a)) by removing the provision that an insurer's statement informing a person of a decision to cancel, decline, or renew an insurance policy must state the precise risk factor or factors of the applicant or policyholder that violate the guideline or guidelines, and replacing it with the provision that the statement must state the precise incident, circumstance, or risk factor or factors applicable to the applicant or policyholder that violate the guideline or guidelines. Amends S.B. 984 in SECTION 1 (proposed Article 21.49-2E(a)) by providing that an insurer's statement informing a person of a decision to cancel, decline, or renew an insurance policy must state the source of information the insurer relied on regarding the incident, circumstance, or risk factor or factors.