HBA-TBM H.B. 765 77(R) BILL ANALYSIS Office of House Bill AnalysisH.B. 765 By: Chavez Insurance 2/9/2001 Introduced BACKGROUND AND PURPOSE Under current law, insurers set the policy price of motor vehicle insurance by considering such factors as the age and driving record of the motorist, the type of vehicle insured, and the area in which the motorist lives. House Bill 765 requires insurers to insure individual drivers, rather than the driver's vehicle, requires the commissioner of insurance to set a minimum rate for liability insurance for all insurers to use, and sets a formula that raises the rate based on the number of liability claims made by the insured. The bill also establishes penalties for operating a motor vehicle in violation of the provisions set forth in the bill and provides for suspension and revocation of a person's driver's license for violations. 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 28.152, Insurance Code) of this bill. ANALYSIS House Bill 765 amends the Insurance and Transportation codes to modify the liability insurance requirements for passenger vehicles. The bill amends the Insurance Code to prohibit a person from operating a passenger vehicle on a Texas highway without a liability insurance policy (policy) (Art. 28.051). The bill provides that a person commits a Class C misdemeanor for a first offense and a state jail felony for a second offense if the person operates a motor vehicle without a policy (Art. 28.201). The bill sets forth provisions regarding policies and insurers that issue policies, including: _guidelines for policies and insurers, including provisions regarding out-of-state drivers and insurers for operation by the insurer (Art. 27.101) (Art. 27.101 follows Art. 28.051 in the bill); _ the minimum amounts of liability coverage (Art. 27.102); _required and prohibited terms of the policy (Arts. 28.103 and 28.104) (Art. 28.103 follows Art. 27.102 in the bill); and _the policy form and endorsement to be used that are required to be adopted by the commissioner of insurance (commissioner), and that the form must state the entire dollar amount of coverage (Art. 28.106). The bill authorizes a policy to provide additional coverage that is not subject to these provisions (Art. 28.105). The bill authorizes the liability coverage requirements to be met by a combination of policies of one or more insurance companies (Art. 28.107). The bill requires an insurer to report to the Department of Public Safety (DPS) the issuance of a policy, the termination of a policy by either party, or a claim made under a policy. DPS is required to suspend a person's license on notice of termination, and to review a person's record on notice of five or more claims against a person's policy in any three-year period. Following review, DPS is authorized to initiate proceedings to suspend or revoke a person's license (Art. 28.108). The bill prohibits an insurer from refusing to insure or renew a policy, at the minimum required amounts, to an applicant who holds or is eligible to hold a valid Texas driver's license (Art. 28.151). The bill requires the commissioner, after notice and hearing, to set forth the minimum base rates for passenger vehicle liability insurance and annually adjust the rates as is actuarially justifiable. The bill requires the commissioner to adopt rules governing the procedures for establishing and adjusting the minimum base rates. The minimum base rates may not vary because of the insured's residential area, age, or gender. The bill sets forth provisions for rate adjustments based on the amount of paid liability claims against the insured during a specified time period (Art. 28.152). The bill amends the Transportation Code to set forth provisions regarding notice of termination of insurance, suspension of a license, and hearing requests (Secs. 521.501, 521.502, 521.503, and 521.504). The bill specifies that an application for an original driver's license or the renewal of a license must be accompanied by evidence that the applicant is covered by a policy. The bill removes provisions with regard to evidence of financial responsibility and an affidavit for applicants who do not own motor vehicles (Sec. 521.143). The bill exempts passenger vehicles from the Texas Motor Vehicle Safety Responsibility Act (Sec. 601.0025). The bill amends the Insurance Code to modify provisions regarding discounts for insurance coverage to honor students and members of youth groups to specify that a discount is authorized to apply to collision coverage only if the vehicle is owned by the insured and covered under an owner's policy, rather than designated to be driven by the honor student or youth group member (Arts. 5.03-3 and 5.03-5). The bill removes provisions prohibiting the use of an insurance policy written for a term of less than 30 days to obtain an automobile registration or license plates or a motor vehicle inspection sticker (Art. 5.06). The bill specifies that medical, hospital, wage continuation benefits, or similar benefits available to the injured person provide primary coverage for an injury (Art. 5.06-3). The bill exempts passenger vehicle liability insurance from the flexible rate program (Art. 5.101). EFFECTIVE DATE September 1, 1999. The provisions regarding repealers take effect on January 1, 2000.