The purpose of this bulletin is to remind insurers of their responsibility to fully explain to policyholders and applicants any changes in coverage for personal automobile insurance policy forms and endorsements approved by the Texas Department of Insurance under Article 5.145, Insurance Code. It is important that insurers advise consumers of changes in coverage for personal automobile policies so that they may make informed decisions regarding their insurance needs.
I. Disclosure
Because the personal automobile insurance market currently is transitioning from standardized, promulgated policy forms to individually filed policy forms, it is critical that insurers inform policyholders about changes, including reductions in coverage, so that new policy terms are fully and clearly represented to them. Article 5.36, Insurance Code, provides that an insurer may not use an endorsement to a policy form to which Article 5.145 applies that reduces the amount of coverage that would otherwise be provided under the policy unless the insurer provides the policyholder with a written explanation of the change made by the endorsement before the effective date of the change. This provision applies to any policy form to which Article 5.145 applies, but does not apply if the policyholder has requested the endorsement that reduces coverage.
II. Non-Renewal
Insurers who choose to offer to renewal customers a policy that changes coverage under an existing policy must comply with Article 21.49-2B, Insurance Code. Renewal of a policy has been interpreted to mean providing like and similar coverage to the existing policy. Therefore, insurers that choose to offer renewal customers a policy which does not provide like and similar coverage to the existing policy must comply with Section 5 of Article 21.49-2B by mailing proper notice of non-renewal to the insured not later than the 30th day before the date the policy expires. Also, Section 9 of Article 21.49-2B requires insurers, at the request of an insured or applicant for insurance, to provide a written statement of the reason for a cancellation or non-renewal of or determination not to issue a policy. In addition, Article 21.49-2E requires an insurer's written statement giving the reason or reasons for cancellation, declination, or non-renewal to fully explain a decision which adversely affects an applicant or policyholder as specified in subsection (a) of Article 21.49-2E.
Companies writing personal automobile insurance must also ensure that agents have the necessary information available to provide a full explanation to their customers of any changes in personal automobile coverage as discussed in this bulletin.
Questions regarding this bulletin may be directed to Grover Corum, Manager, Personal Lines Division at 512-322-3430 or grover.corum@tdi.state.tx.us.
Marilyn Hamilton, Associate Commissioner
Property & Casualty Program MC 104-PC