The Texas Department of Insurance (TDI) reminds insurers that under the Insurance Code and TDI rules notices of material change must be:
- clear;
- written in plain language;
- appear in a conspicuous place; and
- provided to the insured at least 30 days before renewal or the date the policy expires.
TDI has received complaints about insurers not fulfilling some of these requirements. We encourage all insurers to review the requirements carefully, verify their compliance efforts, and report any suspected violations. Self-reporting may be considered as a mitigating factor in any potential disciplinary action.
Insurance Code Sections 551.056, 551.1055, 2002.001, and 2002.102 allow insurers to provide a notice of material change instead of cancelling or non-renewing policies when the insurer makes a change to a prior or existing policy that will:
- reduce coverage;
- change conditions of coverage; or
- change the duties of the insured at renewal.
Specific issues to watch for include:
- Does the notice clearly indicate the change and is it located in a conspicuous place? Depending upon the applicable line of insurance, insurers may have different statutory obligations. Insurers should carefully review Insurance Code Sections 551.056, 551.1055, 2002.001, and 2002.102, to ensure they are following the appropriate statutory requirements. Generally, a notice of material change must:
- appear in a conspicuous place;
- clearly indicate each material change to the policy;
- be written in plain language; and
- be provided to the insured not later than the 30th day before the renewal or expiration date.
TDI rules 28 TAC Sections 5.9750 – 5.9752, effective February 12, 2020, further define conspicuous. In
part, the rules require the first page of a renewal notice to include the notice of material change or
conspicuously indicate where the change can be found in the document.
- Does a change from replacement cost coverage to actual cash value coverage require an insurer to send a notice of material change? TDI rule 28 TAC Section 5.9752 requires additional explanation in the notice of material change when an insurer makes a change from replacement cost to actual cash value.
- Does the notice of material change need to be sent every time the insurer makes any change to a policy? A notice of material change is required when an insurer makes a change to a prior or existing policy that reduces coverage, changes coverage conditions, or changes the duties of the insured at renewal. TDI rule 28 TAC Section 5.9750 provides some examples of these situations. A notice of material change is not required for changes that increase coverage.
- Is the insurer using policy forms consistent with the information provided to TDI when the forms were approved? If the way an insurer is using a policy form changes, the insurer may need to update its form filing. For example, an insurer may have stated that an endorsement limiting roof coverage to actual cash value was optional to the policyholder. If the insurer later chooses to make this form mandatory for some or all policyholders, the insurer must make an updated form filing.
TDI contact
For more information, contact the Property and Casualty Lines Office at 512-676-6710 or email PropertyCasualty@tdi.texas.gov with questions.