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Texas Department of Insurance
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Renewals require clear, conspicuous notice of material changes

To the property and casualty insurers of Texas:

The Texas Department of Insurance (TDI) has issued rules with specific requirements that insurers must follow to notify consumers of a material change in a property and casualty policy. I want to highlight the importance of these rules. A clear, conspicuous, plain-language notice is essential to helping consumers make informed decisions about their coverage.

New rules

State law already required a clear, conspicuous notice at least 30 days in advance when offering a renewal policy that reduces coverage, changes coverage conditions, or changes the duties of the policyholder. Rules effective February 12, 2020, set specific requirements for such notices. The new rules:

  • Clarify what constitutes a material change. Changing coverage for a roof from replacement cost to actual cash value is a material change.
  • Require that the first page of a renewal notice include the consumer notice or indicate where the consumer notice is located.
  • Provide specific requirements for the consumer notice. For example, a change from replacement cost to actual cash value coverage must include at least one plain-language example that shows the difference in dollar amounts between coverage before and after the change.
  • Provide an example of a consumer notice in plain language.

Insurers also must make the appropriate form, rate/rule, or underwriting guideline filing with TDI.

Use of third-party data

TDI has received reports of insurers using vendor-supplied information for roof age. Insurers that use a third-party vendor to provide data are responsible for checking the methodology used to ensure the accuracy of the data. Some vendors rely on permits to calculate roof age. However, many cities don’t require permits for roof replacements. These errors may lead to consumers being charged the wrong rate or inappropriately narrow the consumer’s coverage options.

These types of issues have a direct effect on consumer understanding and options.

TDI will monitor market activity and consumer complaints for potential compliance issues and will take enforcement action as necessary to ensure the fair treatment of consumers.

Very truly yours,

Kent C. Sullivan
Commissioner of Insurance

Last updated: 2/6/2020