CO-0205B-059 Multi-car Discount Amendments

At a public hearing under Docket No. 2544 at 1:30 p.m., January 22, 2003 in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas, the Commissioner of Insurance considered amendments proposed by Staff to the Texas Automobile Rules and Rating Manual (the Manual), Rule 74.D. in regard to the two or more autos credit (multi-car discount). Staff´s petition (Ref. No. A-1202-44-I) was published in the December 20, 2002 issue of the Texas Register (27 TexReg 12017).

At the same public hearing, under Docket No. 2543, the Commissioner of Insurance considered a similar petition filed by the Insurance Council of Texas (the Council). The Council´s petition (Ref. No. A-0602-25), was published in the December 20, 2002 issue of the Texas Register (27 TexReg 12017). For reasons set forth herein, the Council´s proposal is denied.

The Commissioner of Insurance adopts amendments proposed by Staff to Manual Rule 74.D. in regard to the multi-car discount. This order adds a provision to Manual Rule 74.D. to allow for the expansion of the multi-car discount on an optional basis to include autos assigned to certain classes of drivers in addition to those specified in the current mandatory multi-car discount provisions. Specifically, autos assigned to any or all of the youthful operator classes may be used to qualify other autos for the discount and/or may receive the discount. Under the amended rule, autos assigned to business use operators will remain ineligible to receive the optional multi-car discount. However, autos assigned to business use operators will continue to qualify other autos for the current mandatory discount as well as for the optional discount. The entire discount (both the mandatory and the optional portions) will apply to all autos that meet the rule's eligibility and ownership requirements, if such autos are covered with one company, regardless of whether the coverage is through more than one policy. Other changes are editorial in nature, including changing the current title from "Two or more autos credit" to "Multi-car discount."

Staff´s petition was derived in part from the previously mentioned Council´s petition, which proposed to expand the current mandatory multi-car discount to apply to autos assigned to youthful operators and to business use operators, both for qualification purposes and for receipt of the discount. Available statistics do not support the broad expansion of the multi-car discount as proposed by the Council, specifically with regard to business use operators. In addition, such an expansion could impact benchmark rates and potentially cause other insureds to pay higher premiums to off-set the premium reductions received by those who would become eligible for the multi-car discount due to the proposed expansion. Therefore, the expansion as proposed by the Council would need to be considered at a benchmark rate hearing based on statistical support that may warrant a mandatory discount for the expanded eligibility. However, there is statistical support for a more limited expansion of the current discount. Adopting the expansion to include youthful operators on an optional basis is reasonable at this time.

The amendments as adopted by the Commissioner of Insurance are shown in an exhibit on file with the Chief Clerk under Ref. No. A-1202-44-I, which is incorporated by reference into Commissioner´s Order No. 03-0088.

The Commissioner of Insurance has jurisdiction over this matter pursuant to Insurance Code Articles 5.10, 5.96, 5.98, and 5.101.

This notification is made pursuant to Insurance Code Article 5.96, which exempts it from the requirements of Government Code Chapter 2001 (Administrative Procedure Act).

Consistent with Insurance Code Article 5.96(h), the Department will notify all insurers writing automobile insurance of this adoption by letter summarizing the Commissioner´s action.

IT IS THEREFORE THE ORDER of the Commissioner of Insurance that the Manual is amended as described herein, and the amendments are adopted to become effective on the 60th day after publication of the notification of the Commissioner´s action in the Texas Register.

EXHIBIT "A"

D. Multi-car discount

1. This rule does not apply to autos that are a part of a risk that is:

a. subject to experience or composite rating,

b. assigned through the Texas Automobile Insurance Plan Association, or

c. a miscellaneous type vehicle.

2. a. When a company affords liability (which may include medical payments and/or personal injury protection) coverage for two or more autos classified as 1A, 1B, 1C, 3, 3A, 6A, 6B, 6C, 7, 8, 8A, 1AF and 6AF, the rate otherwise applicable to the class 1A, 1B, 1C, 6A, 6B, 6C, 7, 1AF and 6AF autos shall be reduced 20%.

b. When a company affords collision insurance for two or more autos classified as 1A, 1B, 1C, 3, 3A, 6A, 6B, 6C, 7, 8, 8A, 1AF and 6AF, the collision premium otherwise applicable to the class 1A, 1B, 1C, 6A, 6B, 6C, 7, 1AF, and 6AF autos shall be reduced 15%.

3. To be eligible for this discount the autos must be:

a. owned by an individual or owned jointly by two or more individuals who are residents of the same household, or

b. owned jointly by two or more individuals who are not residents of the same household address shown in the policy, but are related by blood, marriage or adoption, including a ward or foster child.

4. Optional expanded multi-car discount. A discount may be applied when a company affords liability (which may include medical payments and/or personal injury protection) or collision coverage for two or more autos to the rate otherwise applicable when the risk meets the eligibility standards listed in subsection 1 & 3 of this Section D, but is otherwise ineligible because of the classification listings in subsection 2. The classification listings in subsection 2 may be expanded to include the youthful classes 2A-1, 2A-2, 2AF-1, 2AF-2, 2C-1, 2C-2, 2CF-1, 2CF-2, 2D and 2DF.

The election to provide the expanded multi-car discount must be filed with the Department prior to the effective date of such discounts. Notification must include the additional classes that are to be used to qualify a named insured as well as which additional classes will receive the discount. The amount of the premium reduction is the same as provided under subsection 2a or 2b of this Section D.