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You are here: Home . rules . 2006 . 0615-059

SUBCHAPTER M. Filing Requirements

Division 4. Filings Made Easy - Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings 28 TAC §5.9310
Division 6. Filings Made Easy - Rate and Rate Manual Filing Requirements 28 TAC §5.9332
Division 7. Filings Made Easy - Underwriting Guideline Filing Requirements for Personal Automobile, [and] Residential Property, and Workers' Compensation Insurance 28 TAC §§5.9340 and 5.9341
Division 9. Filings Made Easy - Reduced Filing Requirements for Certain Insurers 28 TAC §5.9357

1. INTRODUCTION. The Texas Department of Insurance proposes amendments to §§5.9310, 5.9332, 5.9340, 5.9341, and 5.9357, concerning form, rate, underwriting guideline, and reduced filing requirements for certain property and casualty insurers'. The proposal is necessary to conform filings made by certain property and casualty insurers pursuant to Insurance Code Articles 5.13-2, 5.55, and 5.55A to legislative amendments that were enacted by the 79th Legislature, Regular Session, in SB 99, HB 7, and HB 2437, and by the 78th Legislature, Regular Session, in SB 14. SB 99 added Chapter 706 to the Insurance Code which authorizes property and casualty insurers to offer insurance coverage for a loss suffered by a policyholder who is a victim of identity theft or attempted identity theft and also amended Insurance Code Article 5.13-2 to add identity theft insurance coverage as a line of insurance subject to Article 5.13-2. The proposed amendment to §5.9310(b)(7) is necessary to add identity theft insurance as a commercial and a personal line of insurance in accordance with Chapter 706, each of which is subject to the filing requirements of §5.9310. Section 5.9310 specifies the form and content of the filing transmittal form that is to be used with form, rate, rule, underwriting guideline, and credit scoring model filings. The proposed amendment to §5.9332(e)(1)(N) clarifies that profit and contingency provisions should be included in the actuarial supporting information that is submitted with a rate filing made in accordance with the Insurance Code Article 5.55 (Workers' Compensation Rates) or Article 21.50 (Mortgage Guaranty Insurance). This amendment is necessary because an amendment enacted in SB 14 to the Insurance Code Article 5.13-2 §4 (Rate Standards) removes consideration of contingencies in an insurer's setting of rates under Article 5.13-2, but Insurance Code Articles 5.55 §2(b)(4) and 21.50 §1A(g)(1) were not amended to remove "contingencies" from factors to be considered by insurers in setting rates under these two statutes. Therefore, insurers regulated under these two statutes must continue to submit supporting information on a reasonable margin for profit and contingencies with rate filings. The proposed amendment to §5.9332(e)(1) that adds subparagraph (O) is necessary for consistency with a provision enacted in HB 7, which requires rates filed in accordance with Article 5.55 to consider the effect on premiums of individual risk variations based on loss or expense considerations. Proposed amendments to §§5.9340 and 5.9341 regarding underwriting guideline filing requirements for workers' compensation insurance are necessary to apply the underwriting guideline filing requirements in those sections to workers' compensation insurers. Under HB 7, which added Article 5.55A to the Insurance Code, insurers of workers' compensation insurance are required to file their underwriting guidelines with the Department; prior to this enactment, workers' compensation insurers were only required to provide underwriting guidelines to the Department upon request pursuant to the Insurance Code §38.003. The proposed amendment to §5.9340 is necessary to amend the purpose of Division 7, which regulates underwriting guideline filing requirements, to include workers' compensation insurance. The proposed amendment to §5.9341 is necessary to provide that the definitions set forth in Insurance Code Article 5.55A apply to insurers filing underwriting guidelines for workers' compensation insurance. The proposed amendments to §5.9357 are necessary to conform §5.9357 to Article 5.13-2 §13(h) which was enacted in HB 2437 to provide for reduced filing requirements for certain insurers writing personal automobile insurance. Accordingly, a proposed amendment to §5.9357(a) is necessary to clarify that the reduced filing requirements of this subsection apply to county mutual insurers that meet certain criteria, and a new subsection (b) is proposed to provide reduced filing requirements for all insurers writing personal automobile insurance that meet the criteria described in Insurance Code Article 5.13-2 §13(h). The remaining subsections are proposed to be re-lettered as subsections (c) and (d) to properly incorporate new §5.9357(b) and to conform the application of re-lettered §5.9357(d) to the insurers who qualify for reduced filing requirements specified in subsection (a), (b), and (c) of §5.9357.

2. FISCAL NOTE. C.H. Mah, Senior Associate Commissioner, Property and Casualty Program, has determined that for each year of the first five years the proposed amendments will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the amendments. There will be no measurable effect on local employment or the local economy as a result of the proposal.

3. PUBLIC BENEFIT/COST NOTE. Mr. Mah has further determined that for each year of the first five years the proposed amendments are in effect, there are several public benefits anticipated as a result of the proposed amendments. The proposed amendment to §5.9310 adds identity theft insurance as a commercial and a personal line of insurance. There are no costs required for insurers as a result of this amendment because the sale of this product is voluntary, and thus individual insurers will determine whether they want to incur any necessary expenses to market this product. Additionally, any costs to insurers who voluntarily opt to market this product are the result of the legislative enactment of SB 99 by the 79th Legislature, Regular Session, and therefore, any costs to comply result directly from the enactment of SB 99. The anticipated public benefit from the proposed amendment to §5.9332(e)(1)(N) is uniform and unambiguous rate filing instructions as a result of the clarification that profit and contingency provisions should be included in the actuarial supporting information that is submitted with a rate filing made in accordance with the Insurance Code Article 5.55 (Workers' Compensation Rates) or Article 21.50 (Mortgage Guaranty Insurance). Also, the amendment to §5.9332(e)(1)(N) provides conformity of the rule with the SB 14 amendment enacted by the 78th Legislature, Regular Session, that deletes "contingency provisions" in Article 5.13-2 §4(b)(7) from the factors to be considered by insurers in setting rates under Article 5.13-2 and therefore, from supporting information that insurers must submit with rate filings under Article 5.13-2. There is no additional cost to insurers required to comply with this amendment because the amendment is consistent with current statutory provisions with which insurers must already comply. The anticipated public benefit from the proposed amendment to §5.9332(e)(1) that adds subparagraph (O), which requires rates filed in accordance with Article 5.55 to include the effect on rates and premiums of individual risk variations based on loss or expense considerations, is that insurers need to determine if their rates and premiums meet the statutory rate and premium standards and likewise allows the Department to verify that they do meet the statutory standards. There is no additional cost to insurers required to comply with this amendment because the amendment is the result of the legislative enactment of HB 7 by the 79th Legislature, Regular Session, and any costs to comply result directly from the enactment of HB 7. The public benefit anticipated as a result of the proposed amendments to §§5.9340 and 5.9341, which apply the underwriting guideline filing requirements in those sections to workers' compensation insurers, will be the ability of the Department to conduct a more efficient and thorough review of those guidelines thus promoting stronger and more competitive insurance markets. There is no additional cost to insurers required to comply with this amendment because the amendment is the result of the legislative enactment of HB 7 by the 79th Legislature, Regular Session, and any costs to comply result directly from the enactment of HB 7. The anticipated public benefit resulting from the proposed amendment to §5.9357(a) will be the availability of reduced filing requirements to additional insurers writing personal automobile insurance that meet the criteria in the Insurance Code Article 5.13-2 §13(h). This may promote an increase in the number of insurers that offer personal automobile insurance to consumers, which will result in consumers having a wider range of coverage and cost options. There are no additional costs to insurers that comply with this amendment because the amendment is the result of the legislative enactment of HB 2437 by the 79th Legislature, Regular Session, and any costs to insurers to comply result directly from the enactment of HB 2437. Because there are no additional costs to insurers as a result of the proposed amendments, there is no differential impact between small, large, and micro-businesses to comply with the proposed amendments and therefore, it is neither legal nor feasible nor necessary to waive the requirements of the proposed amendments for small or micro-businesses.

4. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on June 26, 2006 to Gene C. Jarmon, General Counsel and Chief Clerk, Mail Code 113-2A, Texas Department of Insurance, P. O. Box 149104, Austin, Texas 78714-9104. An additional copy of the comment must be simultaneously submitted to Philip Presley, Mail Code 105-5F, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104. Any request for a public hearing should be submitted separately to the Office of the Chief Clerk by 5:00 p.m. on June 26, 2006.

5. STATUTORY AUTHORITY. The amendments are proposed under Insurance Code Articles 5.13-2, 5.55, 5.55A, 5.98, and 21.50, Chapter 706, and §§38.003, and 36.001. Article 5.13-2 governs rates and forms for certain property and casualty insurance lines and the respective filing requirements in this state. Article 5.13-2 §4(b)(7) was amended by the 78th Legislature, Regular Session, in SB 14 to delete "contingency provisions" from the factors to be considered by insurers in setting rates under Article 5.13-2 and therefore, from supporting information that insurers must submit with rate filings under Article 5.13-2. Article 5.13-2 §13 was amended by HB 2437, 79th Legislature, Regular Session, to provide for reduced filing requirements for personal automobile insurers that meet the statutorily specified criteria. Article 5.55 governs workers' compensation rates, and §2(b)(4) of Article 5.55 provides that an insurer in setting rates must consider a reasonable margin for profit and contingencies. Article 5.98 authorizes the Commissioner to adopt reasonable rules that are appropriate to accomplish the purposes of Chapter 5. Article 21.50 governs mortgage guaranty insurance rates, and §1A(g)(1) of Article 21.50 requires insurers to file, with any rate filing, adequate supporting data, including information on a reasonable margin for profit and contingencies. HB 7, 79th Legislature, Regular Session, amended various provisions of the workers' compensation regulatory statutes, including adding subdivision (2-a) to Article 5.55 to define "premium" to mean the amount charged for a workers' compensation insurance policy, including any endorsements, after the application of individual risk variations based on loss or expense considerations. HB 7 also added Article 5.55A to the Insurance Code to require that workers' compensation insurers file their underwriting guidelines with the Department. In accordance with Article 5.55A §3, Article 5.55A may be enforced in the manner provided by Section 38.003(g). Chapter 706 was enacted and Article 5.13-2 §2 was amended in SB 99 by the 79th Legislature, Regular Session, to add specific regulations for identity theft as a commercial insurance product and as a personal insurance product. Section 36.001 provides that the Commissioner of Insurance may adopt any rules necessary and appropriate to implement the powers and duties of the Texas Department of Insurance under the Insurance Code and other laws of this state.

6. CROSS REFERENCE TO STATUTE . The following statutes are affected by this proposal:

Rule Statute

§5.9310 Insurance Code Article 5.13-2 and Chapter 706

§5.9332 Insurance Code Articles 5.13-2, 5.55, and 21.50

§§5.9340 - 5.9341 Insurance Code Article 5.55A and §38.003

§5.9357 Insurance Code Article 5.13-2

7. TEXT.

SUBCHAPTER M. Filing Requirements

Division 4. Filings Made Easy - Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings

§5.9310. Property and Casualty Filing Transmittal Form.

(a) (No change.)

(b) Definitions. Words and terms not defined in this division may be defined in the Insurance Code Article 5.13-2 and Subchapter D of Chapter 5 and shall have the same meaning when used in this division. The following words and terms when used in this division shall have the following meanings unless the context indicates otherwise:

(1) - (6) (No change.)

(7) Line of insurance--For purposes of this section, each of the following is a line of insurance:

(A) - (S) (No change.)

(T) identity theft (commercial);

(U) identity theft (personal);

(V) [(T)] inland marine (commercial);

(W) [(U)] inland marine (personal);

(X) [(V)] involuntary unemployment;

(Y) [(W)] miscellaneous casualty;

(Z) [(X)] miscellaneous liability;

(AA) [(Y)] mortgage guaranty;

(BB) [(Z)] multi-peril;

(CC) [(AA)] personal liability;

(DD) [(BB)] professional liability;

(EE) [(CC)] property-commercial;

(FF) [(DD)] property-residential (dwelling);

(GG) [(EE)] property-residential (homeowners);

(HH) [(FF)] rain;

(II) [(GG)] surety bonds (other than criminal court appearance bonds);

(JJ) [(HH)] umbrella-commercial;

(KK) [(II)] umbrella-personal; and

(LL) [(JJ)] workers' compensation.

(c) - (g) (No change.)

Division 6. Filings Made Easy - Rate and Rate Manual Filing Requirements

§5.9332. Filing Requirements.

(a) - (d) (No change.)

(e) Except as provided in Division 9 of this subchapter (relating to Filings Made Easy--Reduced Filing Requirements for Certain Insurers), insurers must provide supporting information as necessary for the department to establish that a filing produces rates which are adequate, not excessive or unfairly discriminatory for the risks to which they apply. Categories of supporting information are listed in paragraphs (1) - (7) of this subsection, but are not necessarily required for every rate filing. Insurers must only provide sufficient materials to justify specific rates or changes being proposed. To the extent the information originally submitted in a rate filing is insufficient, the department may request additional information as deemed necessary by the department or commissioner.

(1) Actuarial support. Actuarial support generally includes rate indications and support, including the data and methodologies utilized by the insurer to derive such indications. Supporting information that is submitted with a filing should include each of the following to the extent applicable:

(A) - (L) (No change.)

(M) expense and profit provisions; [and]

(N) for rates filed in accordance with Articles 5.55 or 21.50, profit and contingency provisions ; and

(O) for rates filed in accordance with Article 5.55, the effect on premiums of ind ividual risk variations based on loss or expense considerations.

(2) - (7) (No change.)

(f) - (g) (No change.)

(h) Filings under this division may be combined with filings made in accordance with Division 5 of this subchapter (relating to Filings Made Easy-Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings). These combined flings may utilize a single transmittal form. Filings under this division may not be combined with filings made in accordance with Division 7 or 8 of this subchapter (relating to Filings Made Easy-Underwriting Guideline Filing Requirements for Personal Automobile , [and] Residential Property , and Workers' Compensation Insurance and Filings Made Easy-Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.

Division 7. Filings Made Easy - Underwriting Guideline Filing Requirements for Personal Automobile , [and] Residential Property , and Workers' Compensation Insurance

§5.9340. Purpose . The purpose of this division is to specify underwriting guideline filing requirements under Insurance Code §38.002 and Article 5.55A for those insurers writing personal automobile insurance , [or] residential property insurance, or workers' compensation insurance in this state.

§5.9341. Definitions. The definitions set forth in Insurance Code §38.002 apply to insurers filing underwriting guidelines for personal automobile or residential property insurance. The definitions set forth in Insurance Code Article 5.55A apply to insurers filing underwriting guidelines for workers' compensation insurance [this division].

Division 9. Filings Made Easy - Reduced Filing Requirements for Certain Insurers

§5.9357. Filing Requirements.

(a) County mutual insurers writing non-standard [Non-standard] personal automobile insurance. County mutual insurers [Insurers] required to file under the provisions of Insurance Code Article 5.13-2 may make rate filings for personal automobile according to the requirements described in this subsection if they issue policies only at non-standard rates as defined under Article 5.13-2, §13 (f) and if the insurer and the insurer's affiliated companies or group have a market share of less than 3.5 percent.

(1) - (2) (No change.)

(b) I nsurers writing personal automobile insurance. An Insurer that writes personal automobile Insurance and that meets the criteria in the Insurance Code Article 5.13-2 §13(h), is subject to the filing requirements specified in subsection (a) of this section if:

(1) the insurer, along with the insurer's affiliated companies or group, issues personal automobile liability insurance policies only below 101 percent of the minimum limits required by the Transportation Code Chapter 601; and

(2) the insurer, along with the insurer's affiliated companies or group, has a market share of less than 3.5 percent of the personal automobile insurance market in this state.

(c) [(b)] Underserved residential property. In accordance with Article 5.13-2C, §3(b) insurers otherwise exempt from the rate filing requirements of Insurance Code Article 5.13-2, shall make rate filings in accordance with this subsection. Insurers who qualify to file under this subsection shall file as required in §5.9332(a)-(b) of this subchapter (relating to Filings Made Easy - Rate and Rate Manual Filing Requirements) and must:

(1) include a Certification of Article 5.13-2C Exemption Compliance (EC-1) as specified in §5.3702 of this chapter (relating to Designation of Underserved Areas for Residential Property Insurance for Purposes of the Texas Insurance Code Article 5.13-2C).

(2) submit rate change information when applicable as described in §5.9332(e)(5) of this subchapter.

(d) [(c)] Additional provisions. The following provisions apply to any rate or rate manual filing made pursuant to subsection (a) , [or] (b) , or (c) of this section:

(1) The reduced filing requirements provided under this division do not affect the requirements to file supporting data under §5.9941 and §5.9960 of this chapter (relating to Differences in Rates Charged Due Solely to Difference in Credit Scores and Exception to Territory Rating Requirements under Insurance Code Article 5.171). Insurers making a rate or rate manual filing under this division may include supporting data required under §5.9941 and §5.9960 of this chapter [title] with the filing made under this division.

(2) Any filings that do not fully comply with all of the filing requirements described in this division may be considered incomplete and may be returned to the filer for completion with a notice stating that the filing is not complete and shall identify the additional information that is required for completion of the filing.

(3) The department may request additional information related to a rate filing, including actuarial or other reasonable support of rates, as deemed necessary by the department or commissioner. The insurer shall respond by the date specified in the request.

(4) Filings under this division may be combined with filings made in accordance with Division 5 of this subchapter (relating to Filings Made Easy--Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings). These combined filings may utilize a single transmittal form. Filings under this division may not be combined with filings made in accordance with Division 7 or 8 of this subchapter (relating to Filings Made Easy--Underwriting Guideline Filing Requirements for Personal Automobile , [and] Residential Property , and Workers' Compensation Insurance and Filings Made Easy--Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.



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