• Increase Text Icon
  • Decrease Text Icon
  • Email Icon
  • Print this page
You are here: Home . rules . 2009 . 0918-059

SUBCHAPTER O. Texas Commercial Lines Statistical Plan 28 TAC §5.9501

1. INTRODUCTION. The Texas Department of Insurance proposes new Subchapter O, §5.9501, concerning the Texas Commercial Lines Statistical Plan (Plan). The proposed new section adopts by reference an updated Plan, effective January 1, 2010. The Plan proposed to be adopted by reference in the new section incorporates the same requirements and current reporting instructions for the reporting of commercial lines insurance premium and loss data to the Department as the existing Plan, with the exception of the reporting of fidelity and surety experience data. Because the current Plan was adopted in 1995, it is necessary to (i) update obsolete reporting instructions; (ii) update the Insurance Services Office (ISO) copyright notice to reflect the change from the adoption of the Plan pursuant to Articles 5.96 and 5.97 of the Insurance Code to Chapter 38, Subchapter E of the Insurance Code; (iii) update effective dates; and (iv) remove provisional instructions pertaining to the 1995 transition to the Plan. It is necessary, however, to retain the 1995 reporting instructions in the Run-Off Reporting Rule for each line in the event that a policy with a retrospective adjustment prior to 1995 needs to be reported. Additionally, it is necessary to delete the current transmittal form and affidavit, as well as the related instructions. This is necessary because insurers report this information on the designated statistical agent's forms, and the current transmittal form and affidavit are no longer viable. It is also necessary to update reporting media because technological advances have rendered diskettes obsolete in favor of CDs and DVDs as media storage mediums. Also, minor changes have been made throughout the Plan to correct misspelled words and erroneous punctuation and to change the references to "manual" to "Plan" for internal consistency. These changes will assist in understandability and ease of use.

The proposed changes to the fidelity and surety premium and loss experience reporting are for the purpose of standardizing the manner in which fidelity and surety insurers report premium and loss experience. These changes consist of the updating of certain coverage and class fields and codes. Pursuant to the Plan, all insurers writing direct fidelity and surety business in the State of Texas are required to submit a quarterly report of premium and loss experience. Some of the fields and codes contained in the Quarterly Fidelity and Surety Experience Report of the Plan are not consistent with the standard fields and codes utilized by fidelity and surety insurers to submit premium or loss experience data in other states. As a result, insurers are required to maintain two separate systems for tracking premium and loss experience data - one for Texas and one for the rest of the country.

The proposed revisions to the Quarterly Fidelity and Surety Experience Report of the Plan reflect the fields and codes used for reporting premium or loss experience in other states. Adopting standard fields and codes will eliminate the need for fidelity and surety insurers to maintain two separate databases and should, as a result, lower compliance costs, as well as allow for better experience comparison by the Department, the designated statistical agent, and the industry in general.

The Plan was adopted under the procedures outlined in Articles 5.96 and 5.97 of the Insurance Code effective January 1, 1995, for mandatory use by all insurers writing commercial lines insurance in Texas. As a result of subsequent amendments to Article 5.97, which provide that Article 5.97 no longer applies to certain lines of insurance, it is necessary to propose and adopt the Plan under the Administrative Procedure Act, Government Code Chapter 2001.

The Insurance Code §38.202 provides that the Commissioner of Insurance (Commissioner) may, for a line or sub-line of insurance, designate or contract with a qualified organization to serve as the statistical agent for the Commissioner to gather data relevant for regulatory purposes. The Insurance Code §38.204(a) provides that a designated statistical agent shall collect data from reporting insurers under a statistical plan adopted by the Commissioner. The Insurance Code §38.205 requires insurers to provide all premium and loss cost data to the Commissioner or the designated statistical agent as the Commissioner or agent requires. The Insurance Code §38.207 authorizes the Commissioner to adopt rules necessary to accomplish the purposes of the subchapter regarding statistical data collection.

Proposed §5.9501(a) sets forth the purpose and applicability of the proposed new section. Proposed §5.9501(a)(1) specifies the purpose of the proposed section, which is to establish requirements for the reporting of premium and loss data by direct commercial lines insurers pursuant to the Insurance Code Chapter 38, Subchapter E. Proposed §5.9501(a)(2) specifies that, pursuant to the Insurance Code §38.202, the Commissioner has designated a statistical agent for commercial lines of insurance. Proposed §5.9501(a)(3) requires that, pursuant to the Insurance Code §38.205, all insurers writing direct commercial lines business in the State of Texas must provide a report of their premium and loss cost experience to the Commissioner or the statistical agent designated under the Insurance Code §38.202. Proposed §5.9501(a)(3) further requires that the report must comply with the reporting requirements and instructions specified in the Plan, which is adopted by reference pursuant to proposed §5.9501(b).

Proposed §5.9501(a)(4) mandates that the proposed section applies to all reports required under the section filed with the Department for reporting periods beginning on or after January 1, 2010.

Under §5.9501(b), the Plan is proposed to be adopted by the Commissioner by reference, effective January 1, 2010. Proposed §5.9501(b) also provides that the Plan is published by the Department and is available from the Data Services Division, Mail Code 105-5D, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104 or the department website at www.tdi.state.tx.us.

2. FISCAL NOTE. Gary Gola, Director of Data Services for the Property and Casualty Program, has determined that for each year of the first five years the proposed section is in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the proposal. 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. Gola also has determined that for each year of the first five years the proposed section is in effect, the anticipated public benefits will be an updated Plan (i) that no longer contains obsolete effective dates, reporting instructions, provisional instructions pertaining to the 1995 transition to the Plan, and an obsolete Insurance Services Office (ISO) copyright notice; and (ii) that provides for updated media storage options. These changes will result in greater ease of use and readability of the Plan. Additionally, other anticipated public benefits include standardized fields and codes for the reporting of fidelity and surety premium and loss experience, which will eliminate the need for fidelity and surety insurers to maintain two separate databases, possibly lower compliance costs, and allow for better experience data comparison by the Department, the designated statistical agent, and the industry in general.

Analysis of Potential Costs for Persons Required to Comply with the Proposal

Proposed Amendments to Existing Plan except Quarterly Fidelity and Surety Experience Report. The Department does not anticipate any additional costs to insurers required to comply with the proposed section as a result of the elimination of the obsolete information and the adoption of all parts of the Plan except the Quarterly Fidelity and Surety Experience Report. The proposed amendments include changes related to (i) replacement of obsolete reporting instructions, obsolete effective dates, and the provisional instructions pertaining to the 1995 transition to the Plan, with up-to-date information; (ii) updating of the ISO copyright notice to reflect the change from the adoption of the Plan pursuant to Articles 5.96 and 5.97 of the Insurance Code to Chapter 38, Subchapter E of the Insurance Code; and (iii) provision for use of updated reporting media, including CDs and DVDs.. These proposed amendments do not impose any additional requirements to those in the current Plan. The proposed amendments simply update obsolete information.

Proposed Amendments to Quarterly Fidelity and Surety Experience Report. The probable economic costs to each fidelity and surety insurer required to comply with the requirements of the proposed amendments to the Quarterly Fidelity and Surety Experience Report of the Plan will vary based on the methods of reporting of fidelity and surety experience data currently utilized by a particular insurer. Some insurers, either as a result of their Surety & Fidelity Association of America (SFAA) membership or reporting data to other states, already utilize the proposed fields and codes for the reporting of their premium and loss experience data.

Insurers already utilizing proposed fields and codes. Of the estimated 118 insurers writing direct fidelity business in Texas and the estimated 190 insurers writing direct surety business in Texas, an estimated 98 fidelity insurers and 153 surety insurers are members of the SFAA. As members of the SFAA, these insurers already utilize the proposed fields and codes for the reporting of their premium and loss experience data to the SFAA. However, some of these insurers may currently maintain one database for the reporting of fidelity and surety experience data pursuant to the current Plan for Texas and another database for the rest of the country. For any insurers who currently maintain two such databases, the Department has determined that the potential costs of compliance with the proposed Quarterly Fidelity and Surety Experience Report of the Plan will be associated with the consolidation of the two systems for tracking premium and loss experience data into a single system. The types of costs related to this consolidation will be primarily computer programming costs. These costs will vary by insurer and will depend on each insurer's existing data systems, existing staff, the number of fidelity and/or surety policies in-force, and the type of data already captured. Though each insurer has the information needed to estimate its individual costs, the Department estimates that to analyze and consolidate an insurer's current data systems, the insurer may need the services of programmers, software engineers, database managers, and computer support staff. While it is not feasible to determine the actual cost of such employees and the actual amount of time that will be needed for such employees for each individual insurer, the Texas Workforce Commission's Labor Market & Career Information Department's 2008 Texas Statewide Wages, Occupational Employment Statistics Program indicates that the average hourly wages for these professions are $37.28 for a computer programmer, $42.98 for a computer software applications engineer, $43.50 for computer software systems engineers, $32.99 for a database administrator, and $21.60 for computer support staff. The actual number, types, and cost of personnel will be determined by the insurer's existing data systems and staffing. The Department anticipates that because of the consolidation of reporting systems the proposed Plan may actually lower compliance costs for these insurers. This is because insurers will no longer need to maintain two separate databases and will no longer incur costs associated with such maintenance.

There are also an estimated 20 fidelity insurers and 37 surety insurers writing direct business in the State of Texas that are not members of the SFAA. Of these, 13 insurers utilize SFAA as their fidelity and/or surety statistical filing agent outside of Texas. While these 13 non-member insurers may utilize the fields and codes contained in the current Plan for the reporting of experience data in Texas, they also already utilize the proposed fields and codes for the reporting of their premium and loss experience data outside of Texas. The Department has also determined that the potential costs of compliance with the proposed Quarterly Fidelity and Surety Experience Report of the Plan for these insurers will be associated with the consolidation of the Texas system and the system for the rest of the country for tracking premium and loss experience data into a single system. The Department anticipates that the same cost analysis as used for SFAA members (indicated in the preceding paragraph) to consolidate two separate systems for tracking premium and loss experience data into a single system will apply to these insurers also.

Insurers not utilizing proposed fields and codes. The Department's analysis of the potential costs of compliance with the proposed amendments to the Quarterly Fidelity and Surety Experience Report of the Plan for insurers that do not currently utilize the proposed fields and codes is based on the following considerations. Each insurer's costs of compliance will vary, depending on the insurer's existing data systems, existing staff, the number of fidelity and/or surety policies, and the type of data already captured. Each insurer may have to update its current database tracking premium and loss experience with the proposed fields and codes. Though each insurer has the information needed to estimate its individual costs, the Department estimates that to analyze and update an insurer's current data system, the insurer may need the services of programmers, software engineers, database managers, and computer support staff. The same hourly wages indicated in this Public Benefit/Cost Note part for the SFAA-member cost analysis will apply to these insurers. The actual number, types, and cost of personnel will be determined by the insurer's existing data systems and staffing.

4. ECONOMIC IMPACT STATEMENT AND REGULATORY FLEXIBILITY ANALYSIS FOR SMALL AND MICRO BUSINESSES.

The Government Code §2006.002(c) provides that if a proposed rule may have an economic impact on small businesses, state agencies must prepare as part of the rulemaking process an economic impact statement that assesses the potential impact of the proposed rule on small businesses and a regulatory flexibility analysis that considers alternative methods of achieving the purpose of the rule. The Government Code §2006.001(a)(2) defines "small business" as a legal entity, including a corporation, partnership, or sole proprietorship, that is formed for the purpose of making a profit, is independently owned and operated, and has fewer than 100 employees or less than $6 million in annual gross receipts. The Government Code §2006.001(a)(1) defines "micro business" as a legal entity, including a corporation, partnership, or sole proprietorship, that is formed for the purpose of making a profit; is independently owned and operated; and has no more than 20 employees. The Government Code §2006.002(f) requires a state agency to adopt provisions concerning micro businesses that are uniform with those provisions outlined in the Government Code §2006.002(b) - (d) for small businesses.

Proposed Amendments to the Existing Plan except Quarterly Fidelity and Surety Experience Report. In accordance with the Government Code §2006.002(c), the Department has determined that the proposed update and adoption of all parts of the Plan except the Quarterly Fidelity and Surety Experience Report will not have an adverse economic effect on small or micro businesses that are required to comply with the proposal. As explained in the Public Benefits/Cost Note part of this proposal, the proposed amendments to the Plan simply update obsolete information and do not impose any additional requirements or costs to those in the current Plan with which insurers, regardless of size, must comply. The proposed amendments include changes related to (i) replacement of obsolete reporting instructions, obsolete effective dates, and the provisional instructions pertaining to the 1995 transition to the Plan, with up-to-date information; (ii) updating of the ISO copyright notice to reflect the change from the adoption of the Plan pursuant to Articles 5.96 and 5.97 of the Insurance Code to Chapter 38, Subchapter E of the Insurance Code; and (iii) provision for use of updated reporting media, including CDs and DVDs. Therefore, in accordance with the Government Code §2006.002(c), the Department is not required to prepare a regulatory flexibility analysis.

Proposed Amendments to the Quarterly Fidelity and Surety Experience Report. The Department estimates that the proposed update of the Quarterly Fidelity and Surety Experience Report may have an adverse economic impact on three fidelity and surety insurers that qualify as small or micro businesses under the Government Code §2006.001(a)(1) and (2) and that are required to comply with the proposal. The only adverse economic impact of the proposal anticipated by the Department on these three insurers are the additional costs associated with the consolidation of the two systems for tracking premium and loss experience data into a single system or with the updating of current databases tracking premium and loss experience with the proposed fields and codes. The types of costs related to the proposal will be primarily computer programming costs. The Department's cost analysis in the Public Benefit/Cost Note portion of this proposal is equally applicable to those fidelity and surety insurers that qualify as small or micro businesses under the Government Code §2006.001(a)(1) and (2). As previously indicated, the total actual costs for each insurer, regardless of size, will vary depending on each insurer's existing data systems, existing staff, the number of fidelity and/or surety policies in-force, and the type of data already captured.

In accordance with the Government Code §2006.002(c-1), the Department has considered other regulatory methods to accomplish the objectives of the proposal and the statute that is being implemented that will also minimize any adverse impact on the insurers that qualify as small or micro businesses.

The Insurance Code §38.202 provides that the Commissioner may, for a line or sub-line of insurance, designate or contract with a qualified organization to serve as the statistical agent for the Commissioner to gather data relevant for regulatory purposes. The Insurance Code §38.205 requires insurers to provide all premium and loss cost data to the Commissioner or the designated statistical agent as the Commissioner or agent requires. The primary objective of the Insurance Code Chapter 38, Subchapter E is to allow for the collecting of commercial lines data, including fidelity and surety lines data, for analysis and comparison of the insurers' premium and loss experience by the Department, the designated statistical agent, and the industry in general. This includes data from insurers that qualify as a small or micro business under the Government Code §2006.001(a)(1) and (2). The objective of the proposed revisions to the Quarterly Fidelity and Surety Experience Report is to establish a standardized method of collecting fidelity and surety premium and loss experience data by utilizing the fields and codes used for reporting such data in other states.

The other regulatory methods considered by the Department to accomplish the objectives of the proposal and to minimize any adverse impact on the three insurers that qualify as small or micro businesses under the Government Code §2006.001(a)(1) and (2) are: (i) not adopting the proposed revisions to the data fields and codes in the Quarterly Fidelity and Surety Experience Report and (ii) implementing different requirements or standards for the insurers that qualify as small or micro businesses.

Not adopting the proposed amendments to the Quarterly Fidelity and Surety Experience Report. If the proposed revisions to the Quarterly Fidelity and Surety Experience Report were not adopted, fidelity and surety insurers, regardless of size, would still be required to submit a quarterly report on premium and loss experience data pursuant to the current Plan, which was adopted in 1995. The insurers would be required to utilize some fields and codes that would be inconsistent from those used for reporting premium or loss experience in other states. This would result in some insurers being required to continue to maintain two separate systems for tracking premium and loss experience data - one for Texas and one for the rest of the country. This could result in higher compliance costs than is necessary for these insurers. Not adopting the revised fields and codes could also hinder accurate and meaningful premium and loss experience comparison by the Department, the designated statistical agent, and the industry in general. The Department's interpretation of the Insurance Code Chapter 38, Subchapter E is that the purpose of the statute is to ensure accurate and meaningful premium and loss experience comparison of the various commercial lines of insurance written in Texas as needed for regulatory purposes. This includes the fidelity and surety insurance lines. The Department, therefore, has rejected the approach of not adopting the proposed amendments to the Fidelity and Surety Experience Report of the Plan because the Department does not believe that it would accomplish the objective of the statistical data collection statute (Insurance Code Chapter 38, Subchapter E) and, therefore, would not be consistent with legislative intent.

Implementing different requirements or standards for fidelity and surety insurers that qualify as small and micro businesses. Another regulatory alternative considered by the Department was implementing different requirements or standards for fidelity and surety insurers that qualify as small or micro businesses under the Government Code §2006.001(a)(1) and (2). While this approach would quite possibly not result in an adverse economic impact on small or micro insurers, it would hinder the ability of the Department and Department's statistical agent to collect consistent and meaningful premium and loss experience data for the fidelity and surety insurance lines in Texas. Because the fidelity and surety insurance business in Texas written by all insurers of any size is relatively small, the premium and loss experience data gathered from insurers that qualify as small or micro businesses is considered by the Department to be statistically significant. Therefore, the exemption of the small or micro insurers from the proposed data requirements for the larger insurers writing fidelity and surety business in Texas could result in a distortion of the premium and loss experience data. Additionally, implementing different requirements or standards for insurers that qualify as small or micro businesses and that already utilize the proposed fields and codes for the reporting of premium and loss experience data will not allow these insurers to consolidate their reporting systems and, thus, lower their compliance costs. The Department, therefore, has rejected this approach as a viable regulatory alternative.

5. TAKINGS IMPACT ASSESSMENT. The Department has determined that no private real property interests are affected by this proposal and that this proposal does not restrict or limit an owner's right to property that would otherwise exist in the absence of government action and, therefore, does not constitute a taking or require a takings impact assessment under the Government Code §2007.043.

6. REQUEST FOR PUBLIC COMMENT. To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on November 2, 2009, 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 Gary Gola, Director, Data Services, Property and Casualty Program, Mail Code 105-5D, 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 before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

7. STATUTORY AUTHORITY. The new section is proposed pursuant to the Insurance Code §§38.202, 38.204(a), 38.205, 38.207, and 36.001. Section 38.202 provides that the Commissioner of Insurance (Commissioner) may, for a line or sub-line of insurance, designate or contract with a qualified organization to serve as the statistical agent for the Commissioner to gather data relevant for regulatory purposes. Section 38.204(a) provides that a designated statistical agent shall collect data from reporting insurers under a statistical plan adopted by the Commissioner. Section 38.205 requires insurers to provide all premium and loss cost data to the Commissioner or the designated statistical agent as the Commissioner or agent requires. Section 38.207 authorizes the Commissioner to adopt rules necessary to accomplish the purposes of the subchapter regarding statistical data collection. 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.

8. CROSS REFERENCE TO STATUTE. The following statute is affected by this proposal:

Rule Statute

§5.9501 Insurance Code §§38.202, 38.204(a), 38.205, and 38.207

9. TEXT.

§5.9501. Texas Commercial Lines Statistical Plan.

(a) Purpose and Applicability.

(1) The purpose of this section is to establish requirements for the reporting of premium and loss data by direct commercial lines insurers pursuant to the Insurance Code Chapter 38, Subchapter E.

(2) Pursuant to the Insurance Code §38.202, the commissioner has designated a statistical agent for commercial lines of insurance.

(3) Pursuant to the Insurance Code §38.205, all insurers writing direct commercial lines business in the State of Texas are required to provide a report of their premium and loss cost experience to the commissioner or the statistical agent designated under the Insurance Code §38.202. The report must comply with the reporting requirements and instructions specified in the Texas Commercial Lines Statistical Plan adopted by reference pursuant to subsection (b) of this section.

(4) This section applies to all reports required under this section filed with the department for reporting periods beginning on or after January 1, 2010 .

(b) Adoption by reference. The commissioner adopts by reference the Texas Commercial Lines Statistical Plan effective January 1, 2010 . This document is published by the Texas Department of Insurance and is available from the Data Services Division, Mail Code 105-5D, Texas Department of Insurance, P.O. Box 149104 , Austin , Texas 78714-9104 or the department website at www.tdi.state.tx.us.



For more information, contact:

Contact Information and Other Helpful Links