On August 3, 2000, the Commissioner of Insurance, in accordance with the statutory requirements of Article 5.101, Texas Insurance Code, made determinations relating to benchmark rates and flexibility bands for private passenger and commercial automobile insurance. The commissioner ordered changes in benchmark rates for private passenger and commercial automobile insurance. The overall change for private passenger automobile insurance was -1.3%; it was +8.3% for commercial automobile. The changes in benchmark rates by coverage are summarized in the machine letters (see below).
The Commissioner also ordered several major changes in the calculation of private passenger ( not commercial) premiums. The rating structure for Actual Cash Value Physical Damage coverage has been changed. Specifically, the deductible relativity has been replaced by two differentials - a deductible "multiplier" and a deductible "constant." The symbol and model year relativities for Physical Damage have also been updated. Note that the model year differentials for collision and other than collision (comprehensive) are no longer identical. Also, note that the tables of model year relativities has been expanded to show 13 model year relativities (1990 and prior, 1991, … , 2002) for collision and for other than collision (comprehensive). The order of applying factors in calculating the physical damage Stated Amount benchmark rate has been updated to correspond to the procedure for Actual Cash Value premium calculation. This may facilitate implementation in that companies could use the same rating algorithm as in actual cash value coverage but with a deductible "constant" of zero for all deductibles and a model year differential of one for all model years. In addition, the lowest symbol 27 differential for Stated Amount insurance has been limited to 50% of the symbol 26 differential. Rule 31, relating to Sound Receiving and Transmitting Equipment, has been modified as well.
The rating structure for private passenger Personal Injury Protection and Medical Payments has been changed. Premiums will now be calculated by applying a driver class differential to a territorial base rate, an approach similar to that currently used for BI and PD.
For specific details on these changes, please refer to the instructions and examples listed in the Private Passenger Machine Letter and Rate Bulletin.
The changes ordered by the Commissioner are effective at 12:01 a.m. November 1, 2000. Article 5.101 of the Texas Insurance Code requires that within 30 days of the effective date of the benchmark rate each insurer that proposes to write that line of insurance during the effective period of the benchmark rate shall make a rate filing with the Department. The new rates filed by the insurer take effect on the date specified by the insurer, but not later than the 60th day after the date of the filing of the rates with the Department. For policies effective prior to the effective date of the new flex rate filing, the insurer's previously filed rates based on the February 15, 1999 benchmark shall apply. Any policy effective on or after the effective date of the new flex rate filing must be written using the insurer's new filed rates.
The revised rates, premiums, rating factors and instructions (called the "machine letters") for companies utilizing EDP equipment to generate November 1, 2000 voluntary private passenger and commercial rates are available for downloading at the Department's website: www.tdi.state.tx.us. Look for Commissioner's Bulletin No. B-0046-00) under "Bulletins" in the "Latest News" section of TDI's website home page. Also available for downloading are the new voluntary private passenger and commercial rate tables (called the "rate bulletins"), similar in format to those that will soon appear in the Texas Automobile Rules and Rating Manual. These are available in Excel and PDF formats. These machine letters and rate bulletins include rates for risks written in the voluntary market only. The involuntary TAIPA rates will be included in a subsequent distribution.
If you are unable to download the machine letters and rate bulletins, a hard copy can be requested. Contact Lisa Garza 512-475-3017.
All flex rate filings should be submitted to:
Texas Department of Insurance
Property and Casualty Intake Unit (MC 104-3B)
P. O. Box 149104
Austin, TX 78714-9104
Questions regarding private passenger or commercial automobile rate filings should be directed to Tammy Rowland, Property and Casualty Actuarial Section, 512-475-3021.
Sincerely,
Philip O. Presley
Chief Actuary
Property & Casualty
Attachments:
Private Passenger Auto Rate Bulletin in EXCEL or PDF
Private Passenger Auto Machine Letter in EXCEL or PDF
Commercial Auto Rate Bulletin in EXCEL or PDF
Commercial Auto Machine Letter in EXCEL or PDF