The Commissioner of Insurance has adopted, effective April 23, 2006, a new section concerning the use of residential property insurance claims in rating programs, including premium surcharge programs and claims-free programs, and a separate transition plan requirement. Intended to protect Texas homeowners from increases in residential property insurance rates and premiums that vary greatly between renewal periods, new §21.1004 places restrictions on the use of residential property insurance claims in rates and premiums due to the introduction of, or changes to, a claims-free program or premium surcharge program.
The new section also requires insurers to file a transition plan when a new method or changes in an existing method of considering, utilizing, reviewing, or otherwise evaluating a policyholder's claim experience results in an increase of 10% or more in premium for any policyholder. Section 21.1004 requires the transition plan to:
(1) be reasonable and promote market and rate stability;
(2) take into consideration any changes other than claims history that may impact overall rates and premiums; and
(3) moderate or otherwise mitigate overall rate and premium increases for individual policyholders over one or several renewal periods.
To ensure compliance, it is essential that you review the entire text of the Insurance Code Article 5.43 and §551.107 and new § 21.1004. The Commissioner's Order and full text of the new section may be accessed on the Department's web site at http://www.tdi.state.tx.us/orders/index.html. Refer to Commissioner's Order Number 06-0317. You may access the text of SB 14 at www.capitol.state.tx.us.
For further information or questions regarding this bulletin, contact the Property & Casualty Program - Actuarial Division at 512-475-3017 or by e-mail at firstname.lastname@example.org.
Philip O. Presley
Property and Casualty Division