Property and casualty insurers regulated by the Texas Department of Insurance (TDI) must file their rates for review. Texas Insurance Code Sections 2053.004(b) and 2251.107(b) require TDI to make information available about the process and methodology for rate review, including why a rate may be disapproved.
Like most other states, Texas is a file-and-use state. This means that once an insurer files its rates, it can use them on their effective date.
State law requires that rates:
- Be adequate.
- Not be excessive. An excessive rate produces an unreasonably high long-term profit compared to the coverage provided.
- Be based on sound actuarial principles.
- Be reasonably related to all costs (expected losses and expenses).
- Not be based on the insured's race, creed, color, ethnicity, or national origin.
If the filed rates do not meet these standards, TDI notifies the insurer. If the insurer does not change, withdraw, or provide better supporting information for the filing, TDI will take action to disapprove it.
Rate review process
TDI receives rate filings through the System for Electronic Rate and Form Filing (SERFF).
Step 1: Intake review
The intake review verifies basic information, such as the name and license status of each company. It also makes sure the appropriate contents are included in the filing.
Step 2: Actuarial review
TDI actuaries review rate filings to make sure they comply with state law and other appropriate statutes and rules. When reviewing a rate filing, the actuaries closely look at the actuarial support in the filing, such as:
- Rate indications, which show the projected rate or rate change necessary to cover future costs.
- Relativity analyses to support changes to base rates, which are based on different classes of risks.
- Assumptions and supporting data used in estimating loss trends, loss development factors, and other factors used to develop the rate indications.
- Information to confirm that expenses disallowed by statute have not been included when developing the rates or loss cost calculations.
- Information about the credibility of the insurer’s data.
Step 3: Decision
If the actuary determines that the filing is complete and complies with state law and other appropriate statutes and rules, the rate can stand.
If the actuary determines that the filing is incomplete, has concerns with the insurer’s assumptions or methods, or needs the insurer to explain something further, the actuary contacts the insurer to request more information.
If the actuary determines that the filing does not comply with state law and rules, the actuary will allow the insurer to change or withdraw the filing or submit a new filing. If the insurer does not respond, the actuary will recommend that the commissioner of insurance disapprove the rate.
- The commissioner's order disapproving the rate filing must clearly state how the filing fails to meet state laws and rules.
- If the commissioner disapproves a rate filing, the insurer can request a hearing.
- The insurer must make the request in writing within 30 days of the effective date in the disapproval order.
TDI and insurers resolve most rate disagreements through ongoing discussions. When the actuarial review is finished, the actuary notifies the insurer in SERFF that they have closed the filing.
2023 rate filings
Of the 2,923 rate filings reviewed in 2023:
- 160 were withdrawn by the insurer. Insurers may withdraw a rate filing if they need more time to respond to TDI’s questions, want to refile with a different rate, were asked to withdraw the filing because it didn’t comply with state laws or rules, or other reasons.
- 100 were rejected for technical reasons, such as filing under the incorrect line of business or not providing enough information.
- No filings were disapproved.
- 2,663 filings were allowed to stand or were approved.
- TDI requested additional information on 74% of the filings.