Division 6.
MANUAL
28 TAC §5.4501
The Commissioner of Insurance adopts amendments to §5.4501 concerning the adoption by reference of the rule manual governing the writing of windstorm and hail insurance coverage by the Texas Windstorm Insurance Association (Association or TWIA). The amendments to §5.4501 are adopted with changes to the proposed text published in the December 13, 2002 issue of the Texas Register (27 TexReg 11717) and with changes to the new table for the one-half percent deductibles that has been adopted by reference in the Manual.
The purpose of the Association is to provide windstorm and hail insurance coverage to coastal residents who are unable to obtain such coverage in the voluntary market. The Manual of the Texas Windstorm Insurance Association (Manual) governs the writing of new policy forms and endorsements by the Association. The amendments to §5.4501 adopt by reference revisions to the Manual that increase the minimum deductible level on commercial policies. On January 22, 2002, the Association petitioned the Department to amend General Rule J.2 (Deductibles for Commercial Risks and Public Buildings) in the Manual which outlines the deductible options and corresponding premium credits that are available for commercial policies (Ref. No. P-0102-2). The Commissioner held a public hearing on the proposed amendments on January 8, 2003, Docket No. 2541. It is the Association´s long range plan to increase the minimum deductible level on commercial policies to one percent which is the current minimum deductible level on residential policies. The Association´s rationale for increasing the minimum commercial deductible level is to reduce the overall exposure of TWIA by reducing the frequency of small, non-catastrophic claims. The Association plans to make the transition to the one percent deductible level in two or three steps in order to minimize the adverse rate impact on policyholders. The amendments that have been adopted implement the first step of this plan. The first step in the process is to establish a new one-half percent deductible level and raise the minimum deductible from $250 to $500.
The adopted amendments delete the flat amount deductible options and replace them with new deductible options that are based on one-half percent of the limit of insurance for the policy written with a schedule of premium credits that correspond to specific ranges based on the insured limit of insurance. The new table for one-half percent deductibles contains seventeen ranges for the amount of insurance of the policy with corresponding credits for each range, beginning with $0 to $100,000 with a credit of 6% and ending with $25,000,001 and over with a credit of 37%. The new table specifies that all one-half percent deductibles are subject to a $500 minimum.
The key change to the deductible credits is a reduction in the credit for the $1,000 deductible. As a result of the adoption of these amendments, the credit on amounts of insurance above $20,000 is 10%. To offset the premium impact of this decrease in the credit, some of the credits in the tables for those deductible options that are higher than $1,000 were increased. Changes have been made to the rule as proposed. The table for one-half percent deductibles, as proposed, contained sixteen ranges for the amount of insurance of the policy with corresponding credits for each range. However, in response to staff comments a deductible option range of $0 to $100,000 with a premium credit of 6% was added to the table, thus, increasing the number of ranges in the table from sixteen to seventeen. In addition, the effective date of the adoption by reference of the Manual has been changed from March 1, 2003 to May 1, 2003. This change was made at the request of TWIA to allow the Association additional time to perform the programming changes and arrange the administrative details that are necessary to make these changes to the Manual.
The purpose of §5.4501 is to adopt by reference the Manual of the Texas Windstorm Insurance Association. The Manual provides policy writing rules, rating rules, and other information that is necessary for the Association to write the different coverages that it offers. The adopted amendments to §5.4501 adopt by reference the updated Manual containing the new deductible options and corresponding premium credits that are available for commercial risks and public buildings. General Rule J.2.a provides a new table for one-half percent deductibles that contains seventeen ranges for the amount of insurance of the policy with corresponding credits for each range. General Rule J.2.b provides nine large deductible options with a corresponding table for each of the deductible options that lists the amount of premium credit based on the amount of insurance purchased by the insured.
No comments were received on the section.
The amendments are adopted pursuant to the Insurance Code Article 21.49 and §36.001. Article 21.49 §8 authorizes the Commissioner of Insurance to approve, modify, or disapprove every manual of classification, rules, rates, rating plans, and every modification of any of the foregoing used by the Association. Article 21.49 §5A authorizes the Commissioner of Insurance to issue after notice and hearing, any orders which are considered necessary to carry out the purposes of Article 21.49 including maximum rates, competitive rates, and policy forms. Insurance Code §36.001 authorizes the Commissioner of Insurance to adopt rules which must be for general and uniform application, for the conduct and execution of the duties and functions of the Texas Department of Insurance only as authorized by statute.
§5.4501. Rules for the Texas Windstorm Insurance Association. The Texas Department of Insurance adopts by reference a rules manual for the Texas Windstorm Insurance Association as amended effective, June 15, 1999. The Texas Department of Insurance adopts by reference amendments effective May 1, 2001, October 15, 2002, and May 1, 2003, to the rules manual. Copies of the rules manual may be obtained by contacting the Automobile and Homeowners Division, Mail Code 104-1A, Texas Department of Insurance, 333 Guadalupe Street, P.O. Box 149104, Austin, Texas 78714-9104.