Division 1. Requirements for Sharing Commercial Risks
28 TAC §5.9301
Division 2. Requirements for Determining a Catastrophe
28 TAC §5.9303
Division 4. Filings Made Easy - Filing Transmittal Form and Requirements for
Property and Casualty Form, Rate, Rule,
Underwriting Guideline, and Credit Scoring Model Filings
28 TAC §5.9310
Division 5. Filings Made Easy - Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings
28 TAC §5.9320
Division 6. Filings Made Easy - Rate and Rate Manual Filing Requirements
28 TAC §§5.9330 5.9332
Division 7. Filings Made Easy - Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance
28 TAC §§5.9340 5.9342
Division 8. Filings Made Easy - Credit Scoring Models Filing
Requirements for Personal Insurance
28 TAC §§5.9350 5.9352
Division 9. Filings Made Easy -- Reduced Filing Requirements for Certain Insurers
28 TAC § 5.9355 5.9357
The Texas Department of Insurance proposes new Divisions 4 - 9, §§5.9310, 5.9320, 5.9330 - 5.9332, 5.9340 - 5.9342, 5.9350 - 5.9352, and 5.9355 5.9357 concerning filing requirements. The department is also adding division heads to existing §§5.9301 and 5.9303 to reorganize Subchapter M and reflect the regulatory activity that is the subject of these sections.
Senate Bill 14 (SB 14), enacted by the 78th Legislature, Regular Session, 2003, amended various provisions of Chapter 5 of the Insurance Code, including Articles 5.13 and 5.13-2, as well as added Article 21.49-2U and Section 38.002 relating to the use of credit scoring and underwriting guidelines for personal automobile and residential property insurance, respectively. House Bill 1865 (HB 1865) 78th Legislature, Regular Session added Article 5.41-3 regarding commercial group property insurance. This legislation changed the form and rate filing requirements for certain insurers, as well as certain lines of insurance. Proposed Divisions 4 - 9 are necessary to implement and clarify the various filing requirements of insurers so that insurers will be able to make the necessary filings and be in compliance with the regulatory changes enacted by SB 14 and HB 1865.
Proposed §5.9310 (Division 4) is necessary to specify the form and content of the filing transmittal form that each insurer is required to use for property and casualty form, rate, rule, underwriting guideline, and credit scoring model filings. Proposed subsection (a) sets forth the purpose of the section. Proposed subsection (b) defines the terms used in the section. Proposed subsection (c) specifies the form and content of the transmittal form and the minimum elements of information that must be included in the transmittal form. Proposed subsection (d) notifies insurers where they may obtain copies of the transmittal form. Proposed subsection (e) provides that insurers may use the National Association of Insurance Commissioners transmittal form or any other transmittal form if the information included in the form contains all of the information required under subsection (c). Proposed subsection (f) provides information to insurers on how to obtain the Filings Made Easy Guide. Proposed subsection (g) provides information on where insurers are to submit filings within the Texas Department of Insurance. The information that is required in the transmittal form is necessary for the following purposes: to identify the insurer or advisory organization making the filing, to specify the line or lines of insurance for which the filing is being made, to provide the information that is necessary for the department to track the filing in the agency, and to provide the information that is needed to properly route the filing to the divisions that will be performing the review of the filed information.
Article 5.13-2 §8(a) mandates that an insurance policy form or endorsement that is subject to Article 5.13-2 may not be delivered or issued for delivery in Texas unless the forms have been filed with and approved by the Commissioner. Proposed §5.9320 (Division 5) concerns the filing requirements for property and casualty policy form, endorsement, and manual rule filings. Proposed subsection (a) sets forth the purpose of the section. Proposed subsection (b) defines the terms used in the section. In proposed subsection (c)(1), the general filing requirements specify that each new or amended policy form or endorsement filing that is filed for approval must contain a filing transmittal form, a copy of the proposed policy form or endorsement, and an explanatory memorandum. Proposed subsection (c)(2)(A) contains additional filing requirements that the department may impose that are specific to new policy forms or endorsements. If the explanatory memorandum required under proposed subsection (c)(1)(B)(iii) does not fully explain or describe the filed policy forms or endorsements additional filing requirements may be imposed by the department. In proposed subsection (c)(2)(B), there are additional filing requirements specific to amendments that are filed for previously approved or adopted policy forms or endorsements which include a coverage evaluation that contains a detailed explanation of the proposed changes to the policy form or endorsement or either a side by side comparison between the proposed form or endorsement and what has been previously approved or a copy of the previously approved or adopted policy form or endorsement with clearly identified editorial notations referencing the new and replaced language. Filers are given the option of providing these additional requirements in the explanatory memorandum required under (c)(1)(B)(iii) in lieu of providing them in the separate documents. Proposed subsection (c)(3) specifies that filings shall include all provisions required by statute, administrative rule, or Commissioner's order. Proposed subsection (d) outlines the requirements for filing manual rules with the department. Proposed subsection (e) outlines the procedure and requirements for insurers to make reference filings for policy forms, endorsements, and manual rules. Proposed subsection (f) provides a description of an incomplete filing, outlines the department's procedure for handling an incomplete filing, and specifies that the 60 day period for a policy form or endorsement to be deemed approved does not commence until a complete filing is received by the department. Proposed subsection (g) provides that filings under Division 5 may be combined with filings under Division 6 (Rate and Rate Manual Filing Requirements) or Division 9 (Reduced Filing Requirements for Certain Insurers); however, filings under Division 5 may not be combined with filings of underwriting guidelines or credit scoring models because of distinct and separate statutes governing underwriting guidelines and credit scoring models. The information that the department specifies in this section which must be included in the filing of new and amended policy forms and endorsements is necessary for the department to ensure that the policy form or endorsement complies with the Insurance Code, administrative rules, and Commissioner's orders and that they do not contain provisions or titles which are unjust, encourage misrepresentation, are deceptive, or violate public policy. The changes resulting from SB 14 have also prompted the department to review its current practice of posting of personal and commercial policy forms for a seven to ten day period before final approval. The department has determined that it is no longer necessary to add this extra period to the policy form approval process set forth in Article 5.13-2. The public information provisions provided by Article 5.13-2 allow for public inspection of filings and any supporting information filed under this article as of the date of the filing. By updating and modernizing current practices, the department will promote efficiency and speed to market initiatives while maintaining public access to information.
Proposed §§5.9330 - 5.9332 (Division 6) will implement Texas Insurance Code Chapter 5 filing requirements (as amended by SB 14, effective June 11, 2003) and also implement new Article 5.41-3 for commercial group property insurance as those provisions relate to rates and supplementary rating information. SB 14 amended or repealed various provisions of Chapter 5 of the Texas Insurance Code, including Articles 5.13, 5.13-2, 5.101, 5.15, and 5.53. These changes essentially streamlined rate regulation from Article 5.101 benchmark and Articles 5.15 and 5.53 prior approval methods into the file and use rate regulation system of Article 5.13-2. Due to separate and distinct articles within the Insurance Code, prior to SB 14, Lloyds plans, reciprocals and interinsurance exchanges (Lloyds and reciprocals), and county mutual insurers were not subject to rate regulation for certain lines of insurance. The SB 14 amendments provided for rate regulation of residential property and automobile insurance under Article 5.13-2 for Lloyds, reciprocals, and county mutual insurance companies. Article 5.13-2 §5A provides for a limited prior approval system for certain insurers but the overall uniform system of rate regulation effective December 1, 2004, for all insurers of property and casualty insurance in Texas is a file and use rate filing system. Most commercial insurers have been subject to a file and use system for several years. The department has the duty to ensure that rates used under the Texas Insurance Code are just, fair, reasonable, adequate, not confiscatory, not excessive, and not unfairly discriminatory for the risks to which they apply. In order to accomplish this legislative mandate, insurers must file all rates, applicable rating manuals, supplementary rating information, and all other information required by the commissioner by rule. The proposed sections set forth general rate filing requirements but do not require insurers to submit a comprehensi ve rate filing in each instance. The department recogni zes that there will be instances where lesser documentation is sufficient. In order to accommodate these different circumstances and provide insurers with some flexibility, the department has developed a list and description of seven categories of supporting information. This supporting information will provide the department with sufficient documentation to determine whether a rate meets the statutory requirements. The department recognizes that documentation will vary from one rate filing to another depending on the category of supporting information an insurer submits. For example, a rate filing containing rates for an endorsement may not require the same extent of information as a loss cost reference filing. The department may also request additional information when necessary to determine whether a rate complies with the statutory rating standards.
Proposed §5.9330 sets forth the purpose of Division 6. Proposed §5.9331 defines certain terms used in the division. Proposed §5.9332(a) provides for maintaining current information with the department. Proposed §5.9332(b) (d) sets forth specific filing requirements for rate filings made in accordance with Articles 5.13-2, 5.41-3, 5.55, and 21.50. Proposed §5.9332(e) requires insurers to submit sufficient supporting documentation as necessary to justify specific rates or rate changes. In accordance with Article 5.13-2 §5(a-1), proposed subsections (e)(1) (e)(7) of §5.9332 set forth categories and clear descriptions of supporting information including actuarial support, expense information, historical experience information, profit provision information, rate change information, loss cost reference information, and rate reference information. Proposed subsection (f) of §5.9332 provides that the department may request additional information. Proposed subsection (g) of §5.9332 describes how rate filings may be combined with form filings but may not be combined with underwriting guideline or credit scoring model filings. Proposed subsections (h) and (i) of §5.9332 provide administrative information regarding the Filings Made Easy guide and the address to where the rate filings are to be submitted.
Proposed §§5.9340 - 5.9342 (Division 7) facilitate the department´s management of underwriting guidelines and updates to underwriting guidelines required to be filed with the department by insurers writing personal automobile and residential property insurance.
Proposed §5.9340 sets forth the purpose of Division 7. Proposed §5.9342 provides a means for the department to manage an increasing volume of filed underwriting guidelines and updates and to fulfill the purposes of Insurance Code §38.002. Proposed §5.9342(a) requires insurers to file with the department a comprehensive set of their underwriting guidelines at least once every three calendar years on or before March 1st. In addition, subsection (a) requires insurers to file underwriting guideline updates not later than 10 days after a change is made to an underwriting guideline. This establishes a reasonable timeline for insurers to file updates with the department in compliance with Insurance Code §38.002. Proposed subsection (b) establishes that oral and electronic underwriting guidelines must be converted to written form for filing purposes. Proposed subsection (c) provides that an insurer group or a group of affiliated insurers that files one set of underwriting guidelines or updates on behalf of individual insurers must clearly identify which underwriting guidelines apply to each insurer within the group. Proposed subsections (d) and (e) provide that insurers must file a separate transmittal form with their underwriting guidelines and may not combine an underwriting guideline filing with a filing made in accordance with Divisions 5, 6 or 8 of Subchapter M.
Proposed §§5.9350-5.9352 (Division 8) sets forth the filing requirements for credit scoring models used for certain types of personal insurance as defined in Insurance Code Article 21.49-2U. Proposed §5.9350 sets forth the purpose of Division 8. Proposed §5.9351 references the definitions in Article 21.49-24 and defines credit scoring model or models. Proposed §5.9352 sets forth the filing requirements for insurers to follow when filing credit scoring models. The section also requires insurers to file all credit scoring models prior to use and requires specific information that must be filed with the department.
In accordance with the provisions of Articles 5.13-2, §13 and 5.13-2C, the department set forth reduced filing requirements for certain insurers in proposed §§5.9355 5.9357 (Division 9). Proposed §5.9355 sets forth the purpose of Division 9. Proposed §5.9356 provides reference for definitions in the division. Proposed §5.9357(a) sets forth the informational filing requirements for an insurer of nonstandard personal automobile insurance. Proposed §5.9357(b) sets forth the informational filing requirements for an insurer serving the underserved market in accordance with Article 5.13-2C. Proposed §5.9357(c) provides that the department may request additional information. Proposed §5.9357(d)(1) clarifies the requirements in proposed §§5.9941 and 5.9960 notwithstanding the reduced requirements of §5.9357. Proposed §5.9357(d)(2) (4) establishes the department´s process for incomplete filings and also identifies the filings which may be combined with a reduced filing and submitted to the department.
The department will consider the adoption of new Divisions 4 - 9, §§5.9310, 5.9320, 5.9330 - 5.9332, 5.9340 - 5.9342, 5.9350 - 5.9352, and 5.9355 -- 5.9357 and amendments to add division headings to §§5.9301 and 5.9303 in a public hearing under Docket Number 2604, scheduled for 10:00 a.m. . on November 30, 2004, in Room 100 of the William P. Hobby, Jr. State Office Building, 333 Guadalupe Street, Austin, Texas.
Marilyn Hamilton, Associate Commissioner, Property and Casualty Program, has determined that for each year of the first five years the proposed sections will be in effect, there will be no fiscal impact to state and local governments as a result of the enforcement or administration of the rule. There will be no measurable effect on local employment or the local economy as a result of the proposal.
Ms. Hamilton has determined that for each year of the first five years the sections are in effect, the public benefits anticipated as a result of the proposed sections will be the implementation of uniform and efficient procedures for the filing of property and casualty forms, rates, rules, underwriting guidelines, and credit scoring models that are required by statute. Additionally, the proposed divisions will help to promote stronger and more competitive insurance markets by providing a consistent and efficient process for the review of filings. This increased competition and more efficient review process will enable insurers to offer additional insurance products for insureds to choose from and to respond more rapidly to variations in market demand. Any costs to insurers complying with new Divisions 6, 7, 8, and 9 each year of the first five years the proposed divisions will be in effect are the result of the legislative enactment of SB 14, and are not the result of the adoption or implementation of these proposed divisions. For those insurers not previously required to file, the costs to those insurers of complying with Divisions 4 and 5 are the result of the legislative enactment of Article 5.13-2, §8(a) and are not the result of the adoption and implementation of these proposed divisions. The cost of complying with proposed Divisions 4 and 5 do not represent additional or new expenses for insurers making policy form or endorsement filings since insurers have been making these filings pursuant to Article 5.13-2, §8(a) since its enactment in 1991. Additionally, the cost to insurers for certain filings such as interline filings and dual filings may actually be reduced as a result of the adoption of new Divisions 5 and 6. Likewise, the cost of complying with Divisions 6 and 9 will not increase for insurers previously subject to rate regulation, and the cost of compliance may in fact decrease depending on the insurer and/or the type of rate filing. The cost per hour or labor would not vary between the smallest and largest businesses. Based upon the cost of labor per hour, there is no disproportionate economic impact on small or micro businesses. It is neither legal nor feasible to waive the proposed new divisions for insurers that qualify as small or micro-businesses because the requirements of these sections are prescribed by statute, and there are no statutory provisions that provide for an exemption.
To be considered, written comments on the proposal must be submitted no later than 5:00 p.m. on November 29, 2004 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 Marilyn Hamilton, Associate Commissioner Property and Casualty Program, Mail Code 104-PC, Texas Department of Insurance, P.O. Box 149104, Austin, Texas 78714-9104.
The new divisions and amended sections are proposed under Insurance Code Articles 5.06, 5.13, 5.13-2, 5.13-2C, 5.35, 5.41-3, 5.55, 5.57, 5.145, 21.49-2U, 21.50 and §§36.001 and 38.002. SB 14, as enacted by the 78th Legislature, Regular Session, amended various provisions of Chapter 5 of the Insurance Code, added Chapter 21.49-2U relating to the use of credit scoring, and added §38.002 relating to underwriting guidelines for personal automobile and residential property insurance. Article 5.13(e) provides that the regulatory power conferred in this article is vested in the commissioner. Article 5.13-2 gives the commissioner authority to regulate policy forms, endorsements, and rates for the writing of insurance subject to this article. Article 5.13-2, §5(a) and (a-1) provide that insurers shall file with the commissioner all rates, applicable rating manuals, supplementary rating information, and additional information as required by the commissioner for risks written in this state and that the commissioner by rule shall determine the information required to be provided in the filing. Article 5.13-2, §13(f) provides that county mutual insurance companies that have a market share of less than 3.5 percent and that issue personal auto policies only at nonstandard rates are subject to rate filing requirements as determined by the commissioner by rule. Article 5.13-2C provides that a residential property insurer that meets certain criteria which demonstrates it is writing more than fifty percent of its policies in underserved areas is exempt from the rate filing and approval requirements of Articles 5.142 and 5.13-2. Article 5.41-3, which concerns the writing of commercial group property insurance, provides the requirements for forming a group or association that would be eligible to be written on a commercial group property policy, the form filing and rate filing requirements for such group policies, and that an insurer shall file related information that clearly identifies the group of business es or the association to be insured. Article 5.55 provides rate standards and rate filing requirements for workers' compensation insurance. Article 5.57 requires the commissioner to prescribe a uniform policy form for workers´ compensation insurance, and provides that an insurance company may not use a form other than one prescribed unless the form is an endorsement appropriate to the company´s plan of operation and submitted to and approved by the department. Article 5.145, §2 provides that notwithstanding any other provision of the Insurance Code and except as provided in this section, an insurer is governed by the provisions of §8 of Article 5.13-2 relating to policy forms and endorsements for personal automobile and residential property insurance, but that an insurer may continue to use the policy forms and endorsements promulgated, approved, or adopted under Articles 5.06 and 5.35 upon notification to the commissioner in writing. Articles 5.06 and 5.35 set forth filing and approval procedures for motor vehicle insurance and residential property insurance previously not subject to Article 5.13-2. Article 5.145 provides that the commissioner may adopt reasonable and necessary rules to implement this article relating to policy forms for personal and residential property insurance. Article 21.49-2U, relating to the use of credit scoring, provides that the commissioner may adopt rules as necessary to implement this article. Article 21.50 provides the form and rate regulation provisions for mortgage guaranty insurance. Section 38.002 provides that each insurer, as defined, engaged in the business of personal automobile or residential property insurance in this state shall file with the department a copy of the insurer´s underwriting guidelines. 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 ot her laws of this state.
The following statutes are affected by this proposal: Insurance Code Articles 5.06, 5.13, 5.13-2,
5.35, 5.41-3, 5.55, 5.57, 5.145, 21.50, 5.13-2C, 21.49-2U, and §38.002
Division 1. Requirements for Sharing Commercial Risks
§5.9301. Commercial Risks Shared by Two or More Insurers .
(a) (d) (No change.)
Division 2. Requirements for Determining a Catastrophe
§5.9303. Definition of Catastrophe.
(a) - (f) (No change.)
Division 4. Filings Made Easy - Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings
§5.9310. Property and Casualty Filing Transmittal Form.
(a) Purpose. The purpose of this division is to specify the form and content of the filing transmittal form that is to be used for property and casualty form, rate, rule, underwriting guideline, and credit scoring model filings and provide information on obtaining such form.
(b) Definitions. Words and terms not defined in this division may be defined in the Insurance Code Article 5.13-2 and Subchapter D of Chapter 5 and shall have the same meaning when used in this division. The following words and terms when used in this division shall have the following meanings unless the context indicates otherwise:
(1) Department-- Texas Department of Insurance (TDI).
(2) TDI file number--The number assigned by the department to a filing submitted by an individual company.
(3) TDI link number--The number assigned by the department to link individual TDI file numbers to a filing which is submitted for more than one company within a group.
(4) Interline filing--A filing submitted for an endorsement that may be used with more than one line of insurance provided the endorsement does not have an impact on rates or a rate filing that may be used with more than one line of insurance that contains only information concerning policy fees, service fees, and other fees that are charged or collected by the insurer under Insurance Code Article 21.35A or 21.35B.
(5) Reference filing-- A filing that references the use of adopted or approved policy form(s), endorsement(s), manual rule(s), rate(s), or other acceptable policy form(s), or endorsement(s), manual rule(s), or rate(s), to which the department has assigned a TDI file number.
(6) Dual filing--A monoline f iling submitted for a specific line of insurance that may also be written as part of a commercial multi-peril policy.
(7) Line of insurance--For purposes of this section, each of the following is a line of insurance:
(A) automobile-commercial;
(B) automobile-personal;
(C) boiler and machinery;
(D) casualty (personal and commercial);
(E) commercial multi-peril;
(F) credit;
(G) credit-involuntary unemployment;
(H) crime;
(I) crop hail;
(J) excess liability;
(K) excess umbrella;
(L) farm and ranch;
(M) farm liability;
(N) farm and ranch owners;
(O) fidelity bonds;
(P) financial guaranty bonds or insurance;
(Q) guaranteed auto protection (GAP) (commercial);
(R) guaranteed auto protection (GAP) (personal);
(S) general liability;
(T) glass;
(U) inland marine (commercial);
(V) involuntary unemployment;
(W) inland marine (personal);
(X) miscellaneous liability;
(Y) mortgage guaranty;
(Z) miscellaneous casualty;
(AA) personal liability;
(BB) professional liability;
(CC) property-commercial;
(DD) property-residential (dwelling);
(EE) property-residential (homeowners);
(FF) rain;
(GG) surety bonds (other than criminal court appearance bonds);
(HH) umbrella-commercial;
(II) umbrella-personal; and
(JJ) workers' compensation.
(c) Form and content of transmittal form. The filing transmittal form must be typed and contain, at a minimum, the following information:
(1) company name;
(2) NAIC number of the company;
(3) company group name and group NAIC number;
(4) type of filing:
(A) new filing; or
(B) revision or replacement of an existing filing. If revising or replacing an existing filing, the TDI file number or link number of the filing that is being revised or replaced must be provided.
(5) line of insurance:
(A) all filings must specify the line of insurance for which the filing is being made;
(B) interline filings must indicate all lines of insurance to which the filing is applicable;
(C) dual filings must indicate commercial multi-peril insurance and a specific line of insurance to which the filing is applicable;
(6) basic description of the filing:
(A) rate filing, rating manual filing, and rating rule filing;
(B) policy form;
(C) endorsement;
(D) manual rules, other than rating manual rules;
(E) reference filing must list the TDI file number or TDI link number of the filing being referenced;
(F) credit scoring model; or
(G) underwriting guidelines;
(7) proposed effective date; and
(8) contact person, including name, telephone number, mailing address, fax number, and e-mail address (if available).
(d) Availability of transmittal form. The Filing Transmittal Form (FTF) is a form that is provided by the department for insurers who are making the filings specified in subsection (c)(6) of this section. This form may be obtained from the TDI website at www.tdi.state.tx.us.
(e) Alternative transmittal forms. An insurer may use, as an alternative, a transmittal form published by the National Association of Insurance Commissioners (NAIC) or any other transmittal form if the information included in the transmittal form, or in an addendum to the transmittal form, contains all the information required under subsection (c) of this section.
(f) The department maintains the Filings Made Easy guide to assist insurers in submitting filings and complying with statutory requirements. This guide may be obtained from the TDI website at www.tdi.state.tx.us.
(g) Filings under Divisions 4, 5, 6, 7, 8, and 9 of this subchapter must be submitted to the Texas Department of Insurance, Property & Casualty Intake Unit, 333 Guadalupe, Austin, Texas 78701 or to the Texas Department of Insurance, Property & Casualty Intake Unit, Mail Code 104-3B, P.O. Box 149104, Austin, Texas 78714-9104.
Division 5. Filings Made Easy - Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings
§5.9320. Required Information for the Preparation and Submission of Policy Form, Endorsement, or Manual Rule (other than rating manual) Filings.
(a) Purpose. The purpose of this section is to specify the filing requirements for property and casualty policy form, endorsement, and manual rule filings that are submitted pursuant to Chapter 5 or Article 21.50 of the Texas Insurance Code.
(b) Definitions. The definitions set forth in §5.9310 of this title (relating to Property and Casualty Filing Transmittal Form) apply to this division.
(c) Policy forms and endorsements. All insurer and advisory organization policy form and endorsement filings submitted pursuant to Chapter 5 or Article 21.50 of the Texas Insurance Code, shall comply with the general filing requirements, other applicable requirements set forth in paragraphs (1) - (3) of this subsection, and any other applicable rules adopted by the commissioner.
(1) General filing requirements.
(A) All filings for new and amended policy forms or endorsements shall relate to only one line of insurance except for commercial multi-peril, dual and interline filings.
(B) All filings for new and amended policy forms or endorsements shall contain the following:
(i) a filing transmittal form as required in Division 4 of this subchapter (relating to Filings Made Easy Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings).
(ii) a copy of the proposed policy form(s) and/or endorsement(s); and
(iii) an explanatory memorandum that contains a detailed explanation of the reason(s) for filing the new or revised policy form(s) and/or endorsement(s) or manual rule(s), a description of the policy form(s) or endorsement(s), and the application (e.g., the type of risk or risks the form(s) or endorsement(s) will be used with).
(2) Additional filing requirements.
(A) Additional filing requirements specific to new policy forms or endorsements for use with new products. If the explanatory memorandum required under subsection (c)(1)(B)(iii) of this section does not fully explain or describe the filed policy form(s) or endorsement(s), the department may request either:
(i) a summary of all policy provisions that includes a detailed description and explanation of the coverages, limitations, exclusions and conditions; or
(ii) a coverage comparison to a similar policy form or endorsement that has been previously approved or adopted by the commissioner containing a detailed explanation of all the differences including any restrictions in coverage, enhancements in coverage, or clarifications to the previously approved policy form(s) or endorsement(s).
(B) Additional filing requirements specific to amending previously approved or adopted policy forms or endorsements. In addition to the general requirements outlined in subsection (c)(1) of this section, the filing shall include a coverage evaluation that contains a detailed explanation of the proposed changes including any restrictions in coverage, enhancements in coverage, or clarifications to the previously approved or adopted policy form(s) or endorsement(s). The additional requirements under this subsection may be provided in the explanatory memorandum required under subsection (c)(1)(B)(iii) of this section or by providing:
(i) a side-by-side comparison showing any differences between the previously approved or adopted policy form(s) or endorsement(s) and the proposed policy form(s) or endorsement(s); or
(ii) a copy of the previously approved or adopted policy form(s) or endorsement(s) indicating the differences between the approved or adopted policy form(s) or endorsement(s) and the filed policy form(s) or endorsement(s) with the new language underlined and the deleted language in brackets with a strikethrough, or other clearly identified or highlighted editorial notations referencing the new and replaced language.
(3) Statutory and regulatory filing requirements.
(A) Filings for new and amended policy form(s) and/or endorsement(s) shall include all provisions required by statute, administrative rule, or commissioner's order for a specific line of insurance. The required statutory or administrative rule provisions may be added to a policy form by a Texas amendatory endorsement. The amendatory endorsement shall be included in the filing or a filing may reference an approved amendatory endorsement that is applicable to the policy form(s) contained in the filing.
(B) All policy forms and endorsements contained in personal automobile and residential property insurance filings shall meet the statutory requirements for plain language in policies as set forth by the Commissioner of Insurance by order.
(d) Filing requirements for manual rules. Manual rules are rules other than rating rules that may be filed with policy form(s) or endorsement(s) or may be submitted separately. When submitted separately, in addition to the transmittal form, the manual rule filing shall relate to only one line of insurance except for commercial multi-peril, dual and interline filings, and include an explanatory memorandum as described in subsection (c)(1)(B)(iii) of this section.
(e) Filing requirements for reference filings. A filing may be made referencing approved or accepted policy form(s), endorsement(s), or manual rule(s) without including a copy of the referenced policy form(s), endorsement(s) or manual rule(s). All reference filings shall relate to only one line of insurance except for dual filings, interline filings, and commercial multi-peril filings. In addition to the transmittal form, a reference filing must include the following information for policy form(s), endorsement(s), or manual rule(s):
(1) name of insurance company or advisory organization whose filing is being referenced; and
( 2) TDI file number, link number, or reference number of the filing being referenced.
(f) Incomplete filing.
(1) a filing will be considered incomplete if the filing does not comply with the filing requirements contained in subsections (c), (d) and (e) of this section;
(2) a filing that is determined to be incomplete by the department will be returned to the filer with a letter or electronic notification, indicating the reason(s) for the filing being returned; and
(3) the deemer period does not commence until a complete filing is received by the department.
(g) Combining filings. Filings under this division may be combined with filings made in accordance with Division 6 or 9 of this subchapter (relating to Filings Made Easy -- Rate and Rate Manual Filing Requirements and Reduced Filing Requirements for Certain Insurers). These combined filings may utilize a single transmittal form. Filings under this division may not be combined with filings made in accordance with Division 7 or 8 of this subchapter (relating to Filings Made Easy -- Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance and Filings Made Easy -- Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.
Division 6. Filings Made Easy -- Rate and Rate Manual Filing Requirements
§5.9330. Purpose. The purpose of this division is to specify requirements for the filing of rates under Insurance Code Articles 5.13-2, 5.41-3, 5.55 and 21.50 including but not limited to prospective loss costs, rating manuals, supplementary rating information and information concerning policy fees, service fees, and other fees that are charged or collected by the insurer under Insurance Code Article 21.35A or 21.35B.
§5.9331. Definitions.
(a) Words and terms not defined in this section but which are defined in Insurance Code Article 5.13-2, Subchapter D of Chapter 5 or §5.9310 of this title (relating to Filings Made Easy Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings) shall have the same meaning, as applicable , when used in this division unless the context indicates otherwise.
(b) The following words and terms when used in this division shall have the following meanings, unless the context indicates otherwise.
(1) Disallowed expenses--Applies only to filings made in accordance with Insurance Code Article 5.13-2. Payments anticipated to be made to advisory organizations, licensed to do business in Texas, for services authorized by Insurance Code Article 5.73 for the development of statistical plans, data collection and reporting, the development and distribution of prospective loss costs, supplementary rating information, policy forms and endorsements, research, and the performance of inspections, and other activities reasonably related thereto, are not disallowed expenses.
(2) I nsurer--An insurer authorized to write property and casualty insurance in this state, including an insurance company, reciprocal or interinsurance exchange, mutual insurance company, capital stock company, county mutual insurance company, association, Lloyd´s plan, or other entity writing insurance in this state. The term includes an affiliate, as described by §823.003 of the Insurance Code, if that affiliate is authorized to write insurance in this state. The term does not include a farm mutual insurance company, an eligible surplus lines insurer under the Insurance Code, the Texas Windstorm Insurance Association, the Texas FAIR Plan Association, or the Texas Automobile Insurance Plan Association.
§5.9332. F iling Requirements.
( a) An insurer shall keep the following information current with the department and is not required to re-file unless affected by the proposed filing or requested by the department or commissioner:
(1) All prospective loss cost multipliers, rates, and rating manuals as required by Insurance Code Articles 5.13-2, 5.41-3, 5.55, 5.171, 21.49-2U, 21.50 or other articles that impose specific filing requirements for any line of insurance;
(2) Supplementary rating information; and
(3) Information concerning all policy fees, service fees, and other fees that are charged or collected by an insurer under Insurance Code Article 21.35A or 21.35B.
(b) For rates filed pursuant to Insurance Code Article 5.13-2 or 5.41-3, a filing containing rate information must contain the information described in paragraphs (1) (3) of this subsection:
(1) A filing transmittal form as required in Division 4 of this subchapter (relating to Filings Made Easy Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings).
(2) The filing memorandum briefly explaining the purpose of the filing, and all material background details relating to the filing including a statement on the overall impact of the filing. For example, a filing memorandum may include one or more of the following, as applicable:
(A) reasons for entry into a new market;
(B) reasons for offering additional coverages;
(C) reasons for offering new discounts or applying new surcharges;
(D) reasons for changing rates;
(E) changes in the insurer's goals and objectives; or
( F) an explanation of changes in insurer or insurer group operations.
(3) Rating information can be any rate pages detailing information described in subsection (a) of this section or any supporting information required by §§5.9941 or 5.9960 of this title (relating to Differences in Rates Charged Due Solely to Difference in Credit Scores and Exception to Territory Rating Requirements under Insurance Code Article 5.171) or any other applicable statute or rule.
(4) In accordance with Article 5.41-3, insurers filing commercial group property rates shall clearly identify the group of businesses or the association to be insured.
(c) For rates filed pursuant to Insurance Code Article 5.55, a filing containing rating information must contain the information described in paragraphs (1) (3) of subsection (b) of this section. An insurer may not make such filing more frequently than every six months in accordance with Insurance Code Article 5.55, §3(a).
(d) For rates filed pursuant to Insurance Code Article 21.50, a filing containing rating information must contain the information described in paragraphs (1) (3) of subsection (b) of this section. In accordance with Article 21.50 rates must be filed at least 15 days before they are to become effective and must include a certification as described in Article 21.50, §1A(g)(4).
(e) Except as provided in Division 9 of this subchapter (relating to Filings Made Easy Reduced Filing Requirements for Certain Insurers), insurers must provide supporting information as necessary for the department to establish that a filing produces rates which are adequate, not excessive or unfairly discriminatory for the risks to which they apply. Categories of supporting information are listed in paragraphs (1) (7) of this subsection, but are not necessarily required for every rate filing. Insurers must only provide sufficient materials to justify specific rates or changes being proposed. To the extent the information originally submitted in a rate filing is insufficient, the department may request additional information as deemed necessary by the department or commissioner.
(1) Actuarial support. Actuarial support generally includes rate indications and support, including the data and methodologies utilized by the insurer to derive such indications. Supporting information that is submitted with a filing should include each of the following to the extent applicable:
(A) premiums at current rate level and applicable on-level factors;
(B) incurred and paid losses;
(C) loss and claim development factors;
(D) premium and loss trend factors;
(E) rate relativities (e.g., classification, territory, amount of insurance);
(F) increased limits factors;
(G) hurricane and non-hurricane catastrophe factors or loss provisions;
(H) definition of a catastrophe and how it has changed over the experience period used to calculate the provisions;
(I) deductible credits and debits;
(J) description and support for discounts and surcharges;
(K) off-balance factors if there have been changes in relativities (e.g., discounts, surcharges, territorial definitions);
(L) credibility;
(M) expense and profit provisions; and
(N) contingency provisions.
(2) Projected and historical expense information. As applicable to the insurer´s filing, the information set out in subparagraphs (A) (C) of this paragraph should be filed. For Texas , and if applicable, country-wide experience, the insurer should provide projected and historical expense information. The loss adjustment expenses would be shown as a dollar amount as well as a ratio to incurred losses. All other expenses would be shown as a dollar amount as well as a ratio to direct written premium. All expense items should be on a direct basis.
(A) Three years of historical Texas experience for commission and brokerage expenses incurred; taxes, licenses, and fees incurred; losses incurred; and, defense and cost containment expenses incurred. These shall be the amounts, or a subset of the amounts, reported on the Exhibit of Premiums and Losses (Statutory Page 14 Data) or Insurance Expense Exhibit, Part III (IEE) in the insurer´s Annual Statement.
(B) Three years of historical countrywide experience for, commission and brokerage expenses incurred, other acquisition expenses incurred, general expenses incurred, losses incurred, defense and cost containment expenses incurred and adjusting and other loss adjustment expenses incurred. These shall be the amounts reported in the insurer´s Insurance Expense Exhibit, Part III (IEE).
(C) Three years of historical countrywide experience for each category of disallowed expenses shall be the amounts reported in the insurers´ response to the annual Texas Department of Insurance Call for Disallowed Expense Data. Total other acquisition expenses and general expenses each adjusted for disallowed expenses should be listed. The total adjusted general expense percentage should reflect any necessary adjustment due to the capping of general expenses at 110% of the industry median for the line of insurance.
(D) To the extent the expense provisions that underlie the rates differ from the historical expenses, support should be provided. For filings submitted under Insurance Code Article 5.13-2, the expense provisions should be net of the disallowed expenses as defined in §5.9331 of this division (relating to Definitions). Provisions for commissions and brokerage expenses; other acquisition expenses; general expenses; taxes, licenses and fees; and profit and contingencies, should be displayed and a sum computed. In addition, a permissible loss and loss adjustment expense ratio shall be computed as unity less the sum of these expense provisions.
(3) Historical experience information. This displays an insurer's most recent five year historical experience for Texas which are the amounts, or a subset of the amounts pertinent to the subline, reported on the Exhibit of Premiums and Losses (Statutory Page 14 Data) in the insurer´s Annual Statement. It also includes the most recent five year countrywide experience which are the amounts, or a subset of the amounts pertinent to the subline, reported on the insurer´s IEE, part III. Direct premiums written, direct premiums earned, direct losses and defense and cost containment expenses paid, and direct losses and defense and cost containment expenses incurred are shown as well as the ratio of the incurred loss and defense and cost containment expenses incurred to direct earned premiums, for both Texas and countrywide experience.
(4) Profit provision information. A brief description of the methodology and assumptions used to arrive at the profit provisions underlying the proposed rates.
(5) Rate change information. This generally includes a rate change history, the statewide average proposed rate change for each applicable coverage, form, or classification and the total average rate change for all coverages, forms, and classifications combined, even if only the rates for some of the coverages or forms are being changed. For loss cost reference filings, rate change information would include the proposed percentage change in the underlying loss costs, the change in the insurer´s loss cost multiplier, and the rate level change (i.e., the product of the change in the loss costs and the loss cost multipliers, expressed as a factor). For workers' compensation filings, change information would include the impact of the change in relativities if the filing includes adopting a new set of relativities using either the insurer's own class distribution or the industry wide distribution, the change in the insurer's deviation, and the rate level change (i.e., the product of the change in the relativities and the deviation, expressed as a factor).
(6) Loss cost reference information. This includes the following:
(A) The TDI file number, link number, or reference number of the loss costs being referenced;
(B) The derivation of the loss cost multiplier proposed including any loss cost modification factor and the following expense and profit provisions:
(i) commission and brokerage expenses;
(ii) other acquisition expenses;
(iii) general expenses;
(iv) taxes, licenses and fees; and
(v) underwriting profit and contingencies;
(C) The loss cost multiplier to be used as of the effective date of the filing; and
(D) For rate change filings, the loss cost multiplier used immediately prior to the effective date of the filing, and the effective rate level change due to any change in loss cost multiplier.
(7) Rate reference information. Rate reference information includes:
(A) A description of the rates being referenced including the line of business and TDI file number or link number;
(B) If an insurer is developing package modification factors, proposed modification factors and supporting data; and
(C) If an insurer is referencing package modification factors, a description of the package modification factor including a TDI file number or link number.
(f) Any filings that do not fully comply with all of the filing requirements described in this division may be considered incomplete and may be returned to the filer for completion with a notice stating that the filing is not complete and shall identify the additional information that is required for completion of the filing.
(g) The department may request additional information as necessary related to a rate filing, including actuarial or other reasonable support of rates as deemed necessary by the department or commissioner.
(h) Filings under this division may be combined with filings made in accordance with Division 5 of this subchapter (relating to Filings Made Easy Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings). These combined filings may utilize a single transmittal form. Filings under this division may not be combined with filings made in accordance with Division 7 or 8 of this subchapter (relating to Filings Made Easy Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance and Filings Made Easy Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.
(i ) The department maintains the Filings Made Easy guide to assist insurers with compliance of statutory requirements. Insurers may refer to the Filings Made Easy guide for rate filing forms that insurers may use to display necessary supporting information described in subsection (e) of this section. This guide may be obtained from the TDI website at www.tdi.state.tx.us.
Division 7. Filings Made Easy - Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance.
§5.9340. Purpose. The purpose of this division is to specify underwriting guideline filing requirements under Insurance Code §38.002 for those insurers writing personal automobile insurance or residential property insurance in this state.
§5.9341. Definitions. The definitions set forth in Insurance Code §38.002 apply to this division.
§5.9342. Filing Requirements.
(a) An insurer must file with the department:
(1) at least once every three calendar years on or before March 1, beginning March 1, 2004, a written, comprehensive set of each underwriting guideline used by the insurer or the insurer´s agent; and
(2) during the interval between March 1 of each third calendar year and not later than the 10 th day after the underwriting guideline has changed, a written update to the underwriting guideline clearly identifying each section of the previously filed underwriting guideline that has changed.
(b) For purposes of compliance with this section, an oral or electronic underwriting guideline must be converted to written form.
(c) An insurer group or group of affiliated insurers may file one set of underwriting guidelines or update to underwriting guidelines on behalf of individual insurers in the group in accordance with the requirements of this section if the group clearly identifies which underwriting guidelines apply to each insurer within the group
(d) An insurer that files underwriting guidelines or updates to underwriting guidelines under this section must submit a filing transmittal form as required by Division 4 of this subchapter (relating to Filings Made Easy - Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings) with the filing for each underwriting guideline and update.
(e) Filings under this division may not be combined with filings made in accordance with Divisions 5, 6 or 8 of this subchapter (relating to Filings Made Easy Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings, Filings Made Easy Rate and Rate Manual Filing Requirements, and Filings Made Easy Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.
Division 8. Filings Made Easy - Credit Scoring Models
Filing Requirements for Personal Insurance
§5.9350. Purpose. The purpose of this division is to specify filing requirements for credit scoring models and to specify other regulatory requirements pursuant to Insurance Code Article 21.49-2U for those insurers that use credit scoring in the writing of personal insurance in this state.
§5.9351. Definitions.
(a) Words and terms not defined in this division may be defined in the Insurance Code Article 21.49-2U and shall have the same meaning when used in this division.
(b) The following words and terms when used in this division shall have the following meanings unless the context indicates otherwise: C redit scoring model or models--The algorithm, computer application, model, or other process that is based on credit information used to derive a credit score or insurance score.
§5.9352. Filing Requirements.
(a) All models must be filed before they may be used. Insurers referencing models that have been filed with the department by another entity on behalf of an insurer in this state shall specify the exact name of the model being referenced in lieu of filing the model itself. Insurers making independent credit scoring model filings should file the entire model, including definitions.
(b) An insurer that files a credit scoring model under this division must submit the following information with the filing:
(1) filing transmittal information as required in Division 4 of this subchapter (relating to Filings Made Easy Filing Transmittal Form and Requirements for Property and Casualty Form, Rate, Rule, Underwriting Guideline, and Credit Scoring Model Filings) ; and
(2) an indication of whether the insurer uses the score resulting from the model for underwriting, rating or both.
(c) An insurer group or group of affiliated insurers may file models on behalf of the individual insurers in the group if the individual filings made by each insurer in the group would otherwise be identical.
(d) Filings under this section may not be combined with filings made in accordance with Divisions 5, 6 or 7 of this subchapter (relating to Filings Made Easy Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings, Filings Made Easy Rate Filing Requirements, and Filings Made Easy Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance) due to the distinct and separate statutes governing underwriting guidelines and credit scoring models.
Division 9. Filings Made Easy - Reduced Filing Requirements for Certain Insurers
§5.9355. Purpose. The purpose of this division is to specify requirements for certain insurers who meet the requirements for reduced filing requirements under the provisions of Insurance Code Article 5.13-2, §13(f) or 5.13-2C.
§5.9356. Definitions. The definitions set forth in §5.9331 of this title (relating to Definitions) apply to this division .
§5.9357. Filing Requirements.
(a) Non-standard personal automobile insurance. Insurers required to file under the provisions of Insurance Code Article 5.13-2 may make rate filings for personal automobile according to the requirements described in this subsection if they issue policies only at non-standard rates as defined under Article 5.13-2, §13 and if the insurer and the insurer´s affiliated companies or group have a market share of less than 3.5 percent.
(1) Insurers who qualify to file under this subsection shall file in accordance with Division 6 of this subchapter (relating to Filings Made Easy Rate and Rate Manual Filing Requirements) with the following exceptions:
(A) Insurers must include a Certification of Article 5.13-2, §13 Exemption Compliance (EC-2) with each filing, or in lieu of submitting the EC-2, an insurer may submit a certification of compliance which certifies that the insurer writes only at non-standard rates and the market share of the insurer and the insurer´s affiliated companies or group have a market share of less than 3.5 percent.
(B) In lieu of the supporting information required in §5.9332(e) of this subchapter (relating to Filing Requirements), insurers may substitute rate change information as described in §5.9332(e)(5) of this subchapter.
(2) The Certification of Article 5.13-2, §13 Exemption Compliance (EC-2) form is provided by the department for use by insurers seeking an exemption from rate fling and approval requirements pursuant to Article 5.13-2, §13. This form may be obtained from the Texas Department of Insurance website www.tdi.state.tx.us or by requesting such form from the Property and Casualty Actuarial Division, Mail Code 105-5F, P.O. Box 149104 , Austin , TX 78714-9104 .
(b) Underserved residential property. In accordance with Article 5.13-2C, insurers exempt from the rate filing requirements of Insurance Code Article 5.13-2, shall make rate filings in accordance with this subsection. Insurers who qualify to file under this subsection shall file as required in §5.9332(a) (b) of this subchapter (relating to Filings Made Easy Rate and Rate Manual Filing Requirements) and must:
(1) include a Certification of Article 5.13-2C Exemption Compliance (EC-1) as specified in §5.3702 of this chapter (relating to Designation of Underserved Areas for Residential Property Insurance for Purposes of the Insurance Code Article 5.13-2C).
(2) submit rate change information when applicable as described in §5.9332(e)(5) of this subchapter.
(c) Additional provisions. The following provisions apply to any rate or rate manual filing made pursuant to subsections (a) or (b) of this section:
(1) The reduced filing requirements provided under this division do not affect the requirements to file supporting data under §§ 5.9941 and 5.9960 of this (relating to Differences in Rates Charged Due Solely to Difference in Credit Scores and Exception to Territory Rating Requirements under Insurance Code Article 5.171). Insurers making a rate or rate manual filing under this division may include supporting data required under §§ 5.9941 and 5.9960 of this title with the filing made under this division.
(2) Any filings that do not fully comply with all of the filing requirements described in this division may be considered incomplete and may be returned to the filer for completion with a notice stating that the filing is not complete and shall identify the additional information that is required for completion of the filing.
(3) The department may request additional information related to a rate filing, including actuarial or other reasonable support of rates, as deemed necessary by the department or commissioner. The insurer shall respond by the date specified in the request.
(4) Filings under this division may be combined with filings made in accordance with Division 5 of this subchapter (relating to Filings Made Easy -- Requirements for Property and Casualty Policy Form, Endorsement, and Manual Rule Filings). These combined filings may utilize a single transmittal form. Filings under this division may not be combined with filings made in accordance with Division 7 or 8 of this subchapter (relating to Filings Made Easy -- Underwriting Guideline Filing Requirements for Personal Automobile and Residential Property Insurance and Filings Made Easy -- Credit Scoring Models Filing Requirements for Personal Insurance) due to distinct and separate statutes governing underwriting guidelines and credit scoring models.