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Texas Department of Insurance
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The Commissioner of Insurance (Commissioner) has received a petition from Safeco Insurance Companies (American States Insurance Company, American Economy Insurance Company, American States Insurance Company of Texas, and First National Insurance Company of America) (Safeco) proposing adoption of amendments to the Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance (Manual) concerning acquisition expense discounts. Safeco's petition (Reference No. W-0708-12) was filed on July 14, 2008.

Pursuant to Texas Insurance Code, Article 5.96(c), the Commissioner is considering this petition for adoption. The Commissioner will not act on the petition prior to September 16, 2008. The Commissioner will not hold a public hearing on the petition prior to taking action unless a hearing is requested by an interested person on or before September 15, 2008.

Safeco's petition is filed pursuant to the Texas Insurance Code, Article 5.96 and §2053.002. Article 5.96(a) authorizes the Commissioner to prescribe, promulgate, adopt, approve, amend, or repeal standard and uniform manual rules, rating plans, classification plans, statistical plans, and policy and endorsement forms for workers' compensation insurance. Section 2053.002 requires that, in setting workers' compensation insurance rates, an insurer shall consider, inter alia, operation expenses.

Safeco requests that the proposed amendments to the Manual be adopted and that the amendments become effective 15 days after the Commissioner's adoption order is published in the Texas Register.

Safeco proposes the following amendments to the Manual:

1.A. Amend Rule VI, titled "Rates and Premium Determination," by adding a new Section L, to be entitled "Acquisition Expense Discount." The proposed new section defines an acquisition expense discount as a "premium credit given to policyholders written by the same insurance carrier who are members of a common group or organization." The acquisition expense discount would allow insurers that can identify and document reduced acquisition expenses related to writing members of such a group or organization to pass the savings on to these policyholders. The acquisition expense discount would be applied in addition to the premium discount and would be applicable to minimum premium policies.

Each insurer electing to offer an acquisition expense discount would be required to file with the Texas Department of Insurance the discount in accordance with the Texas Administrative Code, Title 28, Chapter 5, Subchapter M, Filing Requirements. Each such insurer would be required to provide the following information:

a. The definition of the common group or organization to which the acquisition expense discount will apply;

b. The acquisition expense discount percentage; and

c. Documentation supporting the acquisition expense discount.

1.B. Amend Rule VI, Section E, titled "Minimum Premium," to state that the minimum premiums filed by the insurers shall be reduced by the acquisition expense discount, if applicable.

2. Amend the Procedures Appendix, Section A(6), titled "Policy Issuance," by adding to the list of items that must be included on the information page of the policy the acquisition expense discount factor, if any is applicable. Add the acquisition expense discount as new subsection (r) and re-designate the subsequent subsections as (s) through (x). The amount of the premium reduction, if applicable, would be shown on the information page of the policy.

3. Amend Rule III, Section E, titled "Calculation of Total Estimated Policy Cost" by adding to the list of items new item 19 for "Estimated Standard Premium After Premium Discount" and new item 20 for "Acquisition Expense Discount, If Applicable." Re-designate the subsequent items as (21) through (23). If the minimum premium is the total estimated policy cost, the acquisition expense discount would be applied to the minimum premium.

A copy of the full text of Safeco's petition and related exhibits of specific language for the proposed amendments to the Manual are available for review in the Office of the Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. For further information or to request copies of the petition and proposed revised schedule and table, please contact Sylvia Gutierrez at, 512-463-6327 (Reference No. W-0708-12-I).

Comments on the proposed amendments may be submitted in writing by 5:00 p.m. on September 15, 2008, to Gene Jarmon, General Counsel and Chief Clerk, Texas Department of Insurance, P. O. Box 149104, MC 113-2A, Austin, Texas, 78714-9104. An additional copy of the comment should be simultaneously submitted to Nancy Moore, Deputy Commissioner, WC Classification and Premium Calculation, Texas Department of Insurance, P. O. Box 149104, MC 105-2A, Austin, Texas, 78714-9104. Any request for a public hearing must be submitted separately to the Office of Chief Clerk before the close of the public comment period. If a hearing is held, written and oral comments presented at the hearing will be considered.

This notification is made pursuant to the Texas Insurance Code, Article 5.96, which exempts action taken under this article from the requirements of the Administrative Procedure Act (Government Code, Title 10, Ch. 2001).

Copy of Petition filed by Safeco Insurance Companies

For more information, contact: