Highlights of Actions by the Texas Legislature Affecting Texas Insurance

Following is an overview of the 77th Texas Legislature offered by Bo Gilbert, CPCU, IIAT Director of Governmental Affairs. For a complete analysis of these bills as well as other bills that passed this legislative session, look under industry issues at www.iiat.org.

Licensing, Workers’ Comp Top Ins. Bills List
IIAT achieved its top priority—revision of agent licensing laws needed to avoid a federal takeover of licensing—while the insurance industry emerged from the just-completed legislative session with an unexpected bonus, in the form of strong workers’ compensation laws and only a few unwanted changes, including limits on companies’ ability to manage outside law firms. The agents’ licensing bill (SB 414) is awaiting the signature of Gov. Rick Perry.

Among its provisions, it reduces the number of licenses offered while assuring reciprocal treatment with other states that grant the same rights to Texas agents. Major changes affecting agents include the ability for Texas to issue a nonresident corporate license and requiring only one officer or one active partner and all other persons performing any acts of an agent on behalf of the agency to be individually licensed. This change in corporate ownership also applies to surplus lines agencies. Another important change requires county mutual agents to complete a course of study, pass an examination given by their company and satisfy continuing education requirements. IIAT members and Arlington State Rep. Kim Brimer scored a major coup with passage of a bill (HB 2600) aimed at slowing rising medical costs in the workers’ comp system. Major features include the creation of a provider network, determination of the average weekly wage for employees with multiple employment and prohibitions against employers’ use of pre-injury waivers of liability in lieu of workers’ compensation coverage.

Best of the Bills IIAT Supported
• Restructuring agent licenses (SB 414)—passed

• Streamlining auto, homeowners benchmark rate-setting process
(HB 2102)—passed

• Removal of windstorm residential rate-making from the benchmark process
(HB 1162)—passed

• Implementing new federal financial institu-tion privacy laws (SB 712)—passed

• New controls on workers’ comp medical costs, prohibition against use of pre-injury waivers (HB 2600)—passed

• Prohibition against directed suretyships (SB 1268)—passed

• Conversion of Texas Fund to mutual insurer (HB 3458)—passed

• Creation of auto liability insurance random verification program (SB 1329)—died in House Calendars committee

• Deregulation of commercial auto rates (HB 1195)—died in House Calendars committee

Worst of the Bills IIAT Opposed
• Creation of a renters’ insurance license for property managers (SB 431)—killed on House floor 75-54

• Transfer of state universities’ property and casualty insurance placement from independent agents to the State Office of RiskManagement (HB 1203)—removed from bill by Senate prior to passage

• Restrictions on insurers’ ability to specify parts or repair facilities in auto repair claims (HB 955, HB 956)—died in Senatecommittee

• Requirement for Insurance Commissioner to order further tort reform refunds if a review shows refunds were inadequate (HB 2871)—died in Senate committee

• Requirement that agents advise customers if their auto had prior body damage repairs (HB 3455)—died in Senate committee

• Creation of new legal right for third-party claimants to sue insurers (HB 188)—died in House Calendars committee

• Requirement that insurers provide a copy of the state-approved “Consumer Bill of Rights” with all auto repair estimates (HB 2019)—died in Senate committee

IIAT Analysis

Benchmark Rate Setting Streamlined
Texas’ clumsy and costly benchmark rate-setting system for auto and homeowners coverages survived another legislative session with minimal change. Arlington Rep. Kim Brimer’s bill to deregulate commercial auto rates died in the House Calendars committee, but Galveston Rep. Craig Eiland succeeded in having windstorm pool residential rate-setting moved from the benchmark process.

The legislature did agree with Commissioner Jose Montemayor’s request to streamline the rate-setting system by eliminating the requirement that the rate hearings be held before administrative law judges, a change that will cut in half the time it takes to process rate changes.

Efforts by industry critics to expand the benchmark system also failed, as bills to increase regulation of Texas Lloyd’s and Texas county mutuals failed. Also unsuccessful were bills to clamp down on uninsured motorists. One new requirement imposed on personal lines insurers will be to advise homeowners’ customers of any reductions in coverage prior to changing policy provisions.

Other issues impacting personal lines include legislation addressing privacy—one bill clarifies existing laws regarding a driver’s right to not have information in their motor vehicle record or an accident report sold to private markets and employers and also prohibits companies that buy such records from reselling them; another implements new federal financial institution privacy laws and a third one defines consumers rights to privacy of medical records.

Workers’ Comp: Outlawing Waivers
A Texas Supreme Court decision in March upholding the use of pre-injury waivers provided heightened urgency to a waiver prohibition bill (SB 624) by Lubbock Sen. Robert Duncan that passed the Senate and died in the House but was added to the package of workers’ comp claims cost controls (HB 2600) by Rep. Kim Brimer that is on the governor’s desk.

Workers’ Comp: Protecting Texas Fund’s Surplus by Mutualization
Rep. Brimer, vice chairman of the Research and Oversight Council (ROC) on Workers’ Compensation, obtained approval of a bill (HB 3458) supported by the fund and its business lobby backers to convert the fund to a mutual insurance company. Their reasoning: Until the legislature puts the fund beyond the reach of state budget-writers, the fund’s ample surplus will constantly be an attractive target. The measure awaits the governor’s signature.

Topics Texas Auto Agencies Workers' Compensation