Texas Senate Approves Insurance Department ‘Sunset’ Bill

The Texas Senate has approved a measure that allows the continued operation of the Texas Department of Insurance, but would slightly reform its operations, according to a Senate new release.

The bill’s author Senator Glenn Hegar of Katy, said the legislation better defines the file-and-use system of setting insurance rates “with stronger prior approval protections as a back drop, to bring greater stability and consistent regulation in Texas.”

The bill, SB 1007, looks to clarify the process under which insurance rate changes are approved. Under the current system, insurance companies file rate changes with TDI, then implement those changes while the agency reviews them.

Hegar said the current system is confusing, causing nearly all insurance writers to operate under a quasi-prior approval system, where insurers would negotiate with TDI officials to determine whether or not a rate would be approved.

SB 1007 would clarify under what circumstances the commissioner could place an insurer under a prior approval system and would require him or her to approve or disapprove rate changes within 30 days.

The bill was amended to shorten the agency’s sunset period, from the usual 12 years to six. Another amendment would create penalties for insurers who seek to drag out the approval process through lengthy appeals.

If an insurer’s rate change is rejected by TDI for being excessive or discriminatory, the company has 60 to 90 days to refile a new rate. During that time period, interest penalties equal to six percent plus the prime rate are levied on the disapproved rate. If the insurer still refuses to roll back that rate, the interest on the rates is increased to 18 percent, payable back to consumers if the hearing and appeals process confirms the state’s decision.

The bill now heads over to the House for further consideration.

The Texas Coalition for Affordable Insurance Solutions (TCAIS), an insurer-backed organization praised some parts of the bill but expressed concerns about other portions.

“Senate Bill 1007 does what the Sunset process is supposed to do – it reauthorizes the Texas Department of Insurance and, with it, continues financial regulations that ensure insurance companies remain financially stable and able to pay homeowners claims,” stated TCAIS Executive Director Beaman Floyd.

“Unfortunately, however, some amendments to SB 1007 signal a giant step backward toward prior approval, a regulatory system that will hurt – not help – both consumers and the insurance marketplace,” Floyd said.

Sources: Texas Senate, TCAIS

Topics Carriers Texas Legislation Politics