TDI Offers Guidance on New Ban on Named Driver Policies

September 16, 2019

The Texas Department of Insurance has issued a bulletin providing guidance on House Bill 259, passed during the 2019 legislative session, that prohibits insurers from delivering, issuing for delivery, or renewing named driver policies on or after Jan. 1, 2020.

The prohibition contained in HB 259 does not apply to operators’ policies, as defined in Texas Transportation Code Section 601.077, TDI.

The bulletin addresses the following frequently asked questions regarding HB 259:

How long may an insurer write named driver policies?

Under the new law, an insurer may continue to write and renew named driver policies that comply with current laws and rules as late as Dec. 31, 2019. This means:

  • Regardless of the policy term, a named driver policy written on or before December 31, 2019, may continue in force for the length of its term, but may not be renewed at any time on or after January 1, 2020.
  • No insurer should have any named driver policies in force after December 31, 2020.
  • Insurers must provide policyholders with appropriate and timely notice of nonrenewal. HB 259 does not excuse the insurer from the notice requirements in Texas Insurance Code Section 551.105.
After Jan. 1, 2020, may an insurer send named driver policyholders a “renewal offer” for a different policy?

No, insurers may not send named driver policyholders a renewal because under HB 259 named driver policies may not be renewed on or after January 1, 2020. Insurers may state in a nonrenewal notice that due to HB 259 the named driver policy is no longer available, and the insurer may simultaneously offer a new policy that complies with HB 259.

May an insurer offer named driver policyholders a new policy with a nonrenewal notice?

Yes, insurers may offer a new policy together with the notice of nonrenewal. Insurers may tell a policyholder that the named driver policy cannot be renewed at the end of its term because HB 259 prohibits renewing them.

Instead of a notice of nonrenewal, may an insurer send a notice of material change under Texas Insurance Code Section 551.1055?

No, an insurer may not send a notice of material change to expand or broaden coverage under a named driver policy, because a “material change,” as defined in Texas Insurance Code Section 551.1055(a), does not include an expansion of coverage. The definition of a “material change” includes reductions of coverage, changes in conditions of coverage, or changes in the duties of the insured. Instead, an insurer may choose to transition its named driver policies to automobile policies that comply with HB 259 by sending a new policy offer with a notice of nonrenewal.

If a named driver policy has not reached its 12-month anniversary on or after Jan. 1, 2020, may an insurer continue to renew it until the 12-month anniversary, as contemplated in Texas Insurance Code Section 551.106(b)?

No. HB 259 prohibits an insurer from renewing a named driver policy on or after Jan. 1, 2020, even if it has not reached the 12-month anniversary of the original effective date of the named driver policy.

How much notice must an insurer give to policyholders?

An insurer must give 30 days’ notice of nonrenewal under Texas Insurance Code Section 551.105.

Does an insurer need to have rates and forms on file to offer a new policy?

Yes. New offers must be for a policy form that has been filed with and approved by TDI. The insurer must have rates on file for the new policy.

May an insurer use previously approved policy forms or filed rates for those new policy offers?

Yes, but the laws may have changed since those forms were approved and those rates were filed. The insurer is responsible for verifying that its forms and rates comply with all current statutes and rules.

If an insurer does not want to make new offers to policyholders on or after Jan. 1, 2020, what should the insurer do?

The insurer must run off the named driver policies. “Run off” means the insurer must timely send its policyholders notices of nonrenewal before the named driver policies expire at the end of their terms. The insurer may also need to consider filing a withdrawal plan.

When does an insurer need to file a withdrawal plan?

An insurer must file a withdrawal plan as outlined in Texas Insurance Code Section 827.003 if:

  • The insurer does not write other private passenger automobile insurance, or
  • The insurer’s total annual premium volume for personal automobile insurance is reduced by 50 percent or more.
Will TDI update the rules applicable to named driver policies?

Yes, TDI plans to propose a repeal of 28 Texas Administrative Code Section 5.208 and an amendment of 28 Texas Administrative Code Section 5.204.

Rate and rule filing questions may be directed to the Property and Casualty Actuarial Office at (512) 676-6700 or PCActuarial@tdi.texas.gov.

Form filing questions may be directed to the Property and Casualty Lines Office at (512) 676-6710 or PropertyCasualty@tdi.texas.gov.

Source: TDI

Was this article valuable?

Here are more articles you may enjoy.