| (a) Purpose and Applicability. The purpose of this
section is to protect homeowners in Texas from increases in residential
property insurance rates and premiums that vary greatly between renewal
periods and to provide homeowners in Texas with just, fair, and reasonable
residential property insurance rates and premiums. This section places
restrictions on the use of residential property insurance claims in
rates and premiums due to the introduction of, or changes to, a claims-free
program or premium surcharge program in accordance with the Insurance
Code and also establishes the requirements and procedures for insurers
to file a transition plan. This section applies to the rates and premiums
applicable to residential property insurance policies that are delivered,
issued for delivery, or renewed on or after January 1, 2006.
(b) Definitions for the purposes of this section.
(1) Residential property insurance--Property or property
and casualty insurance covering a dwelling, including homeowner's
insurance, residential fire and allied lines insurance, farm and ranch
insurance, or farm and ranch owners insurance.
(2) Premium surcharge--An additional amount due to
a policyholder's claims experience that is added to the base rate.
The term does not include a reduction or elimination of a discount
previously received by an insured, reassignment of an insured from
one rating tier to another, re-rating an insured, or re-underwriting
an insured by using multiple affiliates.
(3) Claims-free program--Any program that considers
a policyholder's claim experience, in whole or in part, whether through
the use of discounts, a tier classification, or other program that
does not qualify as a premium surcharge if the policyholder has been
a residential property insurance policyholder with that insurer or
an affiliate of that insurer.
(4) Transition plan--A plan that promotes rates and
premiums that are fair, just, and reasonable by moderating rate and
premium increases caused by the introduction of, or change to, a claims-free
or premium surcharge program, including a tier classification system.
(5) Natural cause--A weather related cause.
(6) Claim that is filed but is not paid or payable--A
claim that is filed, including a customer inquiry, that does not result
in an indemnity payment under the provisions of the policy.
(c) Premium consequence prohibited. An insurer may
not assign any premium consequence through a premium surcharge or
claims-free program based on filed claims occurring on or after September
1, 2005, in whole or in part, due to:
(1) claims resulting from a loss caused by natural
causes;
(2) a claim that is filed but not paid or payable under
a residential property policy; or
(3) a claim that an insurer is prohibited from using
under Insurance Code §544.353.
(d) Claims-free programs. Claims-free programs must
be based on sound actuarial principles. Actuarial support as specified
in §5.9332 of this title (relating to Categories of Supporting
Information) must be filed with the department in the event such program
is introduced or changed.
(e) Premium surcharge programs. Premium surcharge programs
must be based on sound actuarial principles. Actuarial support as
specified in §5.9332 of this title must be filed with the department
in the event such program is introduced or changed.
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