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House Interim Committee on Insurance

Charge

Study the practices related to the repair and salvage of motor vehicles under automobile insurance policies.
Background

In 1991, the Texas Legislature adopted a statute entitled "Disclosure of Consumer Information." This law prohibits an insurer from preventing the beneficiary of a policy, directly or indirectly, from selecting the facility of the insured's choice to repair motor vehicle damage, or from specifying the brand, type, kind, age, or condition of parts or products that may be used to repair a motor vehicle covered under the policy. The Department of Insurance has received complaints that some insurance companies employ practices which effectively deny policy holders the right to decide who will perform needed repairs to their vehicles. Another issue which has arisen is that when a vehicle is adjusted as a "total loss," the insurer generally pays the insured the book value of the vehicle rather than the cost of the repairs.
Recommendation

  • Amend the "Disclosure of Consumer Information" statute to provide for mandatory notice of the beneficiary's right to select the body repair shop of his or her choice.
    Charge

    Study the long-term financial stability and solvency of the Texas catastrophic property insurance association.
    Background

    The Catastrophic Property Insurance Pool Act (CATPOOL) was authorized by the 62nd Legislature in 1971, designated 14 coastal counties as catastrophe areas. Since then, other areas have likewise been designated, and as of December 31, 1995, CATPOOL had 68,903 policies in effect with a total liability exposure of $8,828,138,313. CATPOOL rates have generally been based on the extended coverage rates applicable to the entire seacoast area, subject to varying surcharges or percentage modifications of those rates. In 1993, the legislature placed a cap on residential rates of 90 percent of the "modified extended coverage rates."
    Recommendations

  • Amend CATPOOL to provide for actuarially sound rates to be set by the insurance commissioner for both residential and commercial policies.

  • Add a surcharge to CATPOOL rates to accumulate a balance in excess of $1 billion in the catastrophe reserve trust fund.
    Charge

    Review proposals to change building specifications in the plan of operation for the Texas Catastrophic Property Insurance Association.
    Background

    The authorizing legislation for the Texas Catastrophic Insurance Association establishes a plan of operation, which includes a requirement that the commissioner of insurance adopt building specifications. These building specifications refer to certain minimum material and construction standards which a structure must meet before it can be insured under the CATPOOL. The present set of building specifications dates back to the 1970s.
    Recommendations

  • Requires the commissioner of insurance to adopt stronger and more up-to-date building specifications.

  • Repeal the presumption as to suitability of certain product standards and leave such determinations to the discretion of the commissioner.