Notification Pursuant to the Insurance Code, Chapter 5, Subchapter L (Editor's Note: As required by the Insurance Code, Article 5.96 and 5. 97, the Texas Register publishes notice of proposed actions by the Texas Board of Insurance. Notice of action proposed under Article 5.96 must be published in the Texas Register not later than the 30th day before the board adopts the proposal. Notice of action proposed under Article 5.97 must be published in the Texas Register not later than the 10th day before the Board of Insurance adopts the proposal. The Administrative Procedure Act, the Government Code, Chapters 2001 and 2002, does not apply to board action under Articles 5.96 and 5.97. The complete text of the proposal summarized here may be examined in the offices of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78714- 9104.) The Commissioner of Insurance will hold a public hearing under Docket Number 2227 on June 27, 1996 at 11:00 a.m., in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street in Austin, Texas, to consider a petition by the staff of the Texas Department of Insurance proposing the adoption of amendments to the Homeowners Section, Dwelling Section, Farm and Ranch Owners Section, and Farm and Ranch Section of the Texas Personal Lines Manual to revise the Rate and Premium Calculation Rules (Rule VI-L in the Homeowners Section, Rule VI-H in the Dwelling Section, Rule VI-K in the Farm and Ranch Owners Section and Rule VI-J in the Farm and Ranch Section), and to repeal the Rounding of Premium Rules (Rules VI-E in the Homeowners Section and Farm and Ranch Owners Section, Rule VI-G in the Dwelling Section, and Rule VI-I in the Farm and Ranch Section). These rules relate to the calculation of premiums and rates for residential property insurance. The petition proposes the adoption of amendments to the existing Rate and Premium Calculation Rules (Rule VI-L in the Homeowners Section, Rule VI-H in the Dwelling Section, Rule VI-K in the Farm and Ranch Owners Section, and Rule VI-J in the Farm and Ranch Section) in the Texas Personal Lines Manual to specify through detailed narrative and example the method for calculating homeowners, dwelling, farm and ranch owners, and farm and ranch insurance premiums. The proposed rule amendments outline on a step-by-step basis the method to be used to calculate such premiums. The proposed rules for each section require the same computation method with the exception that the proposals for the Homeowners Section and the Farm and Ranch Owners Section provide for separate computation methods for determining the basic premium and other premiums shown separately on the policy. Each of the proposed rules specifies that the premium computation begins with the benchmark base premiums, premium charts, and rates in effect at the policy inception date for each of the policy forms. The proposed rules require that factors and multipliers be applied on a consecutive basis and that the resulting premium of each intermediate step in the computation process be rounded to the third decimal place. The final step specified in the computation process for determining the premiums shown separately on the policy is to round the final premium to the nearest whole dollar. It is also proposed that the rules include a provision to require that any pro rata factor or policy term factor be applied before rounding each resulting premium shown separately on the policy. The proposed rules include an example to demonstrate the application of the proposed computation method. The petition requests the repeal of the existing Rounding of Premium Rules (Rules VI-E in the Homeowners Section and Farm and Ranch Owners Section, Rule VI-G in the Dwelling Section, and Rule VI-I in the Farm and Ranch Section) in the Texas Personal Lines Manual because the substance of these rules is incorporated into the proposed rules, and therefore these rules are no longer necessary. In each section of the Texas Personal Lines Manual, the Rounding of Premium Rules and the Rate and Premium Calculation rules are separate rules that must be read together to calculate residential property insurance premiums. According to the staff petition, the proposed rule amendments are necessary to combine these rules into a single rule in each section of the Manual to provide a detailed step-by-step computation method to prevent possible confusion in determining residential property insurance premiums. In addition, the proposed rules clearly specify that only the final premium for each premium shown separately on the policy, regardless of the policy term, is rounded to the nearest whole dollar. This approach, according to the petition, will assure greater uniformity in residential property insurance premium computation and will foster fairness and consistency in the market to benefit both policyholders and insurers. Staff requests that the proposed amendments be adopted to apply to all Homeowners, Dwelling, Farm and Ranch Owners, and Farm and Ranch insurance policies issued on or before November 1, 1996. The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, Articles 5.96, 5.98, and 5.101. Copies of the full text of the staff petition and the proposed rule amendments are available for review in the Office of the Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas, 78714-9104. For further information or to request copies of the petition and proposed amendments, please contact Sylvia Gutierrez at (512) 463-6326 (refer to Reference Number P-0596-17-I). Comments on the proposed changes must be submitted in writing within 30 days after publication of the proposal in the Texas Register to the Office of the Chief Clerk, P.O. Box 149104, MC113-2A, Austin, Texas 78714-9104. An additional copy of the comment should be submitted to David Durden, Deputy Commissioner for Property and Casualty Lines, P.O. Box 149104, MC104-5A, Austin, Texas 78714- 9104. (Editor's Note: As required by the Insurance Code, Article 5.96 and 5. 97, the Texas Register publishes notice of proposed actions by the Texas Board of Insurance. Notice of action proposed under Article 5.96 must be published in the Texas Register not later than the 30th day before the board adopts the proposal. Notice of action proposed under Article 5.97 must be published in the Texas Register not later than the 10th day before the Board of Insurance adopts the proposal. The Administrative Procedure Act, the Government Code, Chapters 2001 and 2002, does not apply to board action under Articles 5.96 and 5.97. The complete text of the proposal summarized here may be examined in the offices of the Texas Department of Insurance, 333 Guadalupe Street, Austin, Texas 78714- 9104.) This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Administrative Procedure Act. This agency hereby certifies that the proposed rules have been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on May 13, 1996. TRD-9606589 Alicia M. Fechtel General Counsel and Chief Clerk Texas Department of Insurance Filed: May 13, 1996