TEXAS DEPARTMENT OF INSURANCENotification Pursuant to the Insurance Code, Chapter 5, Subchapter LAs 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. PROPOSED ACTION The Commissioner of Insurance will hold a public hearing under Docket Number 2293 on June 24, 1997, at 10:00 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 amendments to the Texas Personal Lines Manual (Manual) to provide deductible adjustment charts for determining premium credits for optional large deductibles for coverage afforded under a dwelling policy, farm and ranch policy, and farm and ranch owners policy. The petition requests consideration of new optional large deductible adjustment charts to be added to the Dwelling, Farm and Ranch, and Farm and Ranch Owners sections of the Manual to be used in determining the appropriate premium credits when optional large deductibles are selected for a dwelling policy, farm and ranch policy, or farm and ranch owners policy. The proposed charts also provide instructions for applying the specified deductible adjustment premium credits to determine the appropriate policy premium. The deductible adjustments for determining premium credits for optional large deductibles for the homeowners policy were determined at the Residential Property Insurance Benchmark Rate Hearing held on December 20-21, 1995 under Docket Number 454-95-1280.G (Commissioner's Order Number 96-1047 effective October 1, 1996). The Commissioner of Insurance under Commissioner's Order Number 95-1084 (October 17, 1995), adopted rules (Rule 7 under the General Requirements Section V, Deductibles Subsection D) in both the Homeowners and the Farm and Ranch Owners sections of the Manual to provide for optional large deductibles of 1.5%, 2.0%, 2.5%, 3.0%, 4.0% and 5.0% of the limit of liability of Coverage A (Dwelling) under the homeowners policy forms and the farm and ranch owners policy forms. The Commissioner under Commissioner's Order Number 95-1284 (December 8, 1995) adopted rules (Rule 5 in the Dwelling Section of the Manual under the General Requirements Section V, Deductibles Subsection D) to provide for optional large deductibles of 1.5%, 2.0%, 2.5%, 3.0%, 4.0% and 5.0% of the limit of liability for each item of insurance shown on the declarations page of the dwelling policy forms and (Rule 6 in the Farm and Ranch Section of the Manual under General Requirements Section V, Deductibles Subsection D) to provide for optional large deductibles of 1.5%, 2.0%, 2.5%, 3.0%, 4.0% and 5.0% of the limit of liability for each item of insurance shown on the declarations page of the farm and ranch policy forms and on the declarations page of any endorsement attached to the farm and ranch policy forms. These rules did not include the deductible adjustment premium credits for the optional large deductibles. Pursuant to Commissioner's Order Numbers 95-1084 and 95-1284, the Commissioner determined that the applicable premium credits for the optional large deductibles should be determined at the next annual residential benchmark rate hearing and that the optional large deductibles would be effective for all applicable policies issued on and after the effective date of the benchmark rates determined pursuant to that hearing. The benchmark rate hearing was held on December 20-21, 1995, under Docket Number 454-95-1280.G. Evidence for the determination of the appropriate premium credits for optional large deductibles to the homeowners policy was presented at that hearing, and pursuant to Commissioner's Order Number 96-1047, the optional large deductibles and the premium credits for Coverage A (Dwelling) under the homeowners policy became effective on October 1, 1996. No evidence, however, was presented at that hearing for the appropriate premium credits for optional large deductibles for a dwelling policy, farm and ranch policy, or farm and ranch owners policy. The Commissioner was therefore unable to promulgate deductible adjustment premium credits for dwelling, farm and ranch, and farm and ranch owners policies as part of the residential property insurance benchmark rate matters. As a result, according to the petition, even though the Commissioner has determined that these optional large deductibles are necessary and in the public interest, insureds are not now able to select any of these large deductibles when purchasing dwelling, farm and ranch, or farm and ranch owners policies. Therefore, according to the petition, it is Staff's position that it is necessary, appropriate, and in the public interest for the Commissioner to consider and to adopt these premium credits under Article 5.96, as part of the manual rules governing the writing of optional large deductibles for dwelling, farm and ranch, and farm and ranch owners policies. The petition states that, in addition, because the proposed decreases in premium correspond to a decrease in coverage, these deductible adjustment premium credits do not affect the residential property insurance benchmark rates in effect for the dwelling, farm and ranch, and farm and ranch owners policies. The proposed deductible adjustment charts will only be used to determine premium credits when an insured chooses one of the optional large deductibles. The proposed premium credits, according to the petition, have been determined using sound actuarial principles that result in just and reasonable premium credits for the attachment of the optional large deductibles. The petition explains the methodology used to determine the proposed premium credits. The petition requests that the proposed deductible adjustment premium credits be adopted, in accordance with Article 5.96 of the Insurance Code, to be effective 15 days after notice of the adoption is published in the Texas Register. The Commissioner has jurisdiction of this matter pursuant to the Insurance Code, Articles 5.35, 5.101, 5.96, and 5.98. Copies of the full text of the staff petition and the proposed deductible adjustment premium credits 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 deductible adjustment charts, please contact Angie Arizpe at (512) 322- 4147 (refer to Reference Number P-0597-13-I). Comments on the proposal 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 Lyndon Anderson, Associate Commissioner for the Property and Casualty Division, P. O. Box 149104, MC103-1A, Austin, Texas 78714-9104. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts action taken under Article 5.96 from the requirements of the Administrative Procedure Act (Government Code, Title 10, Chapter 2001). This agency hereby certifies that the proposal has been reviewed by legal counsel and found to be within the agency's authority to adopt. Issued in Austin, Texas, on May 14, 1997. TRD-9706339 Caroline Scott General Counsel and Chief Clerk Texas Department of Insurance Filed: May 14, 1997