TEXAS DEPARTMENT OF INSURANCE Notification 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. Texas Department of Insurance Proposed Actions The Commissioner of Insurance or his designee at a public hearing under Docket Number 2371, scheduled for August 18, 1998 at 9:00 a.m. in Room 100 of the Texas Department of Insurance Building, 333 Guadalupe Street in Austin, Texas will consider amendments proposed by the Staff of the Workers' Compensation Division to the Texas Basic Manual of Rules, Classifications and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance (the Manual). The purpose of these proposed amendments to the Manual is to combine certain classifications with like or similar hazards, to eliminate clerical and outsides salespersons from the classification wordings for several classifications, to eliminate conflicting language within the classification wordings and footnotes, and to provide clarification to some of the classification wordings by amending the language. The proposed changes by the staff are summarized as follows: 1. Combination of the following classifications with like or similar hazards: * Code 2150 Ice Manufacturing into Code 6504 Food Sundries Manufacturing * Code 2883 Furniture Manufacturing into Code 2881 Furniture Assembly - Wood * Code 3076 Aluminum Awning Manufacturing into Code 3066 Aluminum Door, Window and Frame Manufacturing; * Code 3093 Pipe or Tube Manufacturing - Cast Iron into Code 3028 Pipe or Tube Manufacturing - Iron or Steel; * Code 4113 Cathedral or Art Glass Window Manufacturing into Code 4101 Glass Manufacturing - Polished Plate; * Code 7389 Ice Manufacturing Drivers into Code 7380 - Drivers, Chauffeurs and their Helpers; * Code 8038 Restaurant - Fast Food and Code 9078 Commissary Work into Code 9079 Restaurant NOC; * Code 8393 Automobile Body Repair into Code 8391 Automobile Repair Shop; * Code 8605 Oil or Gas Geologist or Scout into Code 8601 Surveyors; * Code 9403 Garbage and Refuse Collection - Containerized into Code 9402 Sewer Cleaning; 2. Removal of the inclusion of clerical employees from the following classifications: * Code 4360 Motion Picture: Production & Development of Negatives * Code 4362 Motion Picture: Film Exchange & projection rooms * Code 7610 Radio or Television Broadcasting Station * Code 8832 Physician * Code 8838 Museum or Public Library * Code 8868 School or Church * Code 9033 Housing Authority * Code 9060 Club - Country, golf, fishing or yacht * Code 9061 Club NOC * Code 9063 Health Clubs, YMCA; 3. Removal of the inclusion of salespersons from the following classifications: * Code 4361 Photographer * Code 5192 Vending Machines * Code 7230 News Agent or Distributor of Magazines or Other Periodicals * Code 8288 Stockyards * Code 9033 Housing Authority * Code 9052 Hotel; 4. Changes in the following classifications to classifications with lower relativities: * Golf Cart Rental or Repair from Codes 8385 and 8002 to Code 8017 * News Agent or Dealer of Magazines, Newspapers or Other Periodicals from Code 7230 to Code 8017 if retail or Code 8018 if wholesale; 5. Editorial changes to the footnotes and classifications wordings in the Classification Section of the Manual due to other changes made or for clarification. 6. Amending the footnote under Codes 9015 and 9032 to allow Managers/Directors performing clerical duties exclusively to be rated as Code 8810; Managers/Directors or leasing agents performing outside salesperson duties such as showing, leasing or inspecting property to be rated as Code 8742; and Managers/Directors performing maintenance duties or directly supervising maintenance work to be rated as either 9015 or 9032. The Commissioner has jurisdiction over this matter pursuant to the Insurance Code, Articles 5.96 and 5.60. A copy of the amendments containing the full text of the proposed amendments is available for review in the Office of the Chief Clerk of the Texas Department of Insurance, 333 Guadalupe Street in Austin, Texas. For further information or to request copies of the amendments, please contact Ms. Angie Arizpe (512) 322- 4147, (refer to Reference Number W-0798-16-I). The staff and the Commissioner request that written comments to these proposed amendments be submitted prior to the public hearing on August 18, 1998. The written comments should be directed to Lynda Nesenholtz, General Counsel and Chief Clerk, Texas Department of Insurance, P. O. Box 149104, MC 113-2A, Austin, Texas 78714-9104. An additional copy of the comments is to be submitted to Nancy Moore, Deputy Commissioner, Workers' Compensation Division, Texas Department of Insurance, P. O. Box 149092, Austin, Texas 78714-9092. Public testimony at the hearing on August 18, 1998, is also invited and encouraged. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Government Code, Chapter 2001 (Administrative Procedure Act). The agency hereby certifies that the proposal has been reviewed by the legal counsel and found to be within the agency's authority to adopt. TRD-9810549 Lynda H. Nesenholtz General Counsel and Chief Clerk Texas Department of Insurance Filed: July 2, 1998 The Commissioner of Insurance (Commissioner) will hold a public hearing under Docket Number 2372 on August 18, 1998 at 9: 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 (TDI) proposing the adoption of revised Texas Workers' Compensation Classification Relativities (classification relativities) to replace those adopted in Commissioner's Order Number 96-1038 dated September 12, 1996, and the adoption of a revised table to amend the Texas Basic Manual of Rules, Classification, and Experience Rating Plan for Workers' Compensation and Employers' Liability Insurance (Manual). The petition requests consideration of a schedule of the revised classification relativities and a table amending the Manual. The revised classification relativities schedule is proposed to replace the classification relativities adopted by TDI in Commissioner's Order 96-1038 effective January 1, 1997. The table amending the Manual concerns the Expected Loss Rates and Discount Ratios. The revised table is proposed to replace Table II, pages ER-21 through ER-29 of the Manual. The petition requests that the proposed revised classification relativities be available for adoption by insurers immediately, but that their use be mandatory for all policies with an effective date on or after January 1, 1999. The petition requests that the revised table amending the Manual be made effective for workers' compensation policies with an effective date on or after January 1, 1999. Article 5.60(a) of the Texas Insurance Code authorizes the Commissioner to determine hazards by classes and fix classification relativities applicable to the payroll in each class for workers' compensation insurance. Article 5.60(d) provides that the Commissioner revise the classification system at least once every five years. The classification relativities currently in effect were based on experience data reflecting workers' compensation experience from policies with effective dates in 1991 through 1993. That data reflected experience subsequent to the Texas Workers' Compensation Reform Legislation (Reform Legislation) which became effective on January 1, 1991. The Reform Legislation has had a dramatic effect on workers' compensation experience due to the adoption of revised medical schedules, permanent and partial disability ratings, and increases in maximum weekly benefits payable to injured workers. The proposed classification relativities are based on the analysis of experience data from policies with effective dates in 1991 through 1995. In addition to changes in experience due to legislative changes, the staff's proposed classification relativities also reflect changes in experience that occur over time, due to such things as technological advances and improvement in safety programs. The indicated resulting relativities were initially balanced to the level of the current relativities through the application of off-balance factors. This provides for a revenue neutral set of relativities in relation to the current relativities. The staff proposes to limit changes in the classification relativities that have been balanced overall to the level of the current relativities to +25% and -25%. This would help to minimize possible rate shock due to large indicated changes in the relativities. The individual company rates currently on file with TDI are, on average, approximately 22% below the level of the current relativities. In addition, the application of schedule rating plans produces an average credit of almost 13% based on TDI's most recent information. This suggests that the level of premiums actually charged are approximately 32% below the level of the existing relativities, without considering other competitive tools available to insurers such as negotiated deductibles credits and negotiated experience modifications. The rating system in Texas is somewhat unique in that it does not include approved or promulgated loss costs, nor approved or advisory rates. Instead, the Texas rating system has classification relativities, which bear no necessary relationship to what insurers should charge, or are charging. However, people not familiar with the system frequently mistake the classification relativities for guideline rates and may also use them inappropriately to prepare cost comparisons with other jurisdictions. Such comparisons can place Texas at a competitive disadvantage in attracting new industry. Staff therefore proposes that all of the classification relativities be reduced by 30%. This reduction would produce numbers more in line with what is actually charged, and would maintain a known benchmark against which insurers could measure their own rate needs. This recommended change has no obvious affect on insurer pricing strategies. With the knowledge of the level of the classification relativities, insurers could adjust the factor applied to the classification relativities to produce adequate rates. Modifications to the classification relativities require concurrent changes in the table of Expected Loss Rates and Discount Ratios. The table is contained in the Manual as part of the uniform experience rating plan. The current Table II of the Manual concerning Experience Loss Rates and Discount Ratios was adopted on September 12, 1996 and became effective on January 1, 1997. The current expected loss rates are essentially based on the level of losses used to experience rate a policy effective on July 1, 1997. Staff proposes an adjustment to be more reflective of the level of losses that would be used to experience rate policies that would be effective in 1999. The Reform Legislation has had the effect of significantly reducing the indicated expected loss rates in relation to the current loss rates. Staff proposes to cap changes in the new expected loss rates to +25% and -25%. This would help minimize possible premium shock, which could otherwise occur based solely on the changes in the classification relativities, the expected loss rates, and the discount ratios. The Commissioner has jurisdiction of this matter pursuant to the Texas Insurance Code, Article 5.60 and 5.96. Copies of the full text of the staff petition and the proposed revised schedule and table 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 revised schedule and table, please contact Angie Arizpe at (512) 322-4147 (refer to Reference Number W-0798-17-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 Chief Clerk, P. O. Box 149104, MC 113-2A, Austin, Texas, 78714-9104. An additional copy of the comment should be submitted to Philip Presley, Chief Property and Casualty Actuary, P. O. Box 149104, MC 105-5F, Austin, Texas, 78714-9104. This notification is made pursuant to the Texas Insurance Code, Article 5.96, which exempts action taken under this article from the requirements of the Administrative Procedure Act (Government Code, Title 10, Chapter 2001). 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. TRD-9810550 Lynda H. Nesenholtz General Counsel and Chief Clerk Texas Department of Insurance Filed: July 2, 1998 Adopted Actions The Commissioner of Insurance, at a public hearing under Docket Number 2359 held at 9:00 a.m., July 1, 1998 in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas, adopted amendments proposed by Staff to the Texas Automobile Rules and Rating Manual (the Manual), Rule 75.C.1.a., involving surcharges under the Texas Driving Insurance Plan. Staff's petition (Reference Number A-0598-13-I) was published in the May 22, 1998 issue of the Texas Register (23 TexReg 5461-5462). This order changes the thresholds for assigning surcharge points for auto accidents by amending Manual Rule 75.C.1.a., Texas Driving Insurance Plan. Specifically, bodily injury will no longer be a factor, and the property damage threshold is changed from $500 to $1000. Manual Rule 75.C.1.a. (Rule 75) currently requires assignment of a surcharge point to an insured who has an at-fault auto accident resulting in any bodily injury. An example would be minimal expenses for a doctor's examination for very minor injuries resulting from an auto accident. It is a matter of concern that those minimal expenses significantly affect the insured's premiums. There would be many practical problems in establishing a specific dollar amount threshold for bodily injury, as explained in some of the comments filed in this proceeding. To avoid the above problems, bodily injury (including death) is hereby eliminated as a factor in regard to surcharges. Generally speaking, an accident that results in serious bodily injury will also result in property damage exceeding the $1000 threshold, resulting in a surcharge. Currently Rule 75 requires assignment of a surcharge point to an insured who has an at-fault auto accident resulting in property damage in excess of $500, regardless of whether anyone is injured. The rule formerly provided for a property damage threshold of $200 for accidents occurring prior to February 1, 1985. Since 1985, repair costs have increased significantly and the distribution of automobiles on the road has changed dramatically. Consequently, very minor damage can easily exceed $500. Therefore, the $500 property damage threshold is changed to $1000. This amount is supported by data and methodology explained in Staff's petition. Rule 75 requires assignment of a surcharge point when there is an auto accident resulting in property damage in excess of $500, without further description. This order adopts new wording in Rule 75.C.1.a., to specify that the property damage amount is to be established by claims paid in regard to the accident. The new wording also specifies that claims paid are determined according to requirements for loss reporting under the Texas Private Passenger Automobile Statistical Plan. This new standard should be more readily ascertainable than the total amount of damage caused by the at-fault driver, resulting in more consistency in determining whether the surcharge is applicable in any given case. The amendments as adopted by the Commissioner of Insurance are shown in an exhibit on file with the Chief Clerk under Reference Number A-0598-13-I, which is incorporated by reference into Commissioner's Order Number 98-0795. The Commissioner of Insurance has jurisdiction over this matter pursuant to the Insurance Code, Articles 5.10, 5.96, 5.98, and 5.101. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Government Code, Chapter 2001 (Administrative Procedure Act). Consistent with the Insurance Code, Article 5.96(h), the Department will notify all insurers writing automobile insurance of this adoption by letter summarizing the Commissioner's action. IT IS THEREFORE THE ORDER of the Commissioner of Insurance that the Manual is amended as described herein, and the amendments are adopted to become effective on September 1, 1998. This agency hereby certifies that the amendment as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. TRD-9810644 Lynda H. Nesenholtz General Counsel and Chief Clerk Texas Department of Insurance Filed: July 6, 1998 The Commissioner of Insurance, at a public hearing under Docket Number 2363 held at 9:00 a.m., July 1, 1998 in Room 100 of the William P. Hobby Jr. State Office Building, 333 Guadalupe Street in Austin, Texas, adopted amendments proposed by the Texas Insurance Organization (TIO) to the Texas Automobile Rules and Rating Manual (the Manual) and the Texas Standard Provisions for Automobile Policies (the Standard Provisions) to eliminate the use of pre-printed dates in various forms. TIO's petition (Reference Number A-0598-14) was published in the May 29, 1998 issue of the Texas Register (23 TexReg 5739). Many of the prescribed forms for insuring automobiles utilize pre-printing of the century so that the year can be completed by supplying the last two digits. These forms have places where dates are to be supplied and they use "19__." There is a need to change these prescribed forms because of the approaching turn of the century. This order adopts the TIO proposal and prescribes a blank for the entire year as "____." The prescribed forms (endorsements in the Manual except where otherwise indicated) being amended are the following: Endorsement 4M. Mobilowners Policy - Limited Period Collision (to become 4M-1.) Endorsement 29A. Experience Modification (to become 29B.) Endorsement 29C. Experience Modification Change (to become 29D.) Endorsement TE 99 24A - Experience Modification (to become TE 99 24B.) Endorsement TE 99 25A - Experience Modification Change (to become TE 99 25B) Mobilowners Policy Declarations (in the Standard Provisions). The amendments as adopted by the Commissioner of Insurance are shown in exhibits on file with the Chief Clerk under Reference Number A-0598-14, which are incorporated by reference into Commissioner's Order Number 98-0796. The Commissioner of Insurance has jurisdiction over this matter pursuant to the Insurance Code, Articles 5.06, 5.10, 5.96, and 5.98. This notification is made pursuant to the Insurance Code, Article 5.96, which exempts it from the requirements of the Government Code, Chapter 2001 (Administrative Procedure Act). Consistent with the Insurance Code, Article 5.96(h), the Department will notify all insurers writing automobile insurance of this adoption by letter summarizing the Commissioner's action. IT IS THEREFORE THE ORDER of the Commissioner of Insurance that the Manual and the Standard Provisions are amended as described herein, and the amendments are adopted to become effective for policies issued on and after September 1, 1998. This agency hereby certifies that the amendment as adopted has been reviewed by legal counsel and found to be a valid exercise of the agency's authority. TRD-9810645 Lynda H. Nesenholtz General Counsel and Chief Clerk Texas Department of Insurance Filed: July 6, 1998