The House Committee on Insurance met on March 14th to take up the following bills in order: HB 1553 (Ashby), HB 1900 (Smithee), HB 1901 (Smithee), HB 1902 (Smithee), HB 1903 (Smithee), HB 916 (Ordaz), HB 1040 (Paul), HB 1706 (Perez), HB 1337 (Hull), and HB 1239 (Oliverson). All new bills were left pending. The committee also voted out previously considered bills. An archive video of the hearing can be found here.
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Vote Outs
- CSHB 150 (Johnson, Julie) voted out to full House (7-2)
- Chair Oliverson – CS adds definition of claimant under HB 150
- Clarifies that 26.01 of B&C Code still prohibits oral releases, releases for exchange of money must be in separate written agreement
- Paul no Hull no
- HB 625 (Harris, Cody) voted out to full House (9-0)
- Chair Oliverson – Rep. Harris has agreed to accept an amendment that would limit cost-sharing to harmonize with legislature’s perspective on how physical therapy can be accessed directly without referral
- HB 290 (Oliverson) voted out to full House (9-0)
- Chair Oliverson – Expands MEWAs to be more accessible, sole providers can access
Opening Comments
- Chair Oliverson – Will take one bill and then do vote outs
HB 1553 (Ashby) Relating to the definition of amusement ride for purposes of amusement ride regulation.
- Ashby – “Free Willy” bill, died on Senate Local
- Addresses burdensome costs for summer camps in the state operating smaller water parks, carves out vinyl water slides from other amusement rides
HB 1553 left pending
HB 1900 (Smithee) Relating to notice of nonrenewal of a property and casualty insurance policy.
- Smithee – Currently have a 30-day nonrenewal period, homeowners need to obtain other insurance during this period & often find a company that requires improvements before writing policies
- HB 1900 increases nonrenewal period to 60 days, in line with TDI recommendation; industry will have some heartburn with this, TX already has 60 days on commercial insurance
- Until 2003, TX had mandated forms on homeowner’s insurance
- Looked at other states, some have 30 days, others are much longer at 45, 60, etc.
- Auto is likely not as critical, but makes sense to give consumers 60 days
Jay Thompson, Association of Fire & Casualty Companies of Texas – Opposed
- 3 different sub chapter in the Insurance Code dealing with nonrenewal, Commercial section is 60 days notice
- Don’t oppose 60 days for governmental entities so long as it is limited commercial
- Understand argument for homeowners, but TX has form freedom
- Auto is highly competitive and much easier to shop through compared to this past; reprogramming to put 60 days into system is significant
- If you do this, requesting at a minimum some time to do the rate reprograming, recommend keeping auto at 30 days
- Chair Oliverson – 30 days is a tight window for a homeowner’s policy, especially for nonrenewal on notice of defect; cites person who was nonrenewed due to remodeling their home; 30 days is an insufficient length of notice to correct some aspects of the property
- There are restrictions in some instances, e.g. 3 or more weather instances in some areas
- Companies typically give people 6 months or longer to make repairs
- Have seen some blips recently due to insolvencies
- Chair Oliverson – What is the rate of turnover in the home insurance industry?
- Percentage of nonrenewal is relatively small, though do see some companies that need to downsize their business
- Companies have been changing policy forms to account for market shifts, bill last session required notice of renewal with policy changes
- Governmental entities are commercial policies and those are more time consuming
Jon Schnautz, National Association of Mutual Insurance Companies – Opposed
- Almost every state has a notice timeframe for nonrenewal, about half are at 40 for home and auto
- Most states would probably treat governmental entities as commercial
- 11 more states are either at 45/45 or 45/30, no reason home and auto have to be the same timeframe
- Only 4 states as long as 60 for both home and auto
- Texas has a fairly competitive market for both home and auto, homeowner’s market is getting tougher, but not unusual around the country
- Some flexibility on the effective date, moving it out further than January would be helpful
- Chair Oliverson – Is the major issue from insurance the timeline for implementation? IS there a dollar cost to that? Another reason this would be bad?
- Further out the timeline is, the sooner you require a company to make a decision
- Nonrenewals are relatively rare now,
- Is a more complicated process than the computer changing 30 to 60
- Chair Oliverson – In auto, what are the reasons for nonrenewal? More related to driver than vehicle?
- It could be, one example is theft issues like Kia and Hyundai models
- Chair Oliverson – Would a catalytic convertor on a Toyota be an issue?
- It could be
- Paul – What are examples of homeowners getting kicked out?
- Company may make decision on where it’s writing
- Paul – Like on the coast?
- Possible, also in wildfire areas
- Paul – So the insurance might change, can see on the coast
- Nonrenewal is a binary choice, can see many variations that do not involve nonrenewal
Ware Wendell, Texas Watch – For
- Always advising Texans to shop the market, but has become difficult to shop the market
- Need continuity of coverage, only asking for a little more time and giving consumer the same rights as commercial owners; good for consumer, good for bank holding note
- Compared to rest of country, TX cares more about property rights
Scott Kibby, American Property Casualty Insurance Association – Opposed
- Appreciate intent o help consumers, current process works well, allows consumer to find policy and insurers to write them
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – Opposed
- There are a lot of resources out there to shop the market, disagree with standardizing nonrenewal timelines
- There are times when the only technique available to an auto insurer is to non-renew and then move to mutual; if you get multiple tickets in sequence, would be a significant underwriting issue the company couldn’t consider with 60 days
Rep. Smithee closes
- Smithee – 60 days may be an inconvenience for the industry, but giving homeowners the same protection we give commercial
- Chair Oliverson – Sounds like a little bit of a dichotomy between homeowner and auto insurance
- Smithee – There is, need is more pressing for homeowners, but many companies encourage bundling homeowner’s and auto and could lead to problems with different dates
HB 1900 left pending
HB 1901 (Smithee) Relating to the filing of an annual audit report by a title insurance company, title insurance agent, or direct operation.
- Smithee – Currently, title insurers have to file annual audit by certified mail, HB 1901 provides that it can be filed with the department generally; would allow TDI to develop an online process
- Can probably go to L&C
HB 1901 left pending
HB 1902 (Smithee) Relating to disclosure requirements for health care provider directories maintained by certain health benefit plan issuers.
- Smithee – Have had issues with providers in hospitals not being in your plan, if you go in for surgery in your network, anesthesiologist may not be in your network & you get a balance bill
- Previous bill provided for a health care provider network, but was limited to certain providers, also seeing this issue with other providers in the setting
- HB 1902 adds the word “provider” to incorporate any facility-based provider
- Chair Oliverson – Good bill, fits into protection passed previously; particularly like the last line that specifies any provider identified by commissioner rule
- Smithee – Also a recommendation of TDI in their report
HB 1902 left pending
HB 1903 (Smithee) Relating to capital stock requirements for certain insurance companies.
- Smithee – Current law requires that company pays for at least 50% of authorized shares
- TDI has recommended changing this language to pay total amount of at least $250k for the shares
- In TX For a P&C company now you have to have $2.5m
- Makes law more consistent, doesn’t seem to be controversial
Rep. Smithee closes
- Chair Oliverson – Great that you’ve taken these biennial recommendations bills
HB 1903 left pending
HB 916 (Ordaz) Relating to health benefit plan coverage of prescription contraceptive drugs.
- Ordaz – Allows a person to receive a 12 month supply of prescription contraceptive drugs in one visit
- Consistent, reliable access to birth control reduces incidence of unintended pregnancies by 30%
- Pharmacy access can be difficult in some counties, difficult to access contraceptives
- Cost of giving birth in TX is about $17k, affordable option is contraceptives
- Patients can consult with doctors for type and duration of contraceptive, includes 3-month trial period
- Chair Oliverson – Appreciate you taking this on, have 3 registered to testify, none against
Kristen Lenau, Texas Women’s Health Care Coalition – For
- Priority of TWHCC
- Bill requires 3-month prescription for new prescriptions, then patients can graduate to 12-month plan
- No significant impact to state budgets, LBB noted there would be cost savings due to lessened births under Medicaid
- Already provide 12 month supply under Health Texas Women
- Ready & consistent access to birth control is beneficial
- Research has shown that dispensing larger numbers of pills is associated with medication compliance
Dr. Scott Simpson, Texas Medical Association, Texas Chapter of the American College of OBGYN – For
- When thinking about what has done the most good for the greatest number of people, contraception is at the top of the list; helps people with family planning, has health benefits
- Will help women with medication compliance, consistent use helps women space pregnancies and leads to better outcomes for births, ability to delay and space births is important to women’s social & economic advancement
- 12 month supply will have upfront cost, but will be offset by reductions in maternity and newborn care costs
- Chair Oliverson – After the trial period, what is the likelihood the prescription changes
- It would be uncommon
- Chair Oliverson – I think I hear you saying it doesn’t really happen? They continue it year-to-year until they have a different family planning outlook
- Yes; also important to note that bill doesn’t require the 12 months, only allows it
Carolena Cogdill, Haven Health Clinics – For
- In Panhandle, formidable barriers exist in patient access to contraception; large number of teen pregnancies in Potter County
- Bill would allow patients to have contraception on hand
- Pharmacy access and several hour travel time is problematic for patients in rural areas
- 1 year continuation rates are higher with a 12 month supply of contraception
Rep. Ordaz closes
- Ordaz – No fiscal note attached
HB 916 left pending
HB 1040 (Paul) Relating to the authority of entities regulated by the Texas Department of Insurance to conduct business electronically.
- Paul – Died at the last second on Local in the Senate
- Working on a CS that will be coming out later
- Will make sure it is easier for people to have paperless billing & paperwork with insurance, will make paperless an opt-out rather than an opt-in
- Currently a long process of forms to fill out it, would make it easier to do
- Would still get a letter for nonrenewal
- A Johnson – CS not here yet, so not laying the CS out at this time
Jon Schnautz, National Association of Mutual Insurance Companies – For
- Bill passed House unanimously last session, still a good idea
- Bill came about because on member wanted to offer fully online product, but could only do this if the person filled out paperwork
- Aware of concerns with the bill
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – For
- Bill is a good step in direction of modernization of insurance product
HB 1040 left pending
HB 1706 (Perez) Relating to the right of an insured to enter into a contract with a public insurance adjuster.
- CS laid out
- Perez – Seeks to assert policyholder’s right to hire public adjuster, used in situations like purchasing surplus lines
- Surplus lines are not regulated by TDI and some policies are restricting ability to hire public adjuster, HB 1706 would affirm the right to hire a public adjuster if desired under any policy in TX
- CS cleans up bill language to ensure bill applies to all insurance markets
Art Jansen, Jansen/Adjusters International – For
- Have seen certain carriers in FL and LA put restrictions on public adjusters in policies, recently saw this happen with 3 clients in Harris County
- Anti-public adjuster endorsement will be devastating to policyholders, will need to hire a lawyer instead and will be more costly and take more time
- Endorsement drastically reduces policyholder options
- Cain – They’re creating policies that prohibit policyholders from hiring public adjusters?
- Yes
- Cain – happening in other states?
- Florida, Louisiana, and others
- Cain – Feedback in other states? Are people okay with it?
- People are devastated
- Clients in TX weren’t aware of the endorsement until they filed a claim
- Cain – Is this new to the industry?
- Brand new
- Cain – Sounds like a trend that needs to stop
Jim Beneke, Texas Association of Public Insurance Adjusters – For
- Similar to being audited by IRS and not being able to hire an accountant, or a lawyer when being sued
- Growing trend in property insurance industry to include anti-public adjuster endorsements in homeowner and commercial policies, often no indication that the endorsement was part of the policy
- Especially troublesome as burden to prove policy exists is on the property owner; consumers are giving up right to hire only representation available aside from lawyers
- Here to make sure consumer right to hire a public adjuster is protected; don’t have to, but should be allowed to hire public adjuster
- May not know how many endorsements exist until it is too late
- National Association of Public Insurance Adjusters has issued a whitepaper, clear indication it is a widespread problem
- Endorsements are anti-competitive and arguably anti-trust
Ware Wendell, Texas Watch – For
- Very strong consumer legislation, preserves consumer choice
- Insurance contracts are contracts of adhesion, don’t have ability to negotiate terms; public adjusters help and advocate for consumers, consumers should have right to advocate
- Central tenet of capitalism is the freedom to contract
Jon Schnautz, National Association of Mutual Insurance Companies – On
- As we understood bill originally it was for surplus lines, non-surplus lines would have to go through TDI for approval anyways
- Other concern is with way the bill expresses the prohibition, phrased in terms of right to contract with adjuster and refers to insurance impeding right; no other provision in code that phrases this as a right
- Other way to do this is to say an insurance adjuster cannot prohibit
CS withdrawn, HB 1706 left pending
Committee recessed for & returned from the House Floor
HB 1337 (Hull) Relating to step therapy protocols required by health benefit plans for coverage of prescription drugs for serious mental illnesses.
- Hull – Defines Serious & Persistent Mental Illness (SMI), incl. schizophrenia, bipolar disorder, etc.
- Discontinuing medications can sometimes lead to relapse, people with SMI can see significant side effects and could lead to larger ER visits, homelessness, etc.
- Step Therapy sometimes obligates individuals with SMI to try & fail multiple drugs, sometimes even ones they’ve already failed, creates access barriers
- HB 1337 reflects compromise achieved late last session, didn’t reach this for consideration by the full House; identical to legislation from 2021
- Under HB 1337, those with SMI can only be obligated to try less expensive alternative medication once
Dr. Tony Aventa, Texas Medical Association – For
- Sometimes PAs can include admin impediments, sometimes called Fail First or Step Therapy, can impede access; might have to go through 3 or 4 inferior medications to get to one I would’ve prescribed
- Delay by PA can lead to hospitalization or severe symptoms
- HB 1337 limits Step Therapy on initial diagnosis to one medication before receiving medication doctor prescribed, also allows for trial of generic once per year
Greg Hansch, NAMI Texas – For
- Without effective treatment life with mental illness is fraught with challenges, set backs or disruption in treatment can lead to dramatically negative consequences
- HB 1337 can empower long-term recovery, promote quality of life, and prevent costly adverse outcomes
- Understand that new medications come onto market that insurers will want to drive people towards, but want to keep people stable
- Agree with provision for generic trial once per year
Blake Hutson, Texas Association of Health Plans – For
- HB 1337 addresses the problem
HB 1337 left pending
HB 1239 (Oliverson) Relating to consideration by insurers of certain criteria for ratemaking.
- CS laid out
- Oliverson – HB 1239 considers a prohibition on ESG criteria for ratemaking, adds ESG to list of prohibited ratemaking practices
- Received input from variety of insurance stakeholders, made changes like applicability chapter that clarifies bill doesn’t apply when insurance not engaged in ratemaking function, added private cause of action, and changed criteria list
- Instead of using terms like “ESG” tried to be specific about what is talked about, put an exemption in to allow for consideration of environmental factors in ratemaking when actuarially valid, e.g. like poor safety record that could affect price of premium
- Have discussed with NCOIL, issue that is being considered across all 50 states, not a lot of gray area on this
- Would only be applicable to policies and coverage in Texas, respecting Dodd-Frank Act
- Not uncommon for one state’s factors to differ considerably from others, insurance companies are used to navigating this, e.g. TX is the only state requiring usage of County Mutual Insurance Agency for rates for moving violations
- HB 1239 states Texas’ position and makes clear it won’t happen in the state, but not saying how to conduct business in other states and not regulating other functions
Jennifer Cawley, Texas Association of Life & Health Insurers – Opposed
- Opposed on technical reasons, would like to work further on applicability language in the CS
- Insurance definition in the CS includes Life & Health insurers, some terms aren’t defined like customer ESG score or DEI factors; life & health insurers don’t typically take this into account
- Aware of discussions at NCOIL, further leads me to believe we’re not talking about life insurers
- From the CS, depending on “engaged in” or “has dealings with” is defined, it could prevent life insurer from underwriting based on an individual’s occupation
- Paul – Article in WSJ talked about life insurers using algorithms to set rates & risk, any way to know what those algorithms are? How would we know if these policies are in the algorithms? If you really are using these policies or not?
- Already prohibited under current law to use factors such as race, religion, national origin, in underwriting
- This bill would give regulators more power and ability to look into those factors insurance companies use
- Paul – Understand concern about unintended consequences, just wanted to verify how we would see if companies would verify data
- It is a private market, all companies use legal underwriting factors
- Julie Johnson – Isn’t sex/gender a key factor life insurers use, would this bill prohibit you from considering that?
- It’s unclear because “social” isn’t defined
- Julie Johnson – Seems like state is trying to tell private companies how to conduct business, bill would further restrict how insurance companies operate, telling private market that state ill put new set of restrictions on it; highlights how USAA only writes for military
- I suppose, not sure of intent, but could be read that way
- Caroline Harris – When writing insurance policies, I know some banks do give people a personal ESG score, is that something you’ve looked at?
- Not aware, have heard of them, but not familiar with them, not talked about in our industry
- Life insurance concerned about mortality, don’t care about the why
- Caroline Harris – Without this bill would you be able to look at that info?
- I suppose, if we wanted to and it actually applied to underwriting
- Not looking for reasons to not approve policies or life insurance
- Chair Oliverson – How many life insurance companies are publicly traded?
- Don’t know
- Chair Oliverson – But a publicly traded company could consider this; real problem in the financial services sector, groups come in and sue shares to force company to engage in nonfiduciary business practice; have seen this cause damage in the financial services sector
- Chair Oliverson – Happy to work with you, but want to be clear if life insurers want to be out of bill entirely
- Life insurers do underwrite, some of this may be confusion in wording
- Chair Oliverson – Talking about criteria that are not actuarially valid, not in best interest of industry, certainly discriminatory
- Not aware of life insurers wading into those waters
- Chair Oliverson – But there are commercial insurers who do this, shareholder proposals adopted or proposed
- Have seen a bill by Sen. Hughes bill on shareholder activism, have been working with him and happy to share language
- A Johnson – Are you concerned the bill could keep you from considering environmental risk?
- Language could be tightened o it doesn’t hinder our ability to underwrite
- Chair Oliverson – Not talking about actuarially valid mechanisms, intent of bill is clear that we’re talking about non actuarially valid reasons
- Exception for factors that have a material financial risk is only in one section, would be helpful if it was broader
Paul Martin, Reinsurance Association of America – Opposed
- Did not have position on introduced bill, opposed to the CS
- Same position on pro- and anti- ESG bills, reinsurances should be able to operate and manage book of risk without interference
- Concerned with language relating to decisions to issue coverage; capacity issues go beyond policy-by-policy basis
- Climate change is often viewed from perspective of weather, if there are changing weather factors need to factor that in; language needs to be fleshed out to give latitude to companies to consider this
- There are reasons that reinsurers need to know if companies are insuring firearms, fossil fuels, etc. and market factors that may necessitate doing less business in certain sectors
- Chair Oliverson – Had an electric coop come to office and say that Swiss Re denied coverage due to fossil fuels used in generation, had to seek other reinsurance at higher rates
- Swiss Re is not a member
- Do hear anecdotal stories from time to time, find that ESG may be a factor, but not the only factor
- Chair Oliverson – You would agree that making decisions on policy about not liking method of generation is not actuarially sound?
- Could be actuarially sound, goes back to whether there is a reason
- Chair Oliverson – You know there isn’t one, not as a blanket policy
- Will need to find a way to provide insurance as the energy market evolves
- Chair Oliverson – A whole other problem we have in this state on what methods are reliable and not
- When grid goes down, our companies pay those claims
- Chair Oliverson – If we were 100% renewable would happen more often
- Paul – Is it fair that someone would pay a different rate based on political thought?
- Don’t have objection on the ESG score part
- It is a capacity and aggregation issue, only so much money in the system, needs to be allocated
- Need to make sure there is a plan in place to allocate capital correctly in terms of what is coming down the pipe
- A Johnson – You indicated one of the big factors is weather-related activity, would you take that into consideration in terms of what I might pay in a premium?
- Reinsurers certainly would look at overall risk
- A Johnson – And you don’t care what that is, e.g. if Texas restricted renewables would you factor that in to rates, etc.
- Function of where we think costs will be, industry would certainly look at those
- A Johnson – Fair to say you also don’t want state to implement policies that impact your ability to write
- Yes, take some position on pro- and anti-ESG bills
Lee Ann Alexander, American Property Casualty Insurance Association – Opposed
- Opposed to bill and CS
- APCIA feels strongly that insurance companies be allowed to use actuarially sound factors
- May be a bit of a disconnect, hear what Chair Oliverson and others are saying, that you don’t want irrelevant factors playing into decisions, but CS has unintended consequences & can impact coverage underwriting, e.g. asking what business someone is in does have impact on risk, O&G is more risky, expertise of company is a factor, etc.
- Bill might affect ability o consider risk and claims history of O&G companies
- A Johnson – On timber dealings, would language under bill not allow you to take into consideration the physical aspects of regular transport trucks with safety features versus logging trucks?
- Way I read the bill, it wouldn’t allow this, many factors
- Bill restricts taking account the differences and can’t even ask if the person is in the logging industry
- Caroline Harris – How any members have ESG scores? Aware of any that do?
- Not aware of any
- Every time I’ve heard of a member, e.g. Swiss Re, I’ve checked into it and found that how it is reported usually is not the full story
- ESG scores that a company may have is separate from how you look at insuring companies
- This bill seems to focus on something different, which is can we look at what a business does when writing policies; investment is a different thing as well
- This bill affects how we do business, insurers need to prove why one rate is justified over another
- Caroline Harris – Does your Association do education on ESG?
- Answer is probably yes, discussions at the National level have generated discussions throughout organizations; have had lengthy discussions with members and legislators about impact of bills like this
- Did submit language to the original filed bill that could’ve fixed a lot of these
- Don’t educate, but have had mutual conversations; caught the industry by storm, no one was prepared for how conversation hit the industry
- Caroline Harris – You had cohosted events in 2021 on ESG and long term effects
- Have had meetings and seminars, but not educating, more discussing how pro- or anti-ESG legislation can impact industry and take away tools
- Don’t like policy that would penalize for writing O&G either
- Julie Johnson – Seems like there is a distinction between underwriting a business for what it does and what its core operation is, being able to factor that risk in versus core policy, is that a fair statement?
- Sounds fair, there is a difference between using inappropriate characteristics in the business of insurance and appropriate characteristic; fair to ask someone’s business and basing price off of this
- Julie Johnson – As insurance, important to be able to understand and factor in the actual business of the policyholder, e.g. logging industry
- Correct, equally fair to ask about grocery delivery, florist delivery, logging, etc.; factors of operations are fair to ask about
- Bill is saying you can’t ask those questions of these specific industries, which may bizarrely negatively impact the industries the bill is trying to protect; if you can’t determine the risk it makes it more difficult to offer the product
- Many reasons why you might not write a certain industry, need to preserve those tools
- Paul – Saying we don’t want you to punish one company based on political factors; do you think that’s right?
- I think there is a way to do that, without the way it’s drafted in this bill; legitimate concern and public policy decision for you to make
- Paul – Getting into the weeds, but we’re talking about how people are discriminated against based on how the business is operated
- Reason for the weeds is because bill does go beyond that as it is drafted, happy to work on this and had language that could be added into the bill to address this
- Paul – But you’d be okay with that?
- Can’t answer for members
- No one should use unfairly discriminatory factors; if you want to add to this list, there are ways to draft this more tightly so it doesn’t have unintended consequences
- Chair Oliverson – Not coming to the same conclusion on language, if you had two trucks, one carrying timber and one carrying water pipe, you shouldn’t be able to price the timber truck differently than the water pipe; not saying you can’t consider safety factors, loss experience in industry, etc.
- Chair Oliverson – Section 5 says you can’t look at this one thing and make policy decisions on that; would it be appropriate to price a timber truck differently from a water pipe truck with all other factors the same?
- Language we submitted would’ve added a clause that allows for things relative to the rate
- NCI has codes
- Chair Oliverson – Which is a convenient way for bucketing the risk, but risk factors are the operation of the industry, injury risk, severity, etc.
- Language restricting consideration of industry the policyholder is in makes you unable to ask about this
- Worker’s comp might be on average more expensive for timber industry
- Chair Oliverson – I don’t think if this were to pass and you had to justify decision, you could respond with stats of and factors of the operation of the timber industry, not because it is the timber industry
- Language we submitted does exactly what you’re saying and raises our comfort level
- Chair Oliverson – Happy to work with you, but as I’m reading the section doesn’t see how it prohibits you
- Concerned that this is not drafted tightly enough to differentiate between goal and what industry does
- Bill can suffer from an unfortunate reading
- Chair Oliverson – Happy to clarify
- Which is why we submitted suggestions
- Chair Oliverson – You did, but one of the suggestions allowed for internal ESG ratings
- IF you’re willing to look back at sections before that, could be good add ons; simply says that you can use factors when they are actuarially relevant, e.g. chainsaw usage, heavy equipment, severity of injuries, lead to inherently dangerous line of work
- Chair Oliverson – Totally get that and want to work with you, bill doesn’t do anything on this, but can’t use industry as a criteria, use the safety record, etc.
- TX has a very competitive marketplace, people want to write insurance in a way that best serves customers; market works well
- Hopes that whatever comes out of this legislative session doesn’t end up causing harm to the marketplace, concerned that there are some ways to read this that result in a less vibrant market
- A Johnson – If I am lawyer reading this statue where it says you can’t consider O&G involvement, and a trucker is hauling chemicals, versus timber, versus tractor trailer, etc., if this goes into application as is you wouldn’t be able to question timber and chemicals, so other truck drivers would pay higher premiums
- You will be penalized, bill says you may not consider whether customer is engaged or deals with these industries, so truck driver would pay premiums comparable to the higher risk industries
Jon Schnautz, National Association of Mutual Insurance Companies – Opposed
- Opposed to filed bill
- Price of insurance ought to vary with risk; CT bill would impose 5% surcharge for policy holders in the O&G industry, principal of why we oppose that bill is same reason why we have concerns with this bill
- Trying to impose something beyond the actuarial implications of the risk, application of this bill is the opposite, but principle is the same
- Law already prohibits grading that has no basis in sound actuarial principles or has no relation to risk and loss
- If bill is trying to reinforce this concept, can get to a place we’re comfortable with that
- Bill doesn’t make any attempt to define ESG, words conceptually are pretty broad
- CS does include a material risk carveout, but it is limited to greenhouse gas and climate change and this implies there is no carveout elsewhere in the bill
- CS applies bill to underwriting, underwriting is whether to accept risk, grading is how you price it
- For an underwriting provision to be put in for certain industries, you’re almost elevating these considerations to prohibition in law like race, religion, etc.; opens question of what that means, e.g. would a company with no O&G experience be required to underwrite O&G
Jay Thompson, Association of Fire & Casualty Companies of Texas – Opposed
- Opposed to filed bill and the CS
- Not opposed to Chair Oliverson’s description of the bill, but the actuarially justified language is not in the bill; intent language will likely not be considered by the court when interpreting this
- Courts will look to language in the bill; have submitted language that tries to take the concept describe and draft it similar to language in other code about prohibited discrimination
- Bill also refers to companies like non-profit legal services organizations, risk retention, etc. that either don’t exist or are preempted by federal law
- In description bill was described as prohibiting solely based on industry, but bill does not use that word
- ESG and DEI not defined
- A Johnson – If you were writing a policy for a company that is insured, would you take sexual harassment classes or claims into consideration?
- Yes, would take that into consideration in rate and decision to issue coverage
- A Johnson – So your concern is this may be caught in bill
- Yes, I think there are some fixes
- Need the actuarially justified language in the law
- WSJ article referenced earlier was about AI calculations
- Companies want to sell to good risk, political position doesn’t matter
- Paul – Just trying to get at if TDI could look at that
- Smithee had a bill saying you can’t cancel based on political stance, can’t non-renew based on political position
- May be one offs
- Paul – On the financial side, ESG would be used against individuals all the time, like in buying a car; don’t want discrimination on ESG score, and don’t know who is making these scores
- That’s true, all over the place on who does the score and who does not
- If the push is in the commercial marketplace, should define that
- Have presented language and open to working on it
- Fact that language appears in one section of the code and not in another, will run into argument that legislation didn’t intend for it to apply broadly
Tom Glass, Texas Constitutional Enforcement – For
- In favor of filed bill and the CS
- Started focusing on great reset and ESG, realized effort by World Economic Forum to control money through ESG is a direct assault on Texas rights
- Great reset is trying to make all political power in the hands of the elites; supporting anything that resists using financial power for the elites
- Support making insurance decisions based on actuarial principles, should risk getting it wrong in order to get it right
Beaman Floyd, Texas Coalition for Affordable Insurance Solutions – Opposed
- Opposed to filed bill and CS
- Other witnesses have spoken on everything
- One issue not yet addressed is personal lines & bill has strong elements of commercial language
- Look forward to working with Chair Oliverson on language
Brent Bennett, Texas Public Policy Foundation – For
- Supports bill as filed
- Many parallels in trying to define actuarial for insurance with defining what is fiduciary on the financial side
- Have heard of insurance companies getting out of energy industry, premiums going up
- Have heard anecdotally from several companies in Texas
- Swiss Re and Munich Re both adopted policies that they will not invest or insure O&G companies
- Have seen about 15% of companies globally committed to moving to net zero emissions
- Texas statute also has provisions prohibiting boycotting practices, should also consider enforcing those against companies in this movement
- Paul – You can already tell us where companies are being penalized based on industry & not for actuarial reasons?
- Not in a position to understand what is actuarial or not
- Can send report that identifies 50 companies with a policy
Chair Oliverson closes
- Chair Oliverson – Interesting if you go to net zero insurers alliance, have set out aggressive criteria to change underwriting practices; caught this in time before it spreads like in the financial services sector
- Willing to continue working with stakeholders to make bill clear
- Committed to the cause, have every right to prohibit ESG
CS withdrawn, HB 1239 left pending