SWAF 2011 Legislative Update Panelists David Durden, Texas Department of Insurance Joe Woods, PCIA Bo Gilbert, USAA Jay Thompson, AFACT, Thompson Coe June 10,2011 Austin, Texas

INTRODUCTION Numerous Difficult Issues Confronted the 2011 Legislature Numerous Difficult Issues Confronted the 2011 Legislature –Budget Deficit –Public School Finance –Funding for Hurricanes after Ike –Education –Health Insurance and Health Care –Immigration

TDI Sunset Legislation HB 1951-Continuation of TDI HB 1951-Continuation of TDI –9 Issues Identified in Sunset Process Issue 1: Rate Regulation for Homeowners Lacks Clarity, Predictability & Transparency Issue 1: Rate Regulation for Homeowners Lacks Clarity, Predictability & Transparency Issue 9: State has a Continuing Need for the TDI Issue 9: State has a Continuing Need for the TDI Senate Amendments Senate Amendments House Amendments House Amendments

Issues Discussed as Amendments to Insurance Sunset –Prior Approval for Homeowners rates –Limit use of rate differences in rating territories –Ban the use of credit scoring –Designated Driver exclusions –Appraisal Clauses in Property Policies –Require standardized homeowners policies –Data Mining

Other Issues Insurance Sunset Other amendments Other amendments –Regulate Silent PPO or PPO Networks –Rescission of Health policies

Division of Workers Compensation Sunset HB 2605 –extended until 2017 HB 2605 –extended until 2017 –Medical Disputes –Complaint Process –Medical Examinations –Designated Doctor Certifications –Contested Supplemental Income Benefits –Medical Quality Review –Other

Other Sunset OFFICE OF PUBLIC INSURANCE COUNSEL SB 647 SB 647 Continued for 12 years-2023 Continued for 12 years-2023 No significant changes No significant changes OFFICE OF INJURED EMPLOYEE COUNSEL HB 1774 Continued until 2017

Property Casualty Insurance Issues TWIA Funding TWIA Funding Tort Reform Issues Tort Reform Issues Auto Insurance Auto Insurance Data Mining Data Mining Rate Regulation Rate Regulation

Life & Annuity Insurance Issues Guaranty Association Model Update— SB 567 Guaranty Association Model Update— SB 567 Annuity Free Look period- HB 1032 Annuity Free Look period- HB 1032 Prepaid Funeral - HB 3004, SB 579, and HB 2277 Prepaid Funeral - HB 3004, SB 579, and HB 2277 Agent CE for annuities & Medicare Supp-HB 2154 Agent CE for annuities & Medicare Supp-HB 2154 Group Life Coverage eligibility of certain Dependents- HB 2172 Group Life Coverage eligibility of certain Dependents- HB 2172 Suitability Of Annuities— HB 2277 Suitability Of Annuities— HB 2277 Life Settlements Regulation-HB 2277 Life Settlements Regulation-HB 2277 Exchanges of Annuities or Life Policies-HB 2277 Exchanges of Annuities or Life Policies-HB 2277

TEXAS WINDSTORM INSURANCE ISSUES HB 272 HB 272 –Funding of future claims –Governance –Claims Handling Issues –Rates and Building Codes

Historical Hurricane Losses TWIA Texas Windstorm Insurance Association Losses Texas Windstorm Insurance Association Losses –Hurricane Ike---$2.3B ???B 2008 Up from –Original estimated $2.1B –Hurricane Dolly--$200 M 2008 –Hurricane Rita--$180 M2005 –Hurricane Alicia--$157M 1983

HB 4409 TWIA Funding TWIA funds and CRTF TWIA funds and CRTF $1B Class 1 Bonds repaid by TWIA $1B Class 1 Bonds repaid by TWIA $1B Class 2 Bonds; 30% repaid by TWIA members; 70% repaid by surcharges on coastal P & C policies $1B Class 2 Bonds; 30% repaid by TWIA members; 70% repaid by surcharges on coastal P & C policies $500M Class 3 Bonds; Repaid by TWIA members $500M Class 3 Bonds; Repaid by TWIA members TWIA may buy reinsurance at any level TWIA may buy reinsurance at any level

Other TWIA Issues Rate Regulation Rate Regulation Use of Territory Rating Use of Territory Rating Mandatory Flood Coverage Zone V Mandatory Flood Coverage Zone V Compliance with Building Codes Compliance with Building Codes Oversight & Future Changes Oversight & Future Changes

TWIA POTENTIAL MAXIMUM LOSSES Texas Windstorm Insurance Association/Expressed in Billions YR 100 YR 250 YR 500 YR 1000 YR

Workers Compensation, Other Property Casualty Legislation Workers Compensation Workers Compensation –HB 800 Data Collection –HB 528-Pharmacy Network –HB 2089 Overpayments & Underpayments Consolidated Insurance-HB 2093 Consolidated Insurance-HB 2093 Loser Pay-HB 274 Loser Pay-HB 274

Other Legislation SB 1274-Roofing Contractor Legislation SB 1274-Roofing Contractor Legislation HB 3589-Extension of deadlines HB 3589-Extension of deadlines SB 1300-Towing and Auto Repairs SB 1300-Towing and Auto Repairs Other Other

Regulatory & Miscellaneous Legislation Holding Company Act Changes-SB 1431 Holding Company Act Changes-SB 1431 Surplus Lines-HB 3410 Surplus Lines-HB 3410 Certificates of Insurance-SB 425 Certificates of Insurance-SB 425 Fraud Immunity Reporting-SB 918 Fraud Immunity Reporting-SB 918 Notices for P & C Policies:_HB 2382; HB 3570; HB 2655 Notices for P & C Policies:_HB 2382; HB 3570; HB 2655 Limited Purpose Life Companies-HB 3161 Limited Purpose Life Companies-HB 3161 Title Insurance Rate Hearings Title Insurance Rate Hearings Workers Comp. Data Reporting-SB 800 Workers Comp. Data Reporting-SB 800 HB 1 Rider 12 HB 1 Rider 12 Other Bills & Bills that Failed Other Bills & Bills that Failed

Health Insurance Oral Cancer Medication-HB 438 Oral Cancer Medication-HB 438 Exclusive Provider-HB 1772 Exclusive Provider-HB 1772 Pharmacy Claim Audit-HB 2292 Pharmacy Claim Audit-HB 2292 Privacy-HB 300 Privacy-HB 300 Interstate Compact & Medicaid-HB 5 Interstate Compact & Medicaid-HB 5 Federal Health Care Implementation Federal Health Care Implementation Other-Medical Reinsurance Facility Other-Medical Reinsurance Facility

CONCLUSIONS