The Commissioner of Insurance, by Commissioner's Order No. 97-0903, Docket No. 2295, has adopted amendments to the Texas Automobile Rules and Rating Manual, Rule 14 (Installment Payments), and to the Texas Standard Provisions for Automobile Policies, Personal Auto Policy, Special Instructions in regard to installment payments. The Manual's Rule 14 is amended to reduce the percentage of the down payment that is to be required by an insurer writing a Personal Auto Policy that is to be purchased under this rule's installment payment plan. Rule 14 currently allows an insurer to require a down payment of no more than 25% of the total premium for 12-month policies and 40% for 6month policies. Amended Rule 14 (which sets forth minimum requirements) provides for a down payment no greater than 16.67% of the total premium for a 12-month policy, or no greater than 33.33% of the total premium for a 6-month policy, whenever this rule's installment payment plan is used.
Amended Rule 14 also requires the remaining premium balance to be payable in 10 equal monthly installments for a 12-month policy and 4 equal monthly installments for a 6-month policy. In addition to the 10 equal monthly payments and 4 equal monthly payments required for 12-month and 6-month policies respectively, amended Rule 14 requires the insurer to bill for one-half of the initial payment that will be required for policy renewal to be due in the last month of the policy period. Amended Rule 14 provides that the remaining one-half of the initial payment shall be due at the date of renewal.
The Standard Provisions, Personal Auto Policy, Special Instructions, are amended by changing current #11 to #12, and by adding a new #11, titled "Installment Payment Plan" and providing as follows:
- "Each insurance company must either print on, stamp on, or attach to the declarations page the following statement: 'We agree to make available to you an installment payment plan as described in Rule 14 of the Texas Automobile Rules and Rating Manual, except when an installment payment plan is prohibited by other rule or by statute.' "
This instruction provides guidance to insurers on how to comply with the Board Order that created Rule 14, (Board Order No. 59537 issued April 13, 1992) and which requires a statement regarding the installment plan to be incorporated into the policy.
The amendments to Rule 14 will make the required minimum installment payment plan more affordable and provide more uniformity. Amended Rule 14 still allows an insurer to offer other payment options to a new applicant in addition to the Rule 14 plan, but the proposed plan (as a minimum standard) must be made available to each new applicant unless one of the rule's exceptions exists.
The amendments were adopted to become effective January 1, 1998.
David P. Durden
Deputy Commissioner
Property And Casualty Insurance Lines