The Texas Department of Insurance (TDI) regulates the Texas insurance industry. The department seeks quality insurance products for all Texans at reasonable prices and under reasonable terms and strives to protect consumers’ insurance assets. The TDI enforces solvency standards and promotes competition in the industry while protecting consumers from fraud, misrepresentation and unfair practices. It also educates the public about insurance so that Texans can make informed choices and works to protect the lives and property of the citizens of Texas from fire and fire-related hazards.
The history of state regulation of insurance in Texas dates from 1874, when the 14th Texas Legislature passed a law regulating the life and health insurance business in the areas of company formation, activities and coverage (Chapter CXLV, Regular Session). This act also gave the State Comptroller of Public Accounts supervisory authority over insurance (as there was not a state insurance department in existence), including issuing yearly renewal of certificates to companies. In the early days of statehood, practically all insurance business in Texas was written by companies organized in other states and foreign countries. According to State Comptroller’s records, out of 61 companies doing business in Texas in 1874, only four were Texas-based. Until the 1876 State Constitution was adopted, Texas insurance corporations were created by special acts of the legislature. These domestic companies ventured into the business—mostly fire and marine insurance—in competition with financially stronger and more experienced out-of-state companies. As a result, most of them either went bankrupt or had to be reinsured and taken over by their out-of-state counterparts.
The Texas 1876 Constitution authorized the legislature to create the office of Insurance Commissioner. Later that year the 15th Legislature passed a bill creating the Texas Department of Insurance, Statistics and History (Chapter CXXXIII, Regular Session). The department had the responsibility to file and maintain insurance company charters; determine net value of all insurance companies in the state annually, to see that companies maintained an amount equal to their net value in safe, legal securities; calculate re-insurance reserves for unexpired fire risks; and suspend or close the operation of companies in non-compliance with insurance regulations. Insurance companies had to furnish a certificate to the Insurance Commissioner on the valuation of the company. If the commissioner determined the net value was below the state-determined safety net, he was to notify the company to cease doing business and suspend or close their operations. The commissioner had access to all books and papers of companies and could revoke or modify certificates of authority, call witnesses to testify, and initiate suits and prosecutions. In addition to his insurance-related duties, the commissioner was charged with keeping information and statistics on the state’s population, wealth, and general resources. He also served briefly as the state historian, the state librarian, and superintendent of public grounds and buildings.
In 1887, the department’s authority was expanded by adding agriculture regulation to its regulatory functions (House Bill 355, 20th Legislature, Regular Session). It was renamed the Texas Department of Agriculture, Insurance, Statistics and History. In 1905 (Senate Bill 6, 29th Legislature, Regular Session) banking supervision and regulation were added to the agency. In 1907, a separate office was created for agriculture, and the agency became the Texas Department of Insurance and Banking (House Bill 274, 30th Legislature, Regular Session). The history and statistics functions were absorbed by the state librarian.
In 1909, Senate Bill 291 (31st Legislature, Regular Session) required insurance companies to file financial and other information with the new Commissioner of Insurance and Banking. Also in 1909, Senate Bill 25 was passed by the 31st Legislature, 3rd Called Session, which created the Fire Insurance Rating Board, with the Commissioner of Insurance and Banking as the chair. The main duty of this board was to prevent discrimination in fire insurance rates. The Commissioner of Insurance and Banking also became the supervisor of all building and loan associations in Texas.
The 31st Legislature created the State Insurance Board in 1910 (Senate Bill 7, 4th Called Session), which replaced the fire rating board. The Commissioner of Insurance and Banking served as the chair, and the governor appointed two other members with the advice and consent of the senate. One board member was also designated as the fire marshal of the Insurance Board. The board was to supervise, control and regulate fire rates. Duties of the board included to make and prescribe general schedules for insurance, together with rules and regulations for determining maximum specific rates therefrom, and to furnish each insurance company doing business within the state a copy of the rate schedule. The board had the authority to alter or amend insurance rate schedules. The board was also to ascertain the annual fire loss to the state, to collect data in order to classify the fire losses, causes thereof, and amount paid thereon in such a manner as to be of assistance in determining equitable insurance rates, methods of reducing fire losses, and reducing insurance rates of the state. In 1913 the State Insurance Board’s name was changed to the State Fire Insurance Commission and its authority broadened (Senate Bill 387, 33rd Legislature, Regular Session). Additional duties included the ability to prescribe, fix, determine, and promulgate the rates of premiums to be charged and collected by fire insurance companies. The board had the authority to alter and amend premium rates.
In 1923 the Commissioner of Insurance was separated from the Commission of Insurance and Banking (Senate Bill 29, 38th Legislature, 3rd Called Session). The agency now became the Texas Department of Insurance. In 1927, the Commissioner of Insurance was consolidated with the Fire Insurance Commissioner to create the Texas Board of Insurance Commissioners (Senate Bill 253, 40th Legislature, Regular Session). It consisted of three commissioners: the Life Insurance Commissioner, who served as chair; the Fire Insurance Commissioner; and the Casualty Insurance Commissioner. In addition to past insurance functions, the board had the authority to approve and disapprove auto insurance rates and to promulgate uniform policy reforms.
Major changes were made in insurance laws in the 1950s. In 1951, insurance laws were codified into the Texas Insurance Code (Senate Bill 236, 52nd Legislature, Regular Session). Due to a number of insolvency scandals (23 domestic companies were placed into receivership between 1954 and 1958), the legislatures of the period passed at least 16 insurance-related bills, including strengthening examination laws, increasing minimum capital and surplus requirements, and giving the board more control over issuing certificates of authority.
The Board of Insurance Commissioners was abolished in 1957 and replaced with the Texas State Board of Insurance (Senate Bill 222, 55th Legislature, Regular Session). The State Board of Insurance was composed of three members, appointed by the governor with senate approval. Members served six-year overlapping terms. The board was governed by the Texas Insurance Code. From 1957 to 1991, the term “State Board of Insurance” was sometimes used to refer to the agency and all of its employees. At other times, it was used to designate only the three-member board. The board had initial jurisdiction over policies, rules, and rates, and over appeals from the Commissioner of Insurance. The board appointed, with the consent of the senate, the Commissioner of Insurance, who acted as the executive and administrative officer for the agency. The commissioner also served as State Fire Marshal until 1975, when the 64th Legislature passed the Fire Alarm System Act, which created the Office of the State Fire Marshal. The marshal was now appointed by the chair of the State Board of Insurance and was directly responsible to the board.
In 1991, the 72nd Legislature created the Texas Commission on Fire Protection (TCFP) by combining two agencies: the Texas Commission on Fire Protection Personnel Standards and Education, and the Texas Fire Department Emergency Board (Senate Bill 383, Regular Session). It also transferred certain duties from the Texas State Board of Insurance, including oversight of the State Fire Marshal and the key rate municipal inspections. Also in 1991, the 72nd Legislature revised the regulation of insurance and changed the agency’s name to the Texas Department of Insurance (House Bill 2, Regular Session and House Bill 62, 2nd Called Session). The three-member State Board of Insurance was abolished by the 73rd Legislature in 1993 (House Bill 1461, Regular Session). The management and regulatory duties of the board became the responsibility of the Commissioner of Insurance as of September 1, 1994. The commissioner is the overall authority in the enforcement of the Insurance Code and the regulation of the insurance industry in Texas.
(Sources include: Guide to Texas State Agencies, various editions; laws and statutes of Texas; web page of the Texas Department of Insurance http://www.tdi.texas.gov/general/index.html, accessed April 25, 2016; and documents found within the State Fire Marshal’s records.)