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Texas Law Makes Race-Based Pricing A Felony

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NU Online News Service, June 25, 2003, 6:35 p.m. EDT — New York

Texas Gov. Rick Perry has signed S.B. 14, a bill that includes an amendment that makes criminally negligent use of race-based insurance pricing and some other types of discriminatory insurance pricing a “state jail felony.”

Under the new law, a covered person commits a felony if that person, with criminal negligence, collects an insurance premium or offers insurance coverage using a premium “based on a rate that is, because of race, color, religion, ethnicity, or national origin, different from another premium rate offered or used by the person for the same coverage, other than for classifications applicable alike to persons of every race, color, religion, ethnicity, or national origin.”

The new race-based pricing law, which originally was introduced as S.B. 1061, a stand-alone bill, by state Sen. Rodney Ellis, D-Houston, applies to the officers and directors of insurance companies as well as to the companies, according to the bill text.

The law is scheduled to take effect Sept. 30

The new race-based pricing law gives Texas district attorneys the authority to convene a grand jury after finding one plaintiff who accuses an insurer of violating the law, Ellis says.

If insurance company executives facing complaints about violations of the new law know that they and their companies can be held criminally liable, “I assure you, [the cases] will be settled on that day,” Ellis says.

The National Association of Insurance Commissioners, Kansas City, Mo., has been working on the race-based premium issue for several years, but Ellis says he introduced S.B. 1061 because of the insurance industry’s deliberate slowness in rectifying race-based pricing problems.

“There has not been as much [progress] as I would like,” Ellis says. “The industry has just done as much as they have had to do. They have moved at a snail’s pace. They are doing just enough.”

Ellis says the industry has shown “arrogance” by maintaining the position that the McCarran-Ferguson Act supersedes federal civil rights statutes.

Ellis also objects to the industry’s use of statutes of limitations in countering race-based premium charges.

The full text of the race-based pricing amendment to S.B. 14 is posted on the Web at