. . 

AUSTIN ai. TEXAS 

JOEN BEN 8HEppIERD 

*-- OmmRraAx', 

October 20, 1955 

Hon. Mark Wentz 

Fire Insurance Comu@ssioner 

Board of InsurancsCommissioners 

International Life'Building 

Austin, Texas : 

Opinion No. S-179 

Re: construction of Articles.5.25 and 

5.42, Texas Insurance Code 1951, 

'as to authority,of Board o$ Insurance,.Commissioners to regulate the 

amount of interest charged on deferred premiums. 

Dear Mr. Wentz: 

You have asked for the opinion of this office on 

the following questions: 

"1. Does the amount of interest which an 

insurance company might charge for deferring 

the colleation of premium under an insurance 

policy actually constitute a part of the policy 

premium derived from the application of rates 

promulgated by the Board, thus making it subjeot to the rate making authority of the Board? 

“2. Does it constitute a charge~separate 

and apart from the policy premium which is derived from the application of approved rates, 

thus making it subject to the provisions of other 

laws of this State rather than insurance rate 

making laws? 

“3. Do the provisions of Article 5.42 Pen-' 

der the 6% interest rule as found on Page 88 of 

the General Basis Schedules to be of no mandatory 

force and effect?." 

Article 5.2.5 of the Texas Insurance Code,'l951, 

reads as follows: 
Hon. Mark IrEentz, page 2 (s-179) 

"The Board of Insurance Commissioners 

shall have the sole and exclusive cower and 

authority and it shall be its duty to prescribe,~ fix, determine and promulgate the 

rates of oremiums'to be charged and collected 

by fire insurance companies transacting business in this State. Said Board shall also 

have authority to alter or amend any and ail 

such rates of premiums so fixed and determined and adopted by it,.and to raise or ,lower 

the same, 

vided. 

or any part thereof, as herein proSaid Board shall have authority'to 

employ clerical help, inspectors, experts and 

other assistants, and to incur such other expenses as may be necessary in carrying out the 

provisioris of ~this law. Such expenses, including the ~salaries of the members of the 

,Board, shall not exceed in the aggregate, for 

~atiy fiscal year;. thesum of.One Hundred and 

Thirty Thousand ($130,000.00) Dollars. Said 

Board. shall ascertain as soon as practicable 

the annual fire loss in this State; obtain 

make and maintain a record thereof and co1 i. ect ) 

such data with respect thereto as will enable 

said Board to Classify the fire losses of th1.s 

State, the causes thereof, and the'amount of 

premiums c~ollected therefor for each class of 

risksandlthe amount paid thereon,,~:in such 

manner as 'will aid.in' determining equitable,. 

insurance rates:% methods of reducing suoh~fire 

losses.and reducing the insurance rates of the 

State,; or subdivisions of the State. pacts. pi 

1951, 52nd.&eg., ch. 491." 

It is clear from the .above quoted Article that 

the duty of the.,Board is to determine the' rate~:.of premium 

to be charged.' 

particle 5.42, Drov1de.s as follows:' ~~ 

"The nrovisions of this subchaoter shall 

pot deal with the collection of oremiu but 

each com@&ny 'shall be permitted to.make .&ch 

rules and regulation's as it may deem just be-~' 

tweenthe. company; its ~agehts,, and its~ @iiCyholders; and no bona'fide extension of credit 

shall be,construed as a discrimination, or in 

v'iolation of the provisions of this subchapter. 
I. - 

Hon. Mark Wentz, page 3 (s-179) 

All policies heretofore issued which provide 

that said policies shall be void for nonpayment of premiums at a certain specified 

time, shall be and the same are in full force 

and effect, provided, that the aompany or any 

,of its agents have accepted the premium on 

said policies after the expiration of the 

dates named in said provisions fixing the date 

of payment." 

This article permits the company to make such 

rules and regulations as it may deem just between the coa 

pany, its agents, and its policyholders and furthermore 

"The provisions of this subchapter m shali not dealwi$h 

the colleati~cnlo~ p;em;p. . . and po bona fide extensiog 

of credit sh e on rued as a discrimination, or in 

violation of the provisions of this subchapter." 

It is therefore the opinion of this office that 

the Board'of Insurance Commissioners of the State of Texas 

not have the authority to regulate the rate of interst. charged bye companies on deferred premiums, as the 

amount of interest charged is not a part of the policy premium determined by the Board, but constitutes a charge separate and apart from the policy premium, and said interest, 

if any, is subject to Articles 5069-5073, Vernon's Civil 

Statutes. 

SUMMARY 

The Board of Insurance Commissioners of 

the State of Texas does not have the authority 

to regulate the rate of interest charged on 

deferred 

APPROVRD: 

J. Fred Jones 

State Affairs 

premiums. 

Division 

Yours very truly, 

JOHN BEN SRRPPRRD 

Attorney General of Texas 

J. A. Amis 

Reviewer 

Will D. Davis 

Reviewer 

Davis Grant 

Reviewer 

Robert S. Trotti 

First Assistant 

John Ben Shepperd 

Attorney General 

Robert 0.. Fagg 

Assistant