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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 :

OpinionNo. S-179

Re: construction of Articles.5.25 and 

### 5.42, Texas InsuranceCode 1951, 'asto authority,ofBoard 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 interestwhich an insurance companymight charge for deferring the colleation of premium under an insurance policy actually constitutea part of the policy premium derived from the application of rates promulgatedby the Board, thus making it subjeot to the ratemaking authority of the Board?

“2. Does it constitute a charge~separate and apart from the policy premium which is derived from the applicationof approved rates, thus making it subjectto the provisions of other laws of this State rather than insurance rate making laws?
“3. Do the provisionsof Article 5.42 Pen-' der the 6%interest rule as found on Page 88 of the General Basis Schedulesto 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 InsuranceCommissioners shallhave the sole and exclusive cower and authority and it shall be its duty to prescribe,~

fix, determine and promulgate the rates of oremiums'tobe charged and collected by fire insurance companies transactingbusiness in this State. SaidBoard shall also have authorityto alter or amend any and ail such rates of premiums so fixed and determined and adoptedby it,.and to raise or ,lower the same, vided. or any part thereof, as herein proSaid Board shallhave authority'to employ clericalhelp, inspectors, experts and other assistants,and to incur such other expenses as may be necessary in carrying out the provisioris

of ~thislaw. Such expenses, including the ~salariesof the members of the ,Board,shallnot exceed in the aggregate, for ~atiy fiscalyear;.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 ect i. ) 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 amountpaid thereon,,~:in such
manner as 'willaid.in' determining equitable,. insurance rates:%

methods of reducing suoh~fire losses.andreducing the insurancerates of the State,;

or subdivisionsof the State. pacts. pi 1951, 52nd.&eg.,ch. 491."

It is clear from the .abovequoted Article that the duty of the.,Board is to determine the'rate~:.of premium to be charged.'

particle5.42,

Drov1de.s

as follows:'~~
"Thenrovisions of this subchaoter shall pot dealwith the collectionof 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 shallbe,construed as a discrimination,or in v'iolation

of the provisions of this subchapter.I. -



### Hon. MarkWentz, page 3 (s-179)

All policies heretofore issuedwhich 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 ,ofits agents have accepted the premium on said policies after the expiration of the dates named in said provisions fixing the date of payment."
This articlepermits the company to make such rules and regulationsas it may deem just between the coa pany, its agents, and its policyholders and furthermore "The provisions of this subchapterm shalinot dealwi$h the colleati~cnlo~ p;em;p.

. . andpo 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 Commissionersof the State of Texas not have the authority to regulate the rate of interst. charged byecompanies on deferred premiums, as the amount of interest charged is not a part of the policy premium determinedby 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 InsuranceCommissioners of the State of Texas does not have the authority to regulate the rate of interest charged on deferred

APPROVRD:

J. Fred Jones State Affairspremiums.

Division Yours very truly,

JOHN BEN SRRPPRRD AttorneyGeneral of Texas

J. A. Amis Reviewer

Will D. Davis Reviewer

Davis Grant Reviewer Robert S. Trotti First Assistant
John Ben Shepperd AttorneyGeneral Robert 0.. Fagg Assistant