that the rates determined therefrom shall be just, The basic consideration on which all four questions here presented are based is whether the State Board of Insurance is either authorized or required to consider in its automobile rate making formula various types of investment income realized by the insurers from some or all of their investments. Because of the nature of our answers to these questions they all may be considered together. Review of the above quoted sections of the Insurance Code makes it readily apparent that no specific reference is made to either the inclusion or exclusion of investment income of the insurers in the Board's establish ment of adequate and reasonable rates. It is clear, however, from the language of Article 5. 01 that the Board shall have the sole and exclusive power and authority to prescribe just, reasonable and adequate rates of premiums to be charged for automobile insurance in Texas. These are the general guidelines the Board is to follow in establishing the rates. Article 5. 03 provides that such rates shall not be confiscatory as to any class of insurance carriers. There seems to be no question that rate making is a legislative function, and in this case is to be performed by an administrative body, the State Board of Insurance. Brown & Root v. Traders & General Insurance Co., 135 S. W. 2d 534 (Tex. Civ. App., 1940, error dism., judgm. cor.); Associated Indemnity Corp. v. Oil Well Drilling Co., 258 S. W. 2d 523 (Tex. Civ. App. 1953, affirmed, 153 Tex. 153, 264 S. W. 2d 697. ) In the latter decision the Dallas Court of Civil Appeals stated: "It cannot be disputed that the legislature originally intended to leave the details of rate making to a rate-making body, such as the Board ... "The Board's rate-making powers are legislative in character; hence its orders fixing rates must be sub jected to the same tests under the 'equal protection' The Insurance Code was first enacted in 1927. Articles 5.01 and 5.04 were amended in 1953 by H. B. No. 32, Acts of the 53rd Legislature, Regular Session. At that time the words "and all other relevant factors," among other things, were added to the Articles. The words "all relevant factors" were by H. B. No. 32 added to Article 5.01 in the second sentence of the second paragraph of that Article. This sentence is as follows: "In promulgating any such rating plans the Board shall give due consideration to the peculiar hazards and experiences of the individual insurers, past and prospective, within and outside the state and to all other relevant factors, within and outside the state." It thus appears that the words "all relevant factors" as are used in Article 5. 01 apply only to rating plans and not to the general automobile insurance premium formula. As previously observed, the words "all relevant factors" were also added, among other things, to Article 5. 04 in 1953. The Legislature has directed that the Board may take into consideration to insure the adequacy and reasonableness of rates past and prospective experience within and outside the state and all other relevant factors. Therefore, it is apparent that the Board has wide discretion in its determination of what are all other relevant factors and in fact may or may not include in its consideration such factors. In Virginia, the Supreme Court of that state, in reviewing a rate set by the rate fixing board, concluded from the evidence before it that income from investment of the loss reserve, as well as from investment of the unearned premium reserve, was a relevant factor in fixing a reasonable margin for underwriting profit and contingencies. Virginia State AFL-CIO v. Commonwealth of Virginia, et al, 167 S. E. 2d 322 (Va. Sup. 1969). We are of the opinion, therefore, that our Legislature has delegated to the State Board of Insurance the legislative function of rate making. By Articles 5.01 and 5. 03 it has directed the Board to fix just, reasonable and adequate rates which are non-confiscatory. By Article 5. 04 the Legislature has stated that in arriving at just, reasonable and adequate rates which are not confiscatory the Board is authorized to consider, among other things, all other relevant factors. If the Board determines a factor to be relevant for consideration in arriving at a just, reasonable and adequate rate which is not confiscatory, it has the authority to consider such factor. But this is the sole and exclusive power and authority of the Board by virtue of its legislative rate-making authority. It is not for this office to determine what is a relevant factor for the Board's consideration in the exercise of its legislative powers. Section 1, Article II, Constitution of Texas. SUMMARY The fixing of automobile insurance rates by With reference to my letter of October 29, 1968, I am enclosing As we previously advised the automobile bodily injury experience for With this report and the one submitted with our letter of October 29, Very truly yours, Dr. Sill J. F. Gill Vice President and Actuary |