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August 18, 2008
Homeowners insurance reforms must go further, TPPF says
A 2003 overhaul of the Texas homeowners insurance market has failed to foster adequate competition in the market and consumers are bearing the costs, the Texas Public Policy Foundation said in a Homeowners’ Insurance Report.pdfreport released Monday.
As the Sunset Advisory Commission wraps up its review of the Texas Department of Insurance, the foundation’s report called for state leaders to embrace fully the “file-and-use” regulatory system put in place in 2003.
The “file-and-use” rate system for auto and home insurance allows companies to increase premiums once they notify the Texas Department of Insurance, which can challenge any increase it deems excessive. Prior approval is only required in certain cases.
The state has kept a “finger on the regulatory side of the scale” which has discouraged new companies from jumping into the mix so consumers are not reaping the benefit of additional competition, according to the report.
“It didn’t get there. We need to finish that job,” said Bill Peacock, director of the foundation’s Center for Economic Freedom.
Alex Winslow, executive director of the consumer advocate group Texas Watch, said loosening the regulation on insurance companies will make their lives easier while homeowners’ lives get harder.
The report also recommended eliminating the Office of Public Insurance Counsel, a state-funded consumer advocate. The sunset commission staff had suggested folding that office into the Insurance Department, but the report’s authors went a step further.
“We’re focused on making the entire regulatory process consumer-friendly so that we don’t need a consumer representative,” Peacock said.
Winslow said eliminating the public insurance counsel would tilt the market heavily in favor of the insurance companies.
“This is just misguided and a misunderstanding of the market in Texas,” Winslow said.
The Sunset Advisory Commission will take up the issue on Sept. 23 and Sept. 24. The commission will make a recommendation to the Legislature, where Winslow expects a “smart and healthy debate.”
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June 25, 2008
Public insurance counsel gets support at hearing
The proposed dismantling of a state agency that represents insurance consumers encountered resistance on Tuesday evening at a meeting of the Sunset Advisory Commission.
A staff report issued by the commission, which reviews departments every 12 years to make recommendations to the Legislature on whether they should be continued, recommended folding the Office of Public Insurance Counsel (OPIC) into the state Department of Insurance, citing the two bodies’ overlapping functions. But at yesterday’s meeting, State Rep. Ruth Jones McClendon, D-San Antonio, strongly contradicted the staff report, saying that dissolving OPIC would eliminate a vital safeguard for consumers in the insurance market.
“The suits were here today in the back of the room,” McClendon said, referring to the insurance representatives present at the hearing. “They have big lobbies and they can influence in a great manner the Texas Department of Insurance — it’s important we have another component to this; it’s important to have a consumer component.”
Other members of the commission did not reveal their positions on OPIC, but questioned why a Senate bill passed in 2003 designed to increase competition in the Texas insurance market and lower premiums has not worked.
“There’s a lot of room for these new upstart companies to come in and start slashing prices and grab a bigger share of the market,” Sen. Kim Brimer, R-Forth Worth said. “Why isn’t that happening?”
Texas Department of Insurance Commissioner Mike Geeslin said the bill has had results — 29 companies have entered the market and homeowner premiums have decreased six percent in the last five years, he said.
But Brimer said that rate relief has not come fast enough for Texans, who pay among the highest homeowners premiums in the country.
“You’re not moving fast enough, why can’t we move faster?” he said.
The problems partially stem from the ballooning liabilities of the Texas Windstorm Insurance Association (TWIA), a public-private partnership that provides “last resort” hurricane coverage to coastal residents, Geeslin said. As TWIA’s liability has tripled to $65 billion since Hurricane Katrina hit just three years ago, smaller insurers have become wary of entering the Texas market because they would have to front money to TWIA in case of a catastrophic storm, Geeslin said.
The commission will make its final recommendations on issues discussed at yesterday’s meeting on Sept. 23.
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