Insurance bills test strength of legislators’ campaign promises

Perry declares homeowner’s insurance an emergency issue, but it could take months to form package consumers, industry, lawmakers agree on

February 1, 2003
By Monica Wolfson
Scripps Howard Austin Bureau

AUSTIN - There’s little doubt that Texans will see change in insurance regulation. But it’s unclear which reforms will make it through the Legislature.

Bills filed so far have run the gamut from full rate approval of the homeowner’s insurance market to a file-and-use system where insurance companies wait 60 days for rate approval.

Gov. Rick Perry has already declared homeowner’s insurance an emergency issue, which made it a top priority for lawmakers when they convened on Jan. 14.

But legislators predict it could take months to wade through some of the dozens of insurance-related bills filed so far and come up with an acceptable package that pleases consumer groups, the insurance industry and lawmakers.

"Everything is on the table," said Dan Lambe, executive director of Texas Watch, a consumer advocacy group. "There were a lot of promises made during the campaign season. Now it’s time to see what’s going to happen."

Seaman looks for solutions
State Rep. Gene Seaman, R-Corpus Christi, filed a variety of insurance bills that closely resembled Perry’s own agenda on insurance reforms. Seaman’s primary bill called for rate regulation of insurance companies that hold 10 percent or more of the homeowner’s insurance market.

Other Seaman bills mandated discounts for long-term homeowners with no or few insurance claims, and flexibility for insurance companies in offering certain coverage in insurance policies.

"Seaman has been one of the most active representatives on insurance, seeking out opinions and trying to come up with solutions for the current crisis," Lambe said. "He has aggressively been working to find alternatives to the current crisis. We have concerns that his legislation doesn’t go far enough."

The Texas Department of Insurance has already begun allowing insurance companies to limit coverage in policies. Specifically, the commissioner has allowed the insurance industry to exclude mold, water damage and foundation repairs from standard policies, said Lee Jones, spokesman for the Texas Department of Insurance. The commissioner will make his insurance reform recommendations soon, Jones said.

File-and-use opposition
The insurance industry said it needs a law mandating flexibility with policy content because the current rule is at the mercy of whoever is insurance commissioner. "It needs to be a state statute," said Jerry Johns, president of Southwestern Insurance Information Service, an insurance industry trade group whose members write 85 percent of policies in the homeowners and automobile insurance market. "The reason is we change commissioners relatively often. The rules could change dramatically with a new commissioner."

Consumer advocates also had opposed the leading insurance package pitched by state Sens. Troy Fraser, R-Horseshoe Bay, and Mike Jackson, R-La Porte. Fraser and Jackson are members of the Senate Business and Commerce committee, which is the committee that will review insurance reforms.

Fraser’s legislation includes a file-and-use system for homeowner and automobile insurance rates, which means insurance companies file rates with the Texas Department of Insurance, which has 60 days to deem the rates acceptable or excessive.

Fraser’s proposal also includes partial limits on the use of credit scoring, licensing of insurance appraisers, and banning insurance companies from dropping a client because of a water damage claim.

Consumer groups said the Department of Insurance doesn’t have the resources to handle a file-and-use system overseeing premium rates as well as policy contents.

"(The Department of Insurance) is looking at the bills right now and will get back to us on what resources they think they’ll need," said Bill Scott, Fraser’s spokesman. "Fraser would support an adjustment to appropriations (for the Department of Insurance). Given the public’s mood and its desire to have meaningful insurance reform to lower rates, it’s a pretty small price to pay. If it takes 10 more people, fine. Give them the money."

Johns said a file-and-use system is "a form of responsible regulation," although he contends that Fraser’s legislation is only a good starting point.

Contact Monica Wolfson at (512) 334-6642 or wolfsonm@scripps.com