Texas Consumers Must Hold Insurance Companies Accountable for Their Actions
Appalling and unethical are the words that best describe recent actions taken by several large insurance companies in Texas. At a time when millions of Texans are struggling to make ends meet, some insurance companies have chosen to saddle hardworking Texas homeowners with double-digit rate increases. This is simply unacceptable.
Such drastic rate increases are particularly inexcusable in light of the legislation just passed by the Texas Legislature to reform the Texas Windstorm Insurance Association (TWIA). Fixing TWIA was vital because, in its previous state it created unlimited liability for Texas taxpayers and Texas insurers. The TWIA reforms passed by the 81st Legislature solved this problem by stabilizing the homeowners’ market, limiting insurer liability, and protecting policy holders from excessive rate hikes. Collectively, these improvements made TWIA stronger and now make it impossible for big insurers to justify their outrageous rate increases.
These unconscionable rate hikes underscore a point I made frequently to my legislative colleagues in the recently concluded session: the problem with insurance in Texas is that insurance companies hold all the cards. They are not accountable to Texans. The key to solving this problem is to empower Texas consumers, punish rogue insurers that unjustifiably raise rates, and to stabilize the Texas market.
Some argue that instituting a prior approval system will solve all of our problems. The facts show that this simply isn’t true. In fact, many of the states with the highest homeowners' insurance rates in the country have systems where the insurance regulator approves rates before they are instituted. And, most states are moving away from these prior approval systems because they lead to sudden rate spikes, which make the recent increases in Texas seem mild in comparison. In sum, prior approval may sound good, but it simply doesn't work. At the end of the day, consumers are still left at the mercy of unscrupulous insurance companies that care more about their bottom line than serving Texas homeowners.
Instead of seeking a bureaucratic solution like prior approval, state lawmakers need to punish companies that unjustifiably raise rates and also empower Texas homeowners so that they can take control and force insurers to work for them, instead of against. As with so many other things in life, education is the key. Through consumer education and increased choices, we can tip the balance of power in favor of Texas consumers and away from big insurance.
The Texas Legislature and the Texas Department of Insurance (TDI) have already taken important steps toward increased consumer choice and education. TDI operates a website, www.helpinsure.com, which allows Texas consumers to go online and compare prices company-by-company. Texans can get a variety of individualized quotes for their home and select the lowest rate or the plan that best fits their needs. Even so, I believe that legislators can and should do more to educate Texas consumers and provide them with even more tools to compare prices and coverage. I stand committed to working to give Texans the necessary tools in the upcoming legislative session.
None of these important resources and tools will be effective, however, if Texans do not utilize them. We must take control away from the big and unscrupulous insurance companies by forcing them to compete for our business. When an insurance company raises rates excessively, Texas consumers need to make them pay by giving their business to another company with more competitive rates. Texans have always been a strong and independent people. It's time for us to carry that attitude with us when insuring our homes and possessions.
As Texans step up to the plate and exercise their power as consumers, we in the Texas Legislature need to do our part as well. The State of Texas has an obligation to protect consumers from rogue companies, ensure that we have a system in place that guarantees insurance companies are financially solvent, and make sure companies pay their claims in full and in a timely manner. When someone's life has just been turned upside down by a tragedy, insurance companies must provide the help they've been paid premiums to provide and not create even more suffering in an effort to unjustly protect their bottom line. I have introduced legislative reforms aimed at accomplishing those goals in the past and eagerly await the opportunity to take up that fight again. Ultimately, we must rewrite current law to put the balance of power where it belongs: firmly in the grasp of hardworking Texas taxpayers.
State Senator Glenn Hegar lives in Katy and represents the 18th District. He serves as the Vice Chairman of the Sunset Advisory Commission which will once again seek to reform the Texas Department of Insurance in the coming 82nd Texas Legislature which will next convene in regular session in January, 2011.