Senator Lucio's Letterhead


March 26, 2009
CONTACT: Doris Sanchez, Press Secretary
Phone: (512) 463-0385

Better Reforms for Homeowners Insurance Rates in Texas

Texas homeowners aren't just tired of hearing that we have the highest insurance rates in the country. They're ready for economic relief.

Several bills this legislative session may drop us lower on the rate charts. Reports show that the average homeowners insurance premium in Texas is $1,372, which is roughly $600 higher than the national average. Every year consumers pay more money for policies that cover less and less. More than a million Texas homeowners are estimated to have policies that provide only partial coverage for damages.

In Texas, some homeowners and automobile insurance companies pressure the Texas Department of Insurance (TDI) to accept their excessive rates with threats of withdrawing from the state. Others pull out for a month only to return and continue charging exorbitant prices.

I've filed Senate Bill 1372 to impose a five-year ban on insurers that leave the state market before being allowed to re-enter. This bill will take away insurers' ability to strong-arm the Commissioner into accepting rates that excessively burden consumers.

Rates are charges for a specific dollar amount of coverage, while premiums are what customers actually pay for insurance. Premiums can be based on factors that include property values, the cost of repairs and types of coverage, and they can rise even if rates drop.

Record hailstorms and hurricanes Dolly, Ike and Rita have contributed to higher premiums. Losses from hurricanes Dolly and Ike wiped out the reserve fund of the Texas Windstorm Insurance Association (TWIA).

This fund is backed by a Catastrophe Reserve Trust Fund built by insurance premiums. Replenishing TWIA funds is another matter that we are reviewing this session as an emergency legislative issue declared by the Governor. Whatever decision we make, it must not result in even higher premiums for coastal residents when our goal is to lower insurance costs statewide.

This session we must deliver what was promised in 2003 when we passed major insurance reform in response to the Texas mold crisis. The reforms gave insurers the ability to offer different types of policies, and instead of comprehensive policies, many homeowners saw little in savings yet ended up with reduced coverage.

Also as a result of the mold crisis, TDI removed a requirement that insurers must use standardized forms. Since coverage varies from company to company, consumers could no longer simply compare policies based on price; consequently, most people aren't sure of the coverage they're carrying.

To remedy this problem, I have introduced Senate Bill 102 that directs insurers to provide standardized policy forms. The National Association of Insurance Commissioners reports that unlike the other 49 states that almost exclusively use a single form, Texas uses three.

Currently, consumers face the purchase of insurance for one of their most valuable investments--their homes--with limited ability to compare policies. Standard forms would give them the necessary tools to make informed decisions.

Another proposal I've filed is Senate Bill 103 that would bring fairness to the insurance process by limiting to 15 percent the amount insurers can vary their rates within a single county. For a proven, weather-related reason, the bill would allow rates to vary above this cap. If passed, my legislation would provide that neighbors only a block apart with comparable homes won't be paying incomparable premiums.

Another proposal to bring further stability to the industry was filed by my colleague Senator Leticia Van de Putte. Prior approval would authorize the TDI Commissioner to review rates before insurers charge them to consumers. I am pleased to co-author this bill and author others because Texans need relief now, especially in this economy. As always, if you have any input or questions regarding these or other matters, please do not hesitate to contact Doris Sanchez, my Communications Director, 512-463-0385.