PRESS RELEASE
From the Office of State Senator Troy Fraser

For Immediate Release
November 20, 2002
Contact: William A. Scott - (512) 463-0124/923-6162

Fraser Announces Eight-Bill Insurance Reform Package

AUSTIN -- Senator Troy Fraser today announced the filing of a comprehensive, eight-bill package of insurance reform legislation, including measures to provide increased rate oversight on homeowners policies and to restrict the use of credit scoring.

"The current system is broken in a lot of places and these bills attack those identified problems in a very systematic way," Fraser said at Capitol news conference.

Fraser, R-Horseshoe Bay, said the goal of the legislative package is to lower rates for consumers and restore competition to the Texas insurance market that is now dominated by three companies.

"First we need to rid the system of those profiting from the mold hysteria and artificially driving up rates," he said. "Then we want to give the Texas Department of Insurance the tools it needs to restore competition among providers in a way that is fair and responsive to both consumers and insurers."

The legislation also bars insurance companies from "cherry-picking" the most profitable lines of insurance while abandoning others; provides oversight on insurance companies' policy and endorsement forms; requires insurance companies' prompt handling of water claims; prohibits the denial of homeowners coverage because of a previous water damage claim; and requires the testing and licensing of mold remediators and public insurance adjusters.

Fraser made the announcement with Senator Mike Jackson, R-La Porte, who filed the bill that gives the Texas Insurance Commissioner authority to approve or reject proposed rates for homeowners and auto policies. Fraser is the co-author of the rate oversight bill, and Jackson is the co-author of the seven other bills filed by Fraser.

Fraser added that the bill amending the current withdrawal statute is a direct result of Farmers Insurance's recent decision to not renew its 700,000 Texas policyholders after the Texas Department of Insurance issued a cease and desist order against the company and the Texas Attorney General filed a lawsuit against it.

Fraser, chairman of the Senate Committee on Business and Commerce, has been actively engaged in seeking solutions to the growing insurance crisis since last January, and Jackson chaired the subcommittee charged during the interim with examining the issue of rate oversight.


Here is a summary of each of the bills filed today:

Insurance Withdrawal from the Texas Market

SB 125 (by Fraser/co-authored by Jackson)

This bill applies to any licensed insurer or other entity writing insurance in Texas, including county mutual, Lloyd's plan companies, or a reciprocal or interinsurance exchange.

The bill is designed to prevent "cherry-picking" by insurance companies. It amends the current withdrawal statute to prohibit insurance companies from writing any other line of insurance if it withdraws from the auto or homeowners market, or if it reduces its total annual premium volume in auto or homeowners by 75 percent or more.

Insurers required to withdraw from the market would be barred from writing any insurance policies until they are approved by the Texas Insurance Commissioner to resume writing auto and homeowners policies. Insurers who voluntarily or involuntarily completely withdraw from the market are ineligible to write policies in Texas for five years unless the insurer receives special permission from the commissioner.

Unfair Methods of Competition and Unfair and Deceptive Acts By Insurers (Unfair Underwriting Guideline Based on Previous Water Damage Claim)

SB 126 (by Fraser/co-authored by Jackson)

This bill prohibits insurers from refusing to write a homeowners policy for an applicant, or on a covered property, at which a single previous water damage claim was filed. The purpose of the bill is to prevent the so-called "stigmatization" of property and homeowners based on one previous water damage claim. The bill defines such underwriting guidelines as unfair or deceptive acts or practices.

Prompt Handling of Water Damage Claims

SB 127 (by Fraser/co-authored by Jackson)

This bill applies to insurers writing homeowners insurance in Texas, including county mutuals, Lloyd's plan companies, reciprocal or interinsurance exchanges, affiliates and surplus lines insurers..

The purpose of the bill is to expedite the handling of water damage claims, thereby reducing claims costs and homeowners premiums. The bill requires insurers to begin the process of handling claims within 24 hours after being contacted by the policyholder. The requirements include having an insurance company representative at the insured's home within 24 to 72 hours.

Licensing of Public Insurance Adjusters

SB 128 (by Fraser/co-authored by Jackson)

This bill applies to individuals who act on behalf of the insured in negotiating the settlement of a claim, with the exception of attorneys and other specified occupations.

The bill requires the testing and licensing of public adjusters by the Texas Insurance Commissioner; requires $50,000 surety bonding (or suitable equivalent); limits contingency fees collected by public adjusters to 10 percent of the claim settlement; requires licensees to complete at least 15 hours of continuing education courses annually; requires records maintenance; provides for up to $1,000-per violation in administrative penalties and $1,000 and/or six months in jail in criminal penalties.

Licensing of Mold Remediators

SB 129 (By Fraser/co-authored by Jackson)

This bill applies to any mold-related activity performed by a third party for compensation, including mold analysis, remediation or assessment companies and their consultants, technicians, contractors or supervisors.

The bill requires the testing and licensing of mold remediators by the Texas Department of Health (TDH); requires the Texas Board of Health to adopt written standard operating procedures that must be followed by remediators; requires remediators to retain project documentation at the job site or licensee's place of business; provides for up to a $10,000-per violation in administrative penalties; provides for up to a $20,000 fine and/or six months in jail for criminal penalties.

Credit Scoring By Insurers of Residential Property and Personal Automobiles

SB 130 (by Fraser/co-authored by Jackson)

This bill applies to insurers writing personal auto and homeowners insurance in Texas, including county mutuals, Lloyd's plan companies, and reciprocal or interinsurance exchanges. Insurers that use credit scoring must file with the Insurance Commissioner their credit scoring models or methodologies for homeowners and auto insurance.

The bill provides for an appeals process requiring the insurer to reconsider an "adverse action." Appeals may be filed based on catastrophic illness or injury; temporary loss of employment; death of an immediate family member; or other grounds as determined by the Insurance Commissioner. In addition, the bill specifically prohibits insurers from the following:

Oversight of Policy Forms for Auto and Homeowners Coverage

SB 131 (by Fraser/co-authored by Jackson)

This bill applies to insurers that file policy forms used in the writing of auto or homeowners insurance, including county mutual, Lloyd's plan companies, and reciprocal or interinsurance exchanges.

The bill requires insurers to file proposed policy forms or endorsements with the Texas Insurance Commissioner. The new form takes effect in up to 60 days after it is filed, unless it is disapproved by the commissioner. The bill also requires that the forms be written in "plain language" and specifies that form filings and supporting data are open records subject to public inspection.

Rate Oversight of Personal Auto and Homeowners Insurance

SB 14 (by Jackson/co-authored by Fraser)

This bill applies to insurers writing personal auto and homeowners insurance in Texas, including county mutual, Lloyd's plan companies, and reciprocal or interinsurance exchanges. The insurer is required to file rates, rating manuals, supplementary supporting data, and policy and service fees with the Texas Insurance Commissioner. The rate takes effect in up to 60 days after it is filed, unless it is disapproved by the commissioner.

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