Carriers Under Fire’

As mentioned previously in this column, this year is gearing up to be an interesting one with respect to insurance and politics. And at least one industry group—carriers—are likely to feel rather embattled before the Legislature ends its session next June.

The situation in the homeowners market, of course, has already gotten a lot of attention. It is a driving force in the campaigns of both the gubernatorial candidates, Republican Governor Rick Perry and his Democratic rival Tony Sanchez. Both have indicated that, if elected, they intend to take carriers to task over rising rates and movement of customers over to non-rate regulated operating units. Other issues, such as the use of credit histories in determining premiums, are also sure to crop up.

Politicians aside, however, insurers may want to brace themselves for assault by a group within their own industry—agents. The method of attack is shaping up to be a bill introduced in the last legislative session by Representative Jim Dunnam (D-Waco), which, according to the Austin American Statesman, passed the Texas House of Representatives by one vote in the last session. Although it died in the Senate, it is expected to be resurrected in January.

Although the bill, HB 1384, applies primarily to agent-employees of insurance companies, it may have implications for independent agents, as well. Among other things, at issue are the conditions under which an insurer could terminate an agent’s contract and restrict his or her ability to conduct business. It would also involve the state insurance commissioner in companies’ firing decisions by giving the commissioner authority to set up a board to review those decisions. And it would make possible recovery of damages in case a dismissal was found to be unjustified.

The Statesman reported that agents resoundingly supported the bill during the last session, and that it was created in response to agents’ concern over what they believe to be discriminating practices by insurers. Many agents have reportedly indicated that they are reluctant to speak out on insurance issues—especially those that affect consumers—for fear of reprisal by the companies for which they work.

Insurers oppose the legislation and successfully lobbied it to death in the Senate. They assert that the state has no business dictating companies’ policies for terminating agent contracts. They also argue that agents are adult professionals who are fully able to make their own contract decisions and that no one is being forced to sign a contract.

Opponents of the bill acknowledge that, if modified, it has a chance of passing during the next session. Sen. Kip Averitt (R-Waco), who voted against the bill last session as a House member, told the Statesman that agents have “legitimate grievances.” Insurance Commissioner Jose Montemayor underscored that opinion in testimony before a Senate committee last December, in which he told lawmakers of growing unrest between agents and insurers.

Whether or not a new version of HB 1384 makes it through the House and Senate and onto the governor’s desk for signing, it is a bill worth watching. While it is not specifically designed with independent agents in mind, chances are, if passed it will initiate changes in the way agents and companies approach the creating and signing of contracts for selling insurance.

Topics Carriers Agencies