Montemayor Cuts TAIPA Rates 6.1 Percent

For the second straight time, the Texas Department of Insurance has ordered an overall rate reduction for the Texas Automobile Insurance Plan Association, the state’s assigned risk plan.

Earlier this month, Commissioner Jose Montemayor ordered an overall 6.1 percent for drivers covered through TAIPA.

The order cut rates for bodily injury liability insurance by 10.3 percent but allowed a 1.2 percent increase for property damage liability rates. Combined, rates for required liability coverage will be reduced by 4.6 percent. Optional coverage, consisting of personal injury and uninsured/underinsured motorist protection, will be reduced by an average of 23.0 percent, making a total combined decrease of 6.1 percent for all coverages.

“Obviously, we were disappointed in these rate changes,” said Jerry Johns, TAIPA spokesperson, adding that it will be difficult to predict the impact of the rate reduction “until we see losses come in.”

Meanwhile, Commissioner Jose Montemayor said he is pleased that his first TAIPA order continued the “downward turn in rates.”

“But the real credit goes to Texas drivers for helping keep down the cost of accidents, which enabled the rate reductions to take place,” Montemayor said. “By law, TAIPA rates must cover the plan’s costs, so holding down losses from accidents is the key.”

TAIPA has seen relatively stable, though high, combined-loss ratios over the last several years, Johns said. In 1996, TAIPA reported a 109.2 percent combined loss ratio, followed by 113.3 percent in 1997 and 111.3 percent in 1998.

“The losses were considerably high, and will likely remain so,” Johns said.

While TAIPA sought a 13.4 percent rate increase this year, the Office of Public Insurance Counsel proposed a decrease of more than 20 percent.

Administrative law judges who heard testimony in the case for the State Office of Administrative Hearings recommended a decrease of approximately 6.7 percent. The Texas Department of Insurance staff recommended a 1.6 percent increase.

In 1998, TAIPA rates were lowered by 27.4 percent after several years of increases. That year, TAIPA had requested a 1.6 percent increase in rates. In 1997, TAIPA’s rates were increased 3.9 percent after an increase request of 29.9 by the assigned risk insurer.

TAIPA’s new rates will take effect Dec. 1. About 50,000 Texas drivers currently obtain their liability insurance through TAIPA, though Johns said the numbers have been dwindling significantly in recent years.

“And that’s good,” he said. “You really want zero insureds in [TAIPA], but that will never happen.”

Topics Texas