Lobbying Groups Gear Up for Legislative Session

Even though the next Texas legislative session is still months away, lobbying organizations with ties to insurance are polishing their strategies for influencing state lawmakers. Last month, the Austin American Statesman reported that a new insurers’ group had sprung up, the Texas Coalition for Affordable Insurance Solutions, whose members include insurance companies and one insurer association. Shortly after that, a consumers group calling itself the Policyholders of America released a proposed agenda for legislators dealing with homeowners insurance issues.

Members of the Texas Coalition for Affordable In-surance Solutions include State Farm, Allstate, USAA, Nationwide and the American Insurance Association. Their reported goals are to prevent lawmakers from implementing legislation that would increase state control of both insurance rates and currently non rate- regulated companies—such as Lloyd’s companies and county mutuals—or limit the use of credit information in setting rates, among other things.

Policyholders of America, which formed earlier this year, describes itself as a nonprofit, nonpartisan association of homeowners. Its president is Melinda Ballard, whose mold infested Dripping Springs home spurred a lawsuit that resulted in a $32 million judgment against a subsidiary of Farmers Insurance Group in June 2001.

The intentions of Policy-holders of America are pretty much at odds with those of the insurers’ group. Stating that “Rate abuse has gotten so out of control in Texas that it has become the hottest issue in this campaign season,” Ballard laid out a set of problems—and suggested solutions—that her group believes Texas legislators should consider in the coming session, which officially begins in January 2003.

“Homeowners are up-in-arms, real estate closings are being thwarted, homeowners who put a claim in are being targeted and punished and all of this has taken its toll on the already unstable Texas economy,” stated Ballard.

One target the group is aiming at is the element in Texas law that allows Lloyd’s companies and county mutuals to operate in the state without being subject to rate regulation. Policyholders of America assert that “nearly 95 percent of the insurers operating in Texas today have used this loophole to dodge regulation and reporting of requested claims information and underwriting data.” The group wants the “loophole” to be closed and all insurers required to get state approval for all rate hikes. Insurers would also have to justify rate hikes. Those companies balking at the requirements would be subject to benchmark rates.

Another area it wants addressed by lawmakers is fraud and bad faith committed by insurance companies, instances of which the Policyholders claim are on the rise. Calling some insurers “habitual perpetuators,” the group said tort reform that includes a “three strikes, you’re out” policy would help protect the public from those companies. Under such a program, insurers found by a jury of Texas citizens of having committed fraud/bad faith three times within a three-year period would be banned from doing business in the state.

Other items on the Policy-holders of America agenda include: The inability of homeowners to make repairs until the insurance company has completed its investigation of a claim; Insurer practices of punishing policyholders for making claims by canceling their policies or black-balling homeowners and properties with previously reported water damage claims; Delays, denials and disputes over water damage claims that the group says has led to mold infestation in homes; Discrimination and cherry-picking of customers; And unfair use of credit histories in underwriting.

Most insurance-related organizations, meanwhile, believe that the legislature should allow the free market and the introduction of new policy forms to the Texas market a chance to equalize. In a statement regarding reforms proposed by state Representative Gary Seaman of Corpus Christi earlier this year, the Insurance Council of Texas asserted: “The insurance industry believes these diverse insurance products along with rate making freedom for insurers will provide a broad range of choices for consumers and stabilize the homeowners insurance market leading to lower prices.”

Commenting on the legislative possibility of increased regulation of homeowners insurance providers, Jerry Johns, president of the Austin-based insurance trade association Southwestern Insurance Information Service stated: “The solution to the homeowners crisis…is not more regulation. An openly competitive market in which consumers can select from many different companies, products and coverages at rate levels determined by their needs will always be the market that produces the lowest prices.

“A fundamental principle of insurance is that in return for the premiums that policyholders pay, an insurance company makes a contractual promise to pay covered claims. Homeowners deserve for their insurance companies to be solvent and financially able to protect Texas homes.”

Topics Carriers Texas Legislation Homeowners