Texas Commissioner to Insurers: Don’t Jump the Gun on Raising Rates

Texas Insurance Commissioner Mike Geeslin told lawmakers at a hearing on Sept. 24 that compared with previous years, property/casualty insurance companies’ loss ratios will likely be worse “for this calendar year and the first three quarters of 2009,” due to losses from Hurricane Ike and other 2008 storms. But he said dire warnings that rates will likely skyrocket due to carrier losses this year are “overstatement.”

During the previous four years carriers have had good loss ratios, Geeslin explained during a hearing before the Texas Sunset Advisory Commission in Austin. Therefore, he said, the market should not jump to conclusions regarding rate increases.

Hurricane Ike “is the event we have all anticipated would happened,” he said and most companies have allowed for the possibility of such a catastrophe in setting their rates. The built-in catastrophe loads vary from company to company, Geeslin said. “The point is it’s not as if most companies have ignored this type of year coming and most companies have made provisions for it in their rate structures.”

As far as market impact from Hurricane Ike, tighter underwriting restrictions and a reduced willingness to write in Tier 2 counties will likely result, he said. “You can only put wind risk in TWIA [Texas Windstorm Insurance Association] in Tier 1 counties,” Geeslin said. So in Tier 2 counties, like a portion of Harris County and Fort Bend County, commercial risks are especially likely to feel the pinch. In those counties there was a “tightening in the market for commercial risk already. I think that will be amplified,” he said.

Ultimately, “rates must be justified,” Geeslin said. Carriers “can’t just hit the hysteria button and offer something that has no actuarial or economic justification whatsoever.”

The position of the insurance department and the Office of Public Insurance Counsel is that they are there to maintain the stability of the market and to “make sure consumers are treated fairly,” he said.