TDI Looks into Pricing; Mold Task Force Appointed

The Texas Department of Insurance recently opened two fronts in the battle to shore up the weary homeowners market in the state. Responding to consumer complaints about excessive rate increases—exceeding 100 percent in some cases—Commissioner Jose Montemayor ordered an inquiry into possible rate discrimination by two of the state’s largest carriers. Montemayor has also appointed a panel to a new mold task force, created to develop strategies and make recommendations for dealing with turmoil caused by a rapid rise in mold and water-related claims by homeowners across Texas.

The “market conduct” examinations will initially target the Allstate and Farmers groups of insurance companies. Montemayor, who has said he’s heard of rate increases ranging between 30 percent to 300 percent, left open the possibility that more companies may undergo examinations in the future.

TDI staff members trained in investigating how insurance companies treat their customers and establish rates will conduct the examinations. The companies’ processes used to determine 2002 rates will be reviewed and the inquiry will focus on whether disparities in the rate increases amount to discrimination.

“We are hearing that some areas are harder hit by rate increases than others, and we want to make sure this is not due to unfair discrimination prohibited by Texas law,” Montemayor said.

Because Farmers and Allstate, as well as most other homeowners insurers operating in the state, do almost all of their Texas homeowners insurance business through subsidiaries organized as Lloyd’s companies or reciprocal exchanges, they are exempt from state regulation of their homeowners and other residential property insurance rates.

Montemayor has indicated that an investigation into discriminatory practices is one of the few options he has for controlling rates. Although the companies are exempt from rate regulation, the examiners can review their rates structures to determine whether rate increases are being imposed disproportionately on some policyholders.

Investigators will also be examining the companies’ use of credit scoring to determine the extent to which credit scoring is affecting the rates charged by Allstate and Farmers. Texas law does not currently prohibit the use of credit scores in pricing homeowners policies by Lloyd’s companies and reciprocal exchanges. Montemayor acknowledged, however, that the issue has caught the eye of state legislators.

“There is considerable legislative interest in the use of credit scovring in underwriting and rating,” Montemayor said. “It is important for me to understand how some residential property underwriters are using these scores.”

Although results of the studies may be used to enforce Texas laws if violations are found, the examination reports themselves are confidential.

Mold task force appointed
With mold and water damage claims being the driving force behind increased residential property rates, Montemayor took steps to get a handle on the situation by appointing a 19-member Advisory Task Force for Mold-Related Claims to develop recommendations on how insurers should respond to those claims.

Members of the task force represent indoor air quality experts, consumers, bankers, realtors, builders, contractors, adjusters and insurers. They have been asked to provide input to TDI that will assist with developing suggested “best practices” for handling and processing claims for water and mold damage.

Members of the task force include: Bob Allen, Enviro-Mold, Fort Worth; George B. Allen, Texas Apartment Association, Austin; Rod Bordelon, Office of Public Insurance Counsel, Austin; Jerry Edler, JE Adjuster Inc., San Antonio; Nancy Fisher, Texas Association of Builders, Austin; Bo Gilbert, Independent Insurance Agents of Texas, Austin; Bob Huxel, Farmers Insurance, Austin; Nancy Jones, Associated Plumbing Heating Cooling Contractors of Texas, Austi ; Dan Lambe, Texas Watch, Austin; Eric LeBrocq, Technology Servicing People Inc., Houston; Jo Betsy Norton, Allstate Insurance, Austin; Jon Opelt, Citizens Against Lawsuit Abuse, Houston; Bill Pouland, Travelers Insurance, Dallas; Denise Ruggiero, State Farm Insurance, Austin; Rob Schneider, Consumers Union, Austin; Dr. Quade Stahl, Texas Department of Health, Austin; Larry Temple, Texas Mortgage Bankers Association, Austin; Vincent Torrez, UT Institute for Air Quality, Austin; Ron Walker, Texas Association of Realtors, Austin.

Topics Texas Homeowners