RESIDENCE RATES TOO HIGH

In a highly anticipated preliminary report to the Texas Legislature, Insurance Commissioner Jose Montemayor told lawmakers that some of the state's 12 largest homeowners insurance companies are charging rates that are too high by as much as 25 percent in some cases. Montemayor presented his initial findings from filed insurance company data to the Senate Business and Finance Committee. Homeowners insurers were required to file information on their rates with the Texas Department of Insurance under the provisions of the recently passed Senate Bill 310. The report was based on a study of the information provided by the top 12 non-rate regulated residential property insurers in the state, which command about 83 percent of the market. Rates from Jan. 1, 2000 to the present were reviewed. The report said where rates are excessive, two factors were primarily the cause: Companies charging for one type of coverage while providing a policy with less coverage; and companies inappropriately forecasting their loss trends based on policies they no longer sell. Rates since 2000 have increased an average of 38 percent statewide. The report speculates that the increase would have averaged 56 percent had TDI not acted on coverage forms. Rate changes for individual companies ranged from 22 percent to 67 percent. The report showed that discounts, credit scoring and location of the residence influenced the rates individual policyholders were actually charged. Legislators are expected to use the findings in the report as they finalize legislation on how the state's homeowners insurance market is regulated. Montemayor's final report is expected on March 28.

SENATE WANTS RATE ROLL BACK

Lieutenant Governor David Dewhurst is working with the members of the Texas Senate to reach a consensus on driving homeowners insurance rates down by 12 to 15 percent, according to a Senate announcement. The chair of the Business and Commerce Committee, Senator Troy Fraser of Horseshoe Bay, said he is drafting a bill to give the commissioner of insurance the authority to make companies bring rates back down to a level that is commensurate with the current losses. Dewhurst and Fraser are also for regulation of credit scoring practices. The two favor regulating the use of credit history in insurance underwriting rather than banning it altogether. They want to allow its use as a tool, as long as it is not the sole factor in underwriting and rating policies. "If we put sunshine on the issue, then not only do we know what they're doing, but we can assure the public that the practices they are doing are non-discriminatory and are fair in the way that they're used," Fraser said. Fraser wants to ensure that people with little or no credit, those who have had medical emergencies, and those with disputed credit are not discriminated against.

TEXAS JOINS MW CE ZONE

TDI announced the state has entered into an agreement with the Midwest Zone States regarding continuing education (CE) reciprocity. With some exceptions, a course approved by a participating state will be accepted by other participating states merely by filing a standard filing form, one or two attachments, and payment of applicable fees. The participating states have agreed that they will not re-review another state's CE course or instructor approval. A standard course filing form will be used for reciprocity filings. In Texas, filings for self-study credit are limited to 15 credit hours, and classroom courses to 30 hours credit. The program will be effective in Texas on April 1, 2003. At that time, Texas will begin accepting filings under the agreement, and Texas providers may file in other participating states under the agreement. The participating states are: Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri, Nebraska, New Hampshire, Nevada, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Dakota, Tennessee, Texas, Utah, Vermont, Wisconsin and Wyoming. For more information on the agreement and the filing forms, visit TDI's Web site at www.tdi.state.tx.us.

LSLA CONVENTION SET

The Louisiana Surplus Line Association (LSLA) will hold its 2003 Annual Convention April 2-4, 2003 at the Beau Rivage Resort & Casino in Biloxi, Miss. Convention participants will have the opportunity to explore "PROBLEM ISSUES IN THE MARKET." One of the featured speakers, Terry Ebbert, chief of Homeland Security for the City of New Orleans, will address "Terrorism Issues & The Importance of Our Region to the Economic Health of Our Country." Other speakers include Graham Clarke, chief executive, Miller Group, London; Robert Wooley, Louisiana Acting Insurance Commissioner; and George Dale, Mississippi Commissioner of Insurance. In addition, Neal Simpson, regional underwriting manager, AIG, will present "The D&O Industry in 2003: The Need for Responsible Leadership." Trenton Eversull, NECC, will speak on "Mold Issues," and David Cefalu

of Associates Claims & Insurance Services will present "Residential Contractors Underwriting, Claims Issues & Trends." For more information about the convention, visit the LSLA Web site at www.lsla.bizland.com.

TEXANS WANT REGS PLUS CREDIT BAN

Both the Dallas Morning News and the Houston Chronicle reported that a new poll revealed that the majority of Texans want the legislature to ban insurers' use of consumers credit history in underwriting and rating. In addition, Texans want to see more regulation of homeowners insurance companies and prior regulator approval of rate changes by insurers. The Texas Poll released by Scripps Data Center, revealed that some 67 percent of the Texans surveyed want the use of credit history by insurers prohibited. Seventy-nine percent of those polled believe the state should regulate homeowners insurance companies, and 84 percent think state regulators should approved rate changes before they take effect. However, despite lawmakers' efforts in the current legislature, 57 percent of the poll participants said they didn't think legislators will effectively reduce homeowners' rates before they adjourn on June 2. The poll conducted in Feb. 2003 was a random phone survey of 1,000.

AIKENS' RECORD EXPUNGED

LaVera Aiken and Lanny Aiken Insurance Agency Inc. in Granbury, Texas, were completely exonerated of all allegations related to property insurance coverage for Hood County and all reference to proceedings against the Aikens have been expunged from court records. According to the Aikens, in 2000 the insurance agency and LaVera Aiken were indicted on charges of misapplication of a premium for property insurance. LaVera Aiken, a broker, had handled the county's property insurance for many years. When a county official called an insurance company regarding hail damage to the courthouse, a company spokesman wrongly denied coverage existed, leading the official to assume the buildings were not covered. "In order to obtain broader coverage," LaVera Aiken said, "we recommended that the county switch coverage from their 'old' insurance company which had covered them for years to another company at renewal time. Although the 'new' company had received the application, inspected the buildings and notified us they had placed the coverage into effect, we had not received the actual policy. Meanwhile, however, the renewal coverage with the 'old' company was never canceled so the county did, in fact, have coverage with both companies." Eventually, the hail damage claim of over $348,000 was paid by insurers. Investigations conducted by the Hood County district attorney and TDI revealed that coverage in fact existed and that Ms. Aiken had done nothing wrong. "I was told by the TDI that they did not plan to bring disciplinary action against either Ms. Aiken or the insurance agency," said Robert Kuhn, an Austin attorney who represents the Aiken Insurance Agency. "Actually, the TDI said there was nothing to dismiss since no official complaint was ever filed."

TDI WANTS TO GIVE BACK $7M

TDI is searching for 33,000 Texans, each of whom has a $209.50 check coming as his or her piece of a small insurance company that failed in 1992. According to TDI about $7 million will be returned to policyholders. People who held policies of Members Mutual Insurance Co. of Farmers Branch on or after Jan. 1, 1991, and have not received their checks should call TDI at (800) 578-4677. Callers will be asked to verify their identities to make sure they are Members Mutual customers entitled to one of the unclaimed checks. The company's special deputy receiver (SDR) initially mailed checks early in 2002. Members Mutual specialized in providing insurance for credit union members. A state district court judge in Austin placed the company in receivership in September 1992. After all of the defunct company's claims and debts were paid, $13.8 million in company assets remained for distribution to the policyholder/owners. This is the biggest distribution on record from a Texas receivership of an insolvent mutual insurance company. Checks were mailed to 66,000 people named in Members Mutual's policyholder records, but about half of the checks were returned by the postal service because of invalid addresses. TDI has used Internet searches and other means to locate the owners of the returned checks. Questions about the distribution should be directed to TDI's Liquidation Oversight Division at (800) 578-4677, extension 3-6450, for Jean Sustaita, or extension 5-8152 for Bill Carter.