Homeowner MAP Barely Breathing

In September of 1994, a busload of insurance industry members, legislators and business folks toured some of inner city Houston to see what Democratic Sen. Rodney Ellis saw in his district. Insurable houses. That’s what he wanted them to see, at least, and at the end of the tour, several insurers made pledges to offer coverage to areas that Sen. Ellis and other consumer advocates believed were left without substantive homeowners insurance options.

Sen. Ellis, along with Rep. Harold Dutton, another Houston Democrat, solidified these pledges in the 1995 Legislative session by passing House Bill 1367, which established the Market Assistance Program.

The homeowners MAP began accepting applications on Oct. 15, 1996. Between that day and Aug. 31, 2000, the end of the fiscal year, 372 applications were received and 52 policies were written through the program. During fiscal year 2000, the homeowner MAP issued nine policies.

By contrast, the auto MAP, created in 1998 by former Insurance Commissioner Elton Bomer through the rulemaking process, does swift business. Over the course of its life, which is just over half of the span of the HO MAP, it has received 5,302 applications,

Logistics
To participate in the homeowners MAP, a person’s home must be in insurable condition, be located in a designated “underserved” ZIP code, and have been turned down for coverage by at least two licensed insurance companies. One of the two rejections may be a rejection of an application for insurance, a cancellation or refusal to renew an existing policy. The program is not only for homeowners—it includes coverages for renters and mobile home owners. There are currently 427 ZIP codes included in the property program.

Even though the program was spawned after perceived problems in the Houston area, most of the traffic through the program has been from Dallas and Tarrant counties, according the Lee Jones, spokesperson for the Texas Department of Insurance.

Since the program was started, TDI has spent close to $115,000 trying to inform consumers that both the homeowners MAP and auto MAP exist to help them. This money has been spent in a variety of ways: printing brochures, billboard advertising, banner ads on buses, placards on taxicabs, utility bill inserts, newspaper ads, Val-Pack coupons, and others. Over 18 press releases were issued in 1997 and

1998, and there have been several newspaper articles on the programs.

Support for the program
One of the things set out in HB 1367 was a provision for periodic review of the MAP. The bill called for an executive committee to review the operations at least annually and report to the insurance commissioner as to the “necessity for continued operation of the voluntary program, need for establishment of a mandatory program, or the need for establishment of a FAIR Plan.”

The bill also laid out that the program shall be terminated “only upon approval of the commissioner, but in no event earlier than 48 months following the commencement date of the initial plan.”

According to Lee Jones, the last annual review took place in August 2000. The executive committee saw no need to recommend any changes—either for making the program mandatory or for shutting the program down.

“One of the things they discussed was that there were a lot of other things going on to improve availability in the homeowners market [over the last four year],” Jones said. For example, insurers are no longer allowed to use underwriting guidelines that use the age of a house as a reason to deny a risk. Also, higher deductibles are allowed, which has been used extensively by insurers to reduce their risks in places like Tarrant County.

Despite the apparent low use of the homeowner MAP, the program still garners support from the industry.

“First of all, we are very supportive of the voluntary MAP and will continue to support it,” said Jerry Johns, president of Southwestern Insurance Information Services, an insurer trade association. “[The low number of applications] also sends the message that the voluntary market is fulfilling the needs of consumers.”

“This program is extremely helpful to those who need this kind of coverage. … This is not a controversial issue for us.”

Commissioner Montemayor, while acknowleging that the program has not produced stellar numbers, said he’s not ready to give up. “The idea of a residential property Market Assistance Program to assure the availability of coverage is a very noble idea,” Montemayor said. “Obviously, this program has been less than successful in attracting consumers, despite our best efforts to spread the word. However, I never want to give up until the Legislature tells me to give up.”

Topics Carriers Texas Homeowners