Senate Passes Insurance Reform Bill

The Texas Senate passed, on a 28-3 vote, Senate Bill 14, major insurance reform legislation that addresses rate regulation and the use of credit-based insurance scores, among other things.

Generally, the bill regulates the rates of personal auto and homeowners insurance under a prior approval system and places restrictions on the use of insurance scores, according to the National Association of Independent Insurers (NAII).

Pasadena Senator Mike Jackson, author of the bill, attributed its successful passage to the bipartisan work of the Senate. Jackson said the bill will allow for both affordable and available insurance and should provide for reductions in homeowners insurance.

According to a notice on the Senate Web site, SB 14 would grant more authority to the Commissioner of Insurance by requiring that he approves insurance companies rates and forms before they would be allowed to use them. New rates and forms are among anticipated changes that lawmakers predict will result from the new legislation. In addition, insurers would also be required to file all rating manuals and supplementary supporting data along with their rates.

A topic of hot debate, use of credit scoring, was not banned outright. However, the bill does prohibit the unfair and discriminatory use of credit scoring. San Antonio Senator Leticia Van de Putte said that by mandating insurers to make their credit scoring criteria data public, it will add more sunshine on the practice.

The bill was previously halted in its movement to the Senate floor by eleven Democratic senators, including Van de Putte, who sent a letter to Lt. Governor David Dewhurst saying they would not vote on the bill its previous form.

SB 127, which addresses water claims, was also approved by the Senate. The legislation, authored by Horseshoe Bay Senator Troy Fraser, would prohibit insurance companies from denying coverage on the basis of previous water claims on a house that has since been fixed. The legislation would also require public insurance adjusters to be licensed and to follow strict guidelines and procedures.

With the passage of major insurance reform legislation in the Senate, the NAII expressed its support for legislative reforms that will restore marketplace stability through competition.

“It is extremely critical that lawmakers focus on developing solutions that will encourage competition among insurance companies and greater choice for consumers,” said Donald Hanson, NAII southwestern regional manager. “While some reforms in SB 14 are appropriate, some aspects of the bill establish overly bureaucratic control of insurance prices and will preclude companies from adapting to changes in the marketplace. This will serve only to hurt consumers. The restoration of a healthy, competitive insurance marketplace will create an environment where coverage is affordable for consumers.”

As the insurance reform debate moves to the House, NAII will continue to advocate for meaningful reform. “Lawmakers must search for a comprehensive solution that promotes flexibility in addresses losses, coverage and the regulation of business practices. This is a complex issue and requires policymakers to take a long-term perspective that will result in a fair solution that serves the interests of consumers, public policy makers and the insurance industry,” Hanson said.

Topics Legislation