On Aug. 8, the Texas Department of Insurance (TDI) ordered most of the top 32 insurance company groups writing homeowners insurance in Texas to lower their rates by up to 31 percent, a move the department expects will save Texas consumers over $510 million.
Insurers and their trade associations were quick to respond to TDI’s actions, most predicting the mandate will lead to an availability crisis.
Farmers Insurance announced plans to appeal the decision, saying it “seriously disagrees with the actuarial conclusion of the Texas Department of Insurance” In Farmers’ opinion, the mandated cutbacks would “result in significantly inadequate rates, would jeopardize the financial stability of our companies and the interests of our customers, and would cause disruption to the Texas insurance market.”
In a statement released by the Insurance Council of Texas, Mark Hanna, the ICT’s Public Relations manager said, “The rate reductions announced by the Commissioner may sound like good news to some policyholders, but if insurance companies don’t take in enough premiums to pay claims, then everyone loses.” He added that the “last three years have been tough times for both insurers and policyholders. Rates have gone up in response to unprecedented losses. Unfortunately, while mold claims have declined, the state’s traditional weather-related losses continue to escalate. Right now in 2003, Texas leads the country in catastrophic losses.”
TDI said the 32 insurance company groups represent nearly 95 percent of the Texas homeowners market. The regulatory agency’s actions were not totally unexpected. It made the decision after reviewing rating methodologies filed with the department under insurance reforms contained Senate Bill 14, passed by the legislature waning hours of the regular session. The legislature instructed TDI to complete reviews of the top 32 company groups by Aug. 10 and the remainder of the market by Sept. 9. TDI said the remaining rate reviews will be completed before that date.
The department said each affected company has been notified of the rate reductions and has 10 days to decide if it will appeal. A company can appeal the TDI ruling by requesting a public hearing before the Commissioner of Insurance to be held within 30 days of the request.
If a company accepts the rate reductions ordered by TDI, the new rates will take effect in 30 days and will appear on the policyholder’s next scheduled renewal.
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