The Texas insurance market may continue to experience serious affordability and availability issues if lawmakers cannot find an answer to the state’s insurance crisis that encourages competition and more choices for consumer, according to the National Association of Independent Insurers.
After four days of debate and the consideration of over 100 amendments, the Texas House of Representatives passed SB 14. Now a conference committee of Senate and House members will meet to iron out the differences between the House and Senate versions of the bill. The conference committee will have to tackle issues such as use of credit-based insurance scores, rate rollbacks, withdrawal requirements, regulation of the rate filing system, underwriting guidelines and rating territories.
While the amendment to ban the use of credit has drawn much notice, the National Association of Independent Insurers (NAII) is calling legislators’ attention to the central issue at the heart of the debate – implementing reforms that makes insurance more affordable, with more companies competing for business.
“Lawmakers are quickly running out of time to craft a solution that advances reforms that will lead to long-term price stability, increased competition and greater consumer choice. This is what consumers want and the marketplace needs,” said Donald Hanson, NAII southwest regional manager. “In order to resolve this crisis, lawmakers are going to have to address the issue of insurance availability. When the dust settles on the reform effort, an effective solution to this crisis must include provisions that will immediately restore competition to the marketplace. Encouraging competition and consumer choice are the critical ingredients to bringing about an effective solution. To do otherwise will ensure that insurance issues will continue to plague the marketplace for the foreseeable future.”
The insurance reform debate has been characterized by calls for rate rollbacks, a ban on the use of credit information, mandated county-wide rating territories and other provisions that would create an unique regulatory framework in Texas. “The development of a unique regulatory system that includes provisions that discourage new insurance companies from entering Texas and keeps others from getting back into the marketplace will make it even harder for consumers to find insurance,” Hanson said.
In addition to SB 14, the Texas legislature is addressing several other important measures. The following bills have passed the House and Senate in different forms and the differences are currently being considered:
· SB 127 is intended to prevent an individual or their property from being unfairly stigmatized in obtaining residential property insurance as the result of filing a water damage claim. The bill prohibits insurers from imposing a premium surcharge if an appliance caused the water damage claim.
· SB 422 establishes a process for the state to conduct random samples of registered automobile owners for proof of financial responsibility. The random sample approach is less intrusive on insurer operations than the mandatory reporting that have been considered. The bill also contains a provision that would require insurers to offer consumers reduced Uninsured Motorist/Underinsured Motorist (UM/UIM) coverage. However, the requirement to obtain a written rejection of the UM/UIM coverage and a consumer’s signature on a form explaining the amount of coverage available and the amount of premium saved due to the rejection of coverage poses concerns for the industry.
· SB 473 is intended to provide consumers with the ability to “freeze” their consumer credit reports as a mechanism to prevent identity theft. The Texas legislation is based on a recent enactment in California. The unintended consequence of the freeze hampers the use of consumer credit information across a wide spectrum of the economy including insurance. The bill has been amended in the House to restrict the applicability of the “freeze” to entities that use the consumer credit information to extend credit.
· HB 4 is the comprehensive tort reform bill designed to bring more balance to elements addressing: class action lawsuits, offers of settlement, venue and forum shopping, proportionate responsibility, products liability, pre-judgment and post-judgment interest, appeal bonds, seat belts and child safety seats, medical malpractice, and liability, admissibility of evidence regarding nursing homes, and liability relating to asbestos claims.
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