Insurance Subcommittee Studies Skyrocketing Insurance Rates
Homeowners' insurance rates in Texas have increased significantly since last fall. The insurance companies say it's due to expensive water damage claims. The policy owners say there is no way that rates should more than double in a year for the same coverage.
Figuring out what happened is the charge of the Senate Business and Commerce Committee's Subcommittee on Insurance Rates. Today, July 16, 2002, the subcommittee met in Austin to discover whether rates are headed even higher, and to hear how consumers have been affected by the increases.
The first invited witness was Jose Montemayor, the Commissioner of the Texas Department of Insurance(TDI). Phil Presley from TDI also testified. Montemayor said that some homeowners rates have gone up as much as two hundred percent, with many of the increases coming from State Farm, Allstate and Farmers Insurance, the three companies that control two thirds of the Texas Homeowners insurance market. He reported that Texans with less than perfect credit can have surcharges of as much as twenty five percent on their premiums.
Montemayor said part of the answer to rising problems would be to give consumers more choice in what they're purchasing. He suggested that rather than simply having one standard form for all homeowners coverage in the state that the companies could sell different levels of coverage.
Presley testified that the levels of losses due to mold claims will not decrease any time soon, saying that the only way to reduce costs is to have new forms with lesser coverages. He also said that companies were today taking policyholders out of companies subject to rate regulation and placing them with subsidiaries that were not subject to state rates.
Public testimony included industry and consumer organization representatives. Consumer organizations called the state's insurance system a classic example of what happens in an unregulated marketplace and that people can no longer afford homes not because of mortgage costs, but rather due to the insurance burden. Mold coverage has become a burden in other states as well, and legislation is currently before Congress to bring it under a program such as the one which now exists for flood insurance.
The Subcommittee on Insurance rates is chaired by Senator Mike Jackson. Other members include Senators John Carona, Troy Fraser, Eliot Shapleigh, Leticia Van de Putte and Eddie Lucio Jr. Also sitting in with the committee was Senator Kip Averitt.
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