Texas Public Policy Foundation: Positive results are being realized in insurance markets embracing competition, including Texas.

The Texas Public Policy Foundation (TPPF) recently issued a report on the Texas homeowners insurance marketplace. The report found that "Texas consumers have clearly benefitted from the reduced concentration (i.e., increased competition) and reduced prices brought about by the relaxing of regulations since 2002."

Key TPPF report recommendations include:

1) Shift the focus of homeowners’ insurance rate regulation to guarding against rates that are inadequate or discriminatory.

2) Make the homeowners’ insurance system a true file-and-use system.

3) Implement a true file-and-use system for regulating policy forms.

4) Limit the supplementary information insurers may be required to submit to TDI in a rate filing.

Download TPPF report.

Institute for Policy Innovation: More companies and policies to choose from and lower prices! That’s a success story for Texas consumers.

It’s been six years since the state legislature reformed the homeowners insurance market.  As a result of those reforms, rates have decreased by 13.5 percent between 2003 and 2006, excluding State Farm, the state’s largest insurer; and they decreased by 2.7 percent including State Farm, according to the Texas Department of Insurance. More companies and policies to choose from and lower prices! That’s a success story for Texas consumers. 

But imposing an onerous price-control scheme will move further away from a true market and reduce consumers’ access to insurance coverage. We’ve just seen this play out in Florida, where the state slapped absurdly unrealistic price controls on homeowners insurance. Insurers concluded that it was no longer possible to stay in business in Florida, many are refusing to renew policies even to their best customers, and State Farm is pulling out of the state altogether. Having destroyed their homeowners insurance market, now Florida is providing taxpayer-guaranteed homeowners insurance to many Florida residents, and when the next big hurricane hits, it will probably bankrupt the state. Texas doesn’t want to go in this direction. In order for Texas to continue to prosper, just as Texas has avoided the high-tax mistakes of California, Texas must avoid the insurance price controls mistakes of Florida.

Read IPI commentary.

Independent Insurance Agents of Texas: Once again the National Association of Insurance Commissioners has included Texas data in a report comparing homeowners premiums by state, even though they advise that "Texas data should not be compared with any other state."

The NAIC report, based on 2006 data, cites Texas as the most costly state for homeowners premiums, despite the caveat. The second most costly state is Florida, even though the report says that "Florida results are not directly comparable to other states" because the premiums don't include data from Citizens Insurance Co., the largest writer of homeowners in the state and a company that by law must charge more than voluntary carriers. The report concludes that results "underestimate the cost of homeowners insurance in Florida in the private market." Louisiana is shown as having the third most costly homeowners premiums and Oklahoma as fourth. California data, which made it in the top six, does not include the cost of earthquake coverage.

Texas Department of Insurance reports show that the homeowners insurance premium statewide average is $1,214; $200 less than figures reported by the NAIC. TDI’s 2006 report would place Texas third behind Florida and Louisiana. TDI’s 2007 reports shows Texas homeowners rates dropped .7 percent from 2005 to 2006, while the NAIC shows a gain of 2.7 percent.

Read the whole NAIC report and the caveats.