"Consumer and company"

Editorial
Fort Worth Star-Telegram
May 23, 2003

The Legislature, in moving closer to final adoption of insurance industry reforms, must strike a balance between protecting consumers beset with spiraling homeowners insurance rates and companies reeling from mounting claims costs.

Lawmakers must close a legal loophole that has allowed "Lloyds" companies to operate free of rate regulation. These companies, which include all major carriers, serve 95 percent of the Texas market.

But a blanket rollback of rates to the levels of Jan. 1, 2001 -- as proposed by some legislators -- is a flawed idea.

Many rate increases imposed by companies in recent years probably were fully or at least partially justified because the industry has incurred significantly higher claims costs for water and mold damage.

The state should have the power to curb excessive rates. But it should allow significantly varying levels of coverage and rates to give homeowners more choices.

Some homeowners want Cadillac coverage, while others prefer less extensive coverage at lower rates.

Texas Insurance Commissioner Jose Montemayor has said that home insurance rates have increased an average of 45 percent since 2000, while customers are getting 22 to 24 percent less coverage.

At the same time, many insurance companies have been socked with record-high claims costs. That's one reason Texas needs to license and conscientiously regulate the proliferating numbers of mold remediation firms in the state.

Texans are paying the highest home insurance rates in the nation. But that's partially because the state has until recently mandated more extensive coverage for water and mold damage than other states.

And it's also in part because Texas -- with its perennial vulnerability to tornadoes, hurricanes, high winds, hail and floods -- tends to have more weather-related damage than many other parts of the country.

In approving final insurance reform legislation, the state's lawmakers should avoid playing politics and instead be guided by one paramount concern: fair treatment of both consumers and insurance companies.