CONSUMERS WIN AS 79th LEGISLATURE MAKES POSITIVE STRIDES IN INSURANCE COMPETITION

AUSTIN – Consumers were the winners as the 2005 Texas Legislature made positive strides in the insurance marketplace, allowing competition to continue to strengthen and addressing important issues for Texas consumers and insurers, according to the Texas Coalition for Affordable Insurance Solutions (TCAIS).

“ Consumers always win when competition is allowed to take place,” said Beaman Floyd, executive director of TCAIS. “This legislature sustained the move toward a competitive insurance market, which has led to more companies coming into Texas and lower insurance rates for policyholders.”

The Legislature passed important legislation to address uninsured motorists, market conduct, consumer privacy, identity theft, fraud protections, disclosure of fees, solvency regulation, and financial literacy for consumers – all measures supported by TCAIS.

“Sound public policy is critical to the emerging competitive insurance marketplace,” added Floyd. “Reforms passed in 2003 and additional measures passed by this Legislature create the groundwork for competition to flourish. We look forward to working with our elected officials, the Texas Department of Insurance, and Texas consumers to ensure that progress continues.”

Signs of progress have already appeared, according to Floyd. “The lion’s share of the reforms passed in 2003 just went into effect on December 1, 2004, only six months ago,” he said. Even in the early stages of reform, the promise of this new regulatory structure, called “file and use,” has attracted nearly 50 new insurance companies to Texas and led existing insurers to offer significantly more policies and choices than in prior years.

File and use” allows insurers the flexibility to offer a variety of products, prices and services, encouraging competition among companies. Under the old rules, Texas insurers couldn’t really compete because government mandates forced them to essentially offer one-size-fits-all policies for similar prices. If “file and use” is implemented properly, insurers will be facing increasing pressure from each other to provider better products, prices and services, according to Floyd.

As the insurance marketplace begins to operate under the new structure, consumers need to use their most powerful weapon – their ability to shop for the insurance policy that is best for them,” said Floyd. “File and use can be implemented in such a way that allows for even greater competition, which breeds choices in price, products and services for consumers.”

As a result of the reforms and corresponding marketplace activity, consumers are beginning to see discounts in their homeowners and auto insurance premiums. In some cases, insurers filed rates with the Texas Department of Insurance reflecting rate reductions for Texas homeowners of up to 14.5%, according to the Associated Press.

Similar progress is evident in the auto insurance marketplace as reported recently by the Fort Worth Star-Telegram: “The effects of auto insurance deregulation are starting to be felt by Texas consumers as insurers begin to offer more choices and bigger discounts on their polices.” The paper went on to say “More than ever, it’s become worthwhile to shop around.”

“New companies in Texas, rates that have stabilized or even dropped, and expanded choices are all definitive signs of progress and budding insurance competition,” said Floyd. “With public policies in place to help the marketplace flourish, Texans will continue to reap the benefit.”

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The Texas Coalition for Affordable Insurance Solutions (TCAIS) is an alliance of insurance providers and trade organizations committed to working with elected officials, the media and the public to find public policy solutions that promote a competitive insurance marketplace that maximizes benefits for buyers and sellers of insurance. TCAIS members include American Insurance Association, Allstate, Nationwide, State Farm and USAA.