Promoting Competition:

Texas needs public policy that promotes a competitive insurance market

To improve insurance affordability for all consumers, any legislative and regulatory action should promote healthy competition, so Texans can get the best price and the best product possible for their insurance coverage needs.

Competitive markets — offering a variety of products and prices — empower consumers by providing them greater choices and better service than highly-regulated markets. Insurance is no different.

In states where insurance companies compete freely for business based upon the products they offer, the prices they charge, and the service they provide, consumers have greater insurance product and price choices.

In states with more restrictive regulatory environments, insurance competition tends to be more limited. New insurance companies are reluctant to come into the market, while existing companies may stop offering policies or exit the market. The result is that consumers typically have fewer choices and higher rates.

A more free and robust competitive market can help resolve Texas' current insurance issues.

Until recently, insurance companies in Texas could offer a very limited selection of homeowners’ policies. Most Texans were forced to pay for coverage they didn’t want via a state-mandated one-size-fits-all homeowners policy. Homeowners, regardless of their needs and budget, had few coverage options to choose from.

In Texas' automobile insurance market, rate regulated insurers are required to use government drawn territories; government mandated rating schemes, limited discounts and narrow underwriting guidelines. Non-rate regulated insurers do not face such limitations. They are permitted to offer consumers a wider variety of pricing options that allow many customers to save on their premiums.

To make sure all Texans have access to affordable insurance in the long term, what's needed isn't more rate regulation, but measures that will foster greater, healthier competitive markets with ample customer information, disclosures and safeguards.

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