Start the Charade

The session hasn’t started yet, but the insurance reform chess game is already beginning. It began predictably, with Governor Perry moving his pawn, Troy Fraser, the Republican Senator from Horseshoe Bay. A friend and frequent water-carrier for Perry, Fraser has pre-filed a set of bills that seem to reflect the governor’s preferred reform model for the much-maligned industry. The bills take on some controversial practices, such as using customers’ credit ratings to set premiums and refusing mold coverage to policyholders with past water damage claims. Fraser’s package would also limit cherry-picking, that is, pulling out of unprofitable lines, such as home insurance, while still writing policies in others, like auto coverage. But the Fraser reforms stop short of true rate regulation. Due to a loophole in the existing law, rates for most home policies and many auto policies are currently not regulated at all. Fraser is calling for a so-called “file and use” system, in which companies inform the Department of Insurance of what rates they plan to charge, and the Department is given just 60 days to challenge the rates, after which they automatically go into effect.

Consumer advocates have criticized file and use as too heavily weighted toward industry. In order for it to work, they say, regulators must have ready access to data about pricing and risk that the insurance companies have fiercely protected in the past. Critics instead favor a return to something like the benchmark system created ten years ago, in which the Department sets a target rate for each type of policy and companies are required to charge customers premiums that fall within a given range of the target.

If re-regulation of rates is inevitable, file and use is the industry’s preferred model, and Fraser has made it clear–tough talk notwithstanding–that he is their dog in the fight to come, at least in the Senate.

Less clear is who will be fighting for policyholders this session, after the rout the Democrats suffered at the polls in November. Presumptive Speaker of the House Tom Craddick has promised to appoint Democrats to at least a few committee chairs. Presumably, he’ll pick from those who were the first to jump ship after the election returns came in, including a dozen or so members of the Mexican American caucus. But the insurance committee will be headed by one of his own and stacked deep with industry-friendly R’s.

How do we know? Craddick has already unveiled his own package of “bills”: Bill Ceverha, Bill Miller, and Bill Messer. These current and former lobbyists are heading up his transition team and coordinating his late train fundraising binge. If you want access to the Speaker’s office this session, you’ll have to go through these men. For the insurance companies, access to the Bills–and thus to the Speaker–is a given. All three men have insurance connections. Ceverha is not currently a registered lobbyist, but as the head of the PAC that worked for Craddick’s Republican House majority, Ceverha managed to wring $150,000 out of Farmer’s Insurance. This donation came while the company was locked in a rhetorical battle with the governor’s office and threatening to leave the state. Bill Miller, meanwhile, is still acting as Farmer’s spokesman in the high-profile battle. The third Bill, Mr. Messer, is currently representing State Farm.

With Craddick on their side, the industry can stop worrying about fighting off a benchmark system and start working on their own wish list, which inevitably includes more, yes more, tort reform. –N.B.

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Published at 12:00 am CST