Rate and Switch
Remember insurance reform? Given all thatÃ¢â‚¬â„¢s transpired in Texas politics since the 2002 electionÃ¢â‚¬”the congressional redistricting, tort reform, social services budget, and school finance battlesÃ¢â‚¬”itÃ¢â‚¬â„¢s easy to forget that skyrocketing homeownersÃ¢â‚¬â„¢ insurance premiums was the big issue of the last campaign. When the Legislature convened in early 2003, Gov. Rick Perry declared rate reduction an emergency issue for lawmakers.
Well, itÃ¢â‚¬â„¢s been roughly one year since Perry signed the insurance reform (and we use that term loosely) bill into law. And while the nitty-gritty of insurance regulation is almost incomprehensible to anyone whoÃ¢â‚¬â„¢s not a policy wonk, itÃ¢â‚¬â„¢s fairly easy to quantify success. Did the rates drop or not? LetÃ¢â‚¬â„¢s go to the videotape: The Texas Department of Insurance reports that 35 out of 37 companies have agreed to homeownersÃ¢â‚¬â„¢ rate rollbacks, some as high as 15 percent. That sure sounds good. But the two holdoutsÃ¢â‚¬”Farmers and State FarmÃ¢â‚¬”write 41 percent of homeownersÃ¢â‚¬â„¢ policies in Texas. Without cooperation from such a huge chunk of the market, the insurance department has reduced rates by a statewide average of only 4 percent. ThatÃ¢â‚¬â„¢s a far cry from the 12-to-18 percent cut lawmakers promised their reform bill would achieve.
So the rates arenÃ¢â‚¬â„¢t down much. WeÃ¢â‚¬â„¢re shocked. This is, after all, the predictable result of passing a so-called reform bill written largely by insurance industry lobbyists. As you may recall, during the 2003 session, Democrats and some Republicans clamored for real reform: forced rate rollbacks of at least 15 percent (even this would have been a pittance since some consumers saw their rates jump more than 100 percent in 2002). Instead, the Republican leadership went with the more lax, industry-favored approach. Under the new law, companies are simply required to submit their rates to regulators for approval.
Of course, the passage of an industry-written bill wasnÃ¢â‚¬â„¢t a surprising development. Big Insurance helped pay the way for the RepublicansÃ¢â‚¬â„¢ long-sought takeover of the Texas House. Farmers and State Farm donated lavishly to the Texas Association of Business and the Texans for a Republican Majority political action committee, whose 2002 electoral activities are the subject of a Travis County grand jury probe.
That was a wise investment for the industry. After the reform legislation took effect in the summer of 2003, insurance companies have overcharged Texas homeowners more than $400 million, according to consumer groups Texas Watch and the AARP, which are leading the fight for lower rates.
Apparently, enough constituents have complained about the lack of actual savings that lawmakers have begun to fear the votersÃ¢â‚¬â„¢ ire. Lt. Gov. David Dewhurst convened a press conference at the Capitol on June 16 to express his righteous indignation that your homeownersÃ¢â‚¬â„¢ insurance rates havenÃ¢â‚¬â„¢t fallen. Ã¢â‚¬Å“If further legislative action is needed, weÃ¢â‚¬â„¢ll do it,Ã¢â‚¬ Dewhurst told reporters. Ã¢â‚¬Å“When we promised rate relief to our homeowners, we meant it.Ã¢â‚¬ By now, those kinds of statements of outrage have a familiar ring to them.
ItÃ¢â‚¬â„¢s hard to summon much anger at Farmers and State Farm. TheyÃ¢â‚¬â„¢re just making self-interested business decisions: using the rules the Lege established to earn as much money as they can (that is, after all, what corporations do). They wonÃ¢â‚¬â„¢t give consumers a rate-cut until government arm-twists them into it.
So the burden falls on state lawmakers. The question remains: In the Texas Legislature, where Big Insurance calls the shots, will lawmakers do more than posture. Ã¢â‚¬”DM