In mid-January, Gov. Rick Perry launched his bid for re-election—a quest to become Texas’ longest serving governor—with a 12-stop “Proud of Texas” campaign tour of the state. The former Aggie Yell Leader began his campaign accentuating the positive. (There must be something about cheerleading that makes for talented modern campaigners; President Bush, let’s not forget, led cheers at Andover.) Perry’s initial round of television ads, timed to air with his campaign swing, features the governor putting a happy face on a dismal record and then asking “I’m proud of Texas, how ’bout you?” On his recent campaign tour, Perry boasted of progress on a litany of issues, including offering this stunner: “Homeowners’ insurance rates are going down,” Perry told crowds, according to press accounts. The veracity of that statement, with apologies to Bill Clinton, depends on your definition of “going down.”
As you may recall, homeowners’ insurance was the signature issue of Perry’s last campaign, in 2002. The state had descended into an insurance crisis, and some homeowners saw their premiums double that year. Perry promised insurance reform in the 2002 campaign and declared it an emergency issue when the Legislature convened in 2003. The resulting reform bill went easy on the industry—not surprising since insurance lobbyists largely crafted the bill. Instead of mandatory rate rollbacks, the legislation empowered the Texas Department of Insurance to simply check a company’s rates and ask for reductions if state regulators thought the prices were too high. The bill also allowed insurers to remove coverage for mold and water damage from some policies.
Did it work? According to the Department of Insurance, nine of the top 10 insurance underwriters in Texas have agreed to lower their rates by 5 to 20 percent. That sure sounds good. But the one company that hasn’t complied is State Farm, which is the state’s largest insurer, accounting for 30 percent of the market. That means overall rates have dropped by just a few percentage points.
And keep in mind that the baseline industry rates are different than the actual premiums that homeowners pay, which vary by individual policy. Texas’ average premiums are still far and away the highest in the nation. At an average of $1,328, Texas’ premiums were more than double the national average in 2003, according to a recent report from the National Association of Insurance Commissioners. In 2004, average premiums in Texas inched down to a whopping $1,248, according to numbers compiled by the state Office of Public Insurance Counsel. “We were all told that our rates would come back down,” says Alex Winslow, director of the consumer advocacy group Texas Watch. “What actually happened was they went up and stayed up.”
While rates remained high, the reform bill did reduce the money that Texas insurers paid out, and insurance company profits have soared. In 2001 and 2002, insurance companies were losing money badly, paying out as much as $1.18 in losses for every dollar they earned in premiums. But by 2004, claims had fallen such that insurers were earning about 50 cents of pure profit on every dollar they took in. That’s a nice take, and well worth the millions in contributions that the insurance industry made to Perry’s 2002 campaign and to the Republican takeover of the Texas House. (Insurance money was a main source for the coordinated efforts of the Texas Association of Business and Rep. Tom DeLay’s Texans for a Republican Majority.)
Taking pride in Texas will be much easier if and when state lawmakers pass legislation that actually benefits homeowners and not just the people who fund their campaigns.