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Texas Observer VOLUME 96, NO. 13 A Journal of Free Voices Since 1954 Founding Editor Ronnie Dugger Executive Editor Jake Bernstein Editor Barbara Belejack Associate Editor Dave Mann Publisher Charlotte McCann Managing Publisher Jim Ball Circulation Manager Rosie Bamberger Chavez Art Direction Buds Design Kitchen Poetry Editor Naomi Shihab Nye Copy Editor Roxanne Bogucka Webmaster Adrian Quesada Interns Kris Bronstad, Jeremy Brown, Megan Giller, Joe Munch, Sofia Resnick Contributing Writers Nate Blakeslee, Gabriela Bocagrande, Robert Bryce, Michael Erard, James K. Galbraith, Dagoberto Gilb, Steven G. Kellman, Lucius Lomax, James McWilliams, Char Miller, Debbie Nathan, Karen Olsson, John Ross Staff Photographers Alan Pogue, Jana Birchum. Contributing Artists Sam Hurt, Kevin Kreneck, Michael Krone, Gary Oliver, Doug Potter, Penny Van Horn, Gail Woods. Editorial Advisory Board David Anderson, Chandler Davidson, Dave Denison, Sissy Farenthold, John Kenneth Galbraith, Lawrence Goodwyn, Jim Hightower, Kaye Northcott, Susan Reid. In Memoriam Bob Eckhardt, 1913-2001, Cliff Olofson, 1931-1995 Texas Democracy Foundation Board Lou Dubose, Ronnie Dugger, Marc Grossberg, Molly Ivins, D’Ann Johnson, Jim Marston, Gilberto Ocanas, Bernard Rapoport, Geoffrey Rips. tents copyrighted 2004, is published biweekly except every by the Texas Democracy Foundation, 307 West 7th Street, Austin, Texas 78701. E-mail [email protected] World Wide Web DownHome page . Periodicals Postage Paid at Austin, Texas. Subscriptions One year $32, two years $59, three years $84. Full-time students $18 per year; add $13/year for foreign subs. Back issues $3 prepaid. Airmail, foreign, group, and bulk rates on request. Microfilm available from University Microfilms Intl., 300 N. Zeeb Road, Ann Arbor, MI 48106. Indexes The Texas Observer is indexed in Access: The Supplementary Index to Periodicals; Texas Index and, for the years 1954 through 1981, The Texas Observer Index. POSTMASTER Send address changes to: The Texas Observer, 307 West 7th Street, Austin, Texas 78701. The Books 6. the Culture section is partially funded through grants from the City of Austin under the auspices of the Austin Arts Commission and the Writer’s League of Texas, both in cooperation with the Texas Commission on the Arts. Remember insurance reform? Given all that’s transpired in Texas politics since the 2002 electionthe congressional redistricting, tort reform, social services budget, and school finance battlesit’s easy to forget that skyrocketing homeowners’ 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, it’s been roughly one year since Perry signed the insurance reform \(and And while the nitty-gritty of insurance regulation is almost incomprehensible to anyone who’s not a policy wonk, it’s fairly easy to quantify success. Did the rates drop or not? Let’s go to the videotape: The Texas Department of Insurance reports that 35 out of 37 companies have agreed to homeowners’ rate rollbacks, some as high as 15 percent. That sure sounds good. But the two holdoutsFarmers and State Farmwrite 41 percent of homeowners’ 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. That’s a far cry from the 12-to-18 percent cut lawmakers promised their reform bill would achieve. So the rates aren’t down much. We’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 percan 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 industrywritten bill wasn’t a surprising development. Big Insurance helped pay the way for the Republicans’ 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. Since 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 voters’ ire. Lt. Gov. David Dewhurst convened a press conference at the Capitol on June 16 to express his righteous indignation that your homeowners’ insurance rates haven’t fallen. “If further legislative action is needed, we’ll do it,” Dewhurst told reporters. “When we promised rate relief to our homeowners, we meant it?’ By now, those kinds of statements of outrage have a familiar ring to them. It’s hard to summon much anger at Farmers and State Farm. They’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 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? DM EDITORIAL Rate and Switch 7/2/04 THE TEXAS OBSERVER 3