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THE BENEFITS OF CAM UF14AGE hurricane. That’s due in part to a lax regulatory system in which the Texas Department of Insurance has little power over the market. Insurance companies in Texas can raise rates whenever they wish, and simply have to inform regulators. This decidedly industry-friendly arrangement, called a “file and use” system, was implemented in 2003, during the last crisis over home insurance. Insurers have been taking full advantage lately. The most recent increase came courtesy of Farmers Insurance Group, the state’s third-biggest carrier, which in mid-February implemented double-digit rate hikes. Roughly 700,000 Texas homeowners will see their rates jump 10 percent to 12 percent. Farmers announced the rate hike late last year. The insurance departmentwhich can contest increases only after the fact reviewed the proposal, decided the rates weren’t exorbitant, and chose not to challenge them. Last year, State Farm Lloyds Inc., the state’s largest insurer, raised rates 3 percent. “These kind of double-digit rate increases at a time when homeowners are struggling with the economy are pretty unconscionable and really arrogant:’ says Alex Winslow with Texas Watch, a consumer advocacy group. “They’ve got to know that the Legislature is considering serious reforms, and to arrogantly come in and raise their rates that way is disappointing.” State lawmakers are likely this session to alter the way the home insurance market is regulated. Many legislators would like to give the insurance department a say over rates before they go into effect. This is known as prior approval, and it’s a popular idea with Texans, according to a recent poll commissioned by Texas Watch. The group hired Hill Research Consultants, a polling firm with a reputation for independence and a history of working with Republican candidates. About 600 randomly selected voters were surveyed, and 75 percent favored prior approval. Only 16 percent were against it. The margin of error was 4 percent. Of course, the industry still holds a lot of influence at the state Capitol, and has gotten its way many times before. But if Texans favor more regulation as strongly as the Texas Watch poll suggests, then the industry’s golden period of unfettered rates may soon end. Dave Mann MARCH 6, 2009 THE TEXAS OBSERVER 7