The Real Emergency Issue

You’ve no doubt heard a lot about Texas’ $27 billion budget shortfall. And you may have read about Gov. Rick Perry’s attempts to distract everyone by declaring
eminent domain, sanctuary cities and voter fraud as “emergency” issues for the Texas Legislature’s 82nd session. What should really worry you are the issues you haven’t heard about. In a saner world, Perry would have put forward the real emergency item—insurance reform.

Insurance reform isn’t sexy. But, besides the budget, no piece of legislation this session will affect more Texans than the bill to reform the state Department of Insurance. Texas has the highest homeowners’ insurance rates in the nation. We reclaimed the top spot in 2010, according to the National Association of Insurance Commissioners. Texas homeowners pay an average premium of $1,460 a year. That’s double the national average.

Texans pay so much to insure their homes because of varied and complex reasons. Our weather is part of it. Hurricanes and tornadoes batter the state and cause millions of dollars in damages that insurance companies must recoup.

But Texas also has high rates because the state has continually refused to regulate the homeowners’ insurance market. Large companies such as State Farm Insurance, Farmers Insurance and USAA have virtual free reign. They can raise rates whenever they want without permission. They simply have to notify the Department of Insurance that prices are going up. If the rates are too high, regulators can ask insurers to lower them or can take them to court. Those mechanisms have rarely worked. State Farm, the state’s largest insurer, has defeated state regulators in court repeatedly since 2003, when the Legislature last attempted insurance reform.

This session, the Insurance Department is up for sunset review—a process in which the Legislature studies and reforms state agencies every 12 years. Consumer advocates are pushing lawmakers to strengthen regulation of homeowner policies and require the commission to approve rate hikes before they take effect. That seems a common-sense reform. But Republicans in the Legislature have consistently opposed it, yielding to intense lobbying by the insurance industry.

That pattern must change this session. GOP lawmakers have repeatedly opposed tax increases because, they argue, Texas families can’t afford it. If Republicans genuinely want to save Texans money, they should impose stricter regulation on insurance companies.