June 20, 2008

TDI SUNSET REVIEW:

PUBLIC HEARING NEXT WEEK

Reforms passed in 2003 have stabilized or lowered homeowners premiums for most Texans even as home values have increased substantially; attracted 29 new homeowners insurance companies to Texas; and increased choices and availability of coverage for consumers. TCAIS members ask that any recommendations for changes at the Texas Department of Insurance focus on improvements that ensure continued market development that benefits consumers, insurers and the broader Texas economy.

Next week, the Texas Sunset Commission will hold a public hearing on the Texas Department of Insurance (TDI), the Office of Public Insurance Counsel (OPIC) and the overall insurance marketplace in Texas. The Sunset Commission staff report, issued last month, will serve as the starting point for public discussion of the agency's role in advancing the competitive insurance market in Texas. Click here for the Sunset hearing agenda.

Below is an overview of the key Sunset Staff report issues related to homeowners and private passenger auto insurance as well a summary of TCAIS' positions on these issues. For more details on these positions, click here to download TCAIS' Sunset Commission comments or download a two-page summary of our comments.

Sunset Staff report issues related to homeowners and private passenger auto insurance:

RATE REGULATION

• TCAIS agrees with the staff findings - particularly the emphasis on the lack of Department transparency and predictability in the rate review process. However, the staff report finds that while the recent reforms have helped improve our competitive market, the new regulatory system has not been fully allowed to work. A move to more consistently apply the current competitive file and use regulatory system and more clearly define the authority of the Department of Insurance will provide greater market predictability and ensure Texans reap the benefits of a truly competitive marketplace.
• TCAIS has concern about the staff’s recommendation of a deemer system. Past deemers used in Texas have resulted in heavy disapprovals by TDI based on lack of time for approval, or mass requests by TDI for companies to wave deemer dates to avoid such automatic disapprovals.
• The Legislature should institute an objective threshold that the Commissioner must meet before engaging in administrative efforts to reduce the rates of individual companies. This structure would preserve proper consumer protections while allowing the marketplace to dictate rates and consumers to choose the product that best fits their needs and budget.

TEXAS WINDSTORM INSURANCE ASSOCIATION (TWIA) OVERSIGHT

• TCAIS recognizes, as does the Sunset staff, that TWIA stands at a “critical juncture.” While the TWIA board and staff have historically had the expertise to operate TWIA efficiently and mitigate some of the policy flaws, it has not had the proper authority to implement the sound business principles available under the statute because of the arcane system of hearing and approval by TDI.
• The staff recommendations will allow the TWIA board and staff authority to employ its insurance expertise with proper oversight but without undue, inefficient hearing and negotiation and will help properly focus the mission of TWIA as a market of last resort.

ROLE OF TEXAS DEPARTMENT OF INSURANCE (TDI)

• TCAIS agrees with the findings and recommendations on this issue, and we urge the Commission and the Legislature to be precise in any statutory language defining the purpose of the Department. Any statement of purpose should support the fundamental concept that, in a competitive marketplace, consumers benefit from competition between insurers.

ROLE OF OFFICE OF PUBLIC INSURANCE COUNSEL (OPIC)

• TCAIS generally agrees with both the recommendations and findings that a separate agency is no longer needed. The concerns raised by Sunset staff over the incomplete implementation of a competitive market structure have, in our view, been exacerbated by the de facto dual regulation of individual rate filings by OPIC. In fact, the OPIC workload summary includes the negotiation of 32 rate filings and 24 form filings, which suggests far more active interference with market-based filings than what is asserted by the Department.
• The authority for general regulation should lie with the Department, with the more focused role of consumer advocacy as a subset of that authority.