Office of the Governor Rick Perry

Says Common Goals, Including Lower Rates, Link Proposals For Next Legislative Session

Tuesday, December 10, 2002  •  Press Release

HOUSTON – Gov. Rick Perry today reaffirmed his commitment to declare homeowners insurance reform an emergency issue when the 78th Texas Legislature convenes in January, putting homeowners insurance at the top of the legislative agenda for state lawmakers.

“Working with legislators of both parties, we will restore fairness to the marketplace, provide greater incentives for competition and lower rates for Texas consumers,” Perry said.

Throughout the past year, Perry has called for major changes in Texas law to give the state total rate oversight of the homeowners insurance industry – including the ability to impose across-the-board rate freezes and to restrict the use of “credit scoring” to set rates. During a visit to a home construction site in Houston, the governor said there likely will be a variety of homeowners insurance reform proposals introduced in the next legislative session. The 78th Texas Legislature convenes on Jan. 14.

“Homeowners insurance reform will be extensively discussed and debated at the state capitol in the months to come, but all proposals share some common goals,” Perry said. “We must lower rates, continue to stabilize the insurance marketplace, end unfair pricing practices, and stop fraud and abuse within the system.”

Perry has proposed eliminating loopholes in Texas law that have allowed a handful of companies to dominate the state’s insurance market. Currently about 95 percent of homeowners insurance policies in Texas are written by unregulated companies, and almost two-thirds of the market is held by three companies.

Under Perry’s reform plan, the Texas Department of Insurance (TDI) would be given the power to review all insurance companies’ rates and to impose either a company-specific or an across-the-board rate freeze while the agency completes rate reviews. TDI would have 45 days to complete the reviews in most cases.

The governor also has called for a ban on the use of credit histories in setting premium rates, except in instances where there is a direct correlation between consumers’ credit history and their insurance risk. Some insurance companies currently use a score based on consumers’ credit histories to establish homeowner’s rates.

Perry’s insurance reform package also calls for:

  • Greater consumer choice through form flexibility. Current law only allows large, national insurers or groups representing multiple carriers to use alternative forms. Smaller insurers that are financially sound also should be able to develop coverage alternatives.
  • Granting the insurance commissioner greater authority in disciplining companies that are chronically negligent in their responses to claims. State law currently requires insurance companies to respond to claims within 15 days, but Perry said he wants TDI to have the authority to order companies with histories of chronic foot-dragging to respond to claims within 48 hours.
  • Improved claims response, including the licensing and regulation of mold remediators and state oversight of public adjusters.
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