Legislation Will Bring Stability, Fairness to Homeowner Market, End Fraudulent Practices

TEMPLE – Gov. Rick Perry today signed sweeping insurance reforms into law to lower skyrocketing homeowner rates, end deceptive credit scoring practices and enforce tougher regulations on the industry.

“This comprehensive reform measure will stabilize the home and auto insurance market, rid the insurance industry of fraudulent practices and ensure Texans have access to fair rates offered in a competitive market,” Perry said during the signing ceremony at a home construction site in Temple. “For some Texans that will mean significant rate discounts. For all Texans it will mean rate practices that are transparent and fair.”

Perry declared homeowner insurance reform an emergency issue for the 78th Texas Legislature, and lawmakers passed three important pieces of legislation to stabilize the market:

• Senate Bill 14 closes loopholes that had allowed many homeowner and auto insurance companies to bypass rate regulation, strengthens regulatory oversight and increases consumer options for coverage.
• House Bill 329 protects consumers from unlicensed mold remediators and prevents repaired mold claims from being a factor in insurance underwriting.
• Senate Bill 127 requires the licensing of public adjusters and gives the Texas Department of Insurance (TDI) the authority to require more prompt response to water damage claims.

The governor had urged legislators to close loopholes in Texas law that 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.

“Senate Bill 14 provides that rate standards will apply to all homeowner and auto insurance companies with no exceptions, and no loopholes,” Perry said. “All future rates must be fair, reasonable and justified. If future rates are unfair, the Department of Insurance now has the authority in law to reject excessive rates out of hand and force insurance companies to offer lower rates.”

Under the provisions of SB14, some insurance companies may begin implementing rate reductions for homeowner policies within 60 days. TDI must review the homeowner rates of all companies operating in Texas within 90 days.

The new reforms also prohibit companies from using credit scores to determine rates, except in cases where there is a proven link between credit history and insurance risk.

“This means the senior who has a history of living on cash will not be penalized for a lack of credit history,” Perry said. “And Texans will be proud to know that it will now be a state jail felony for any company to offer prices based on race.”

Other provisions of SB14 include:

• Allowing companies more flexibility to offer more coverage options, making it easier for consumers to find policies that best suit their needs at the lowest possible price. The alternative forms must be approved by the insurance commissioner.
• Providing TDI with the authority to offer rate and filing flexibility to small companies to stimulate market competition in Texas and increase consumer options in underserved areas.
• Limiting the use of geographical factors to determine rates.

Joining Perry at the bill signing ceremony was Rep. John Smithee, House sponsor of SB14.