Texas Senator: How Can We Lower Homeowner Insurance Costs?

A Texas lawmaker has asked the state insurance department to find ways to lower homeowners insurance rates.

Texas has consistently been ranked, along with Florida and Louisiana, one of the three states with the highest homeowners insurance rates in the country.

During an interim hearing of the Senate Business and Commerce Committee, Sen. John Carona pressed Texas Insurance Commissioner Julia Rathgeber to explore ways to “achieve lower rates in this state.”

Carona, who chairs the committee, said legislators are aware “that simplicity of forms and other like issues are important. … But what are other things we could do, whether it’s a particular form that’s not presently offered?” he asked. “How might we offer something to consumers that at least gives them the opportunity, albeit for less coverage, to be able to pay less price?”

The senator noted that the committee had asked the same question of the previous commissioner but “didn’t feel like we got a very sufficient answer.”

Carona suggested that a stripped down policy might be the answer.

Rathgeber said that option might be possible “as long as we have really strong disclosure.” She also said there should be a focus on enabling increased competition in the marketplace.

“Where we’ve seen lowering of rates it’s because of competition. We’ve certainly seen that in the auto market,” Rathegeber said.

Weather is a major factor in homeowner insurance costs in the state, she said.

“We also have relatively high supplies costs. So rebuilding is more expensive in Texas, in part because we have a booming oil and gas industry …,” she said. “We have relatively high reinsurance rates as a result of some of the storms that have happened recently. And we have relatively valuable property in Texas.”

Consumers need to know what coverage they do have in their policies, Rathgeber said.

“I think it is incumbent upon us to increase competition in the marketplace by bringing in more companies and providing better disclosures,” Rathgeber said.

The commissioner cited Senate Bill 112 by Sen. Eddie Lucio as an example of legislation that requires increased consumer information in insurance policies. The bill “requires insurance companies to include the declarations page with their policy forms with the exact dollar amount of each deductible in the policy,” Rathgeber said.

TWIA

The commissioner also told the committee members that Texas property insurer of last resort in the state’s coastal counties, the Texas Windstorm Insurance Association (TWIA), continues to be under administrative oversight by TDI. The association’s deficit has been cut approximately in half, primarily due to the quiet hurricane season, Rathgeber said.

The group’s board recently voted for a 5 percent rate increase effective Jan. 1, 2014. TWIA continues to grow in terms of policy count but proposals to depopulate are being explored.

“We are working with TWIA to conduct a feasibility study on development of a clearinghouse or a portal that would allow voluntary take out of policies that are in TWIA. Our thought is if that we create a voluntary program and we see how it works, when you come back next session and you’re interested in a mandatory program we’ll at least have better data for you,” she said.