Consumers pay more while insurances companies sue

By Alex Winslow, Texas Watch — In Texas we like being No. 1. Call us chauvinists or parochial or just downright proud, but when it comes to comparing us with the rest of the union, we darned sure want to be at the top of the list. Well, maybe not every time.

We’ve been paying among the highest homeowners insurance rates in the nation for as long as anyone can remember. A dubious distinction for sure, especially when you consider the games insurance companies are playing to deny or underpay claims and the lack of protection available in most insurance policies.

Some industry apologists want us to believe that insurance customers are better off with a system that allows insurance companies to raise rates whenever they want without getting approval from the insurance commissioner beforehand, keeps consumers in the dark about what is covered in their insurance policies, and lets insurance companies use insurance scores, data mining, and pattern recognition software instead of legitimate risk-based factors when deciding whom to cover and how much to charge.

This is hogwash. If we’ve learned anything over the last couple of years, it is that we can’t simply sit by and hope that complex financial institutions like AIG, State Farm and other insurance companies do the right thing.

The fact is that our current system of insurance regulation favors powerful insurance companies and their lobbyists over consumers and homeowners. Take State Farm. The state’s largest homeowners insurance company has tied the Texas Department of Insurance up in court for seven years over a rate that the department has found unfairly excessive. All this time, State Farm’s customers have been forced to pay a rate that state regulators believe is too high. State Farm owes its policyholders upward of $1 billion, according to the state’s public insurance counsel. Yet the company hasn’t repaid a dime because Texas has a backward system that allows insurance companies to raise rates first and justify them later.

Doesn’t it just make more sense to require insurance companies to justify their rates before they go into effect, not after? That way Texans know they are getting a fair deal.

Instead of being the state where insurance companies can raise their rates while slashing coverage, wouldn’t we all rather be known as the state with the most balanced insurance market? A state that holds fairness for insurance customers just as high as industry profits? Despite what industry lobbyists say, we can have both. Insurance companies are not charities and have every right to make a profit, but not by shortchanging their customers.

Politicians in Austin have promised to help homeowners for years now, but most of the so-called reforms they’ve passed simply benefited the insurance industry without actually lowering rates for consumers. With higher premiums, larger deductibles and expanded exclusions, Texans are paying more and more for their homeowners insurance and getting less and less in return. Why? Because insurance lobbyists have manipulated the market using all three branches of state government. They’ve succeeded in creating a loosey-goosey regulatory system by lying to the Legislature and manipulating the Insurance Department, not to mention the assist they’ve gotten from their cronies on the Texas Supreme Court who have sided with insurance interests 83.6 percent of the time.

The insurance industry’s “trust us” message just rings hollow. We’ve tried it that way; now we need to do it the right way. Maybe then we can truly lead the nation by guaranteeing real insurance protection that all Texans can afford. That would be something all Texans can really be proud of.

N. Alex Winslow is executive director of Texas Watch, a statewide citizen advocacy organization.