Texas Takes Center Stage On The Regulatory ModernizationFront

When the Texas Legislature convenes in January to tackleinsurance reform issues, more than just the affordability andavailability of homeowners insurance in that state will be atstake. A setback for regulatory modernization efforts in Texascould have a nationwide ripple effect.

Across the country, the National Association of IndependentInsurers is working with groups such as the National Association ofInsurance Commissioners and the National Conference of InsuranceLegislators to modernize regulation.

States such as South Carolina that have modernized theirregulatory systems have seen dramatic improvements in theirinsurance markets resulting in more choice, greater competition andlower prices.

Now the national spotlight is on Texas. If the industry losesground in Texas, it will be cited as an example that stateregulation isnt improving.

Losing ground will mean that Texas joins California,Massachusetts, New Jersey and New York as another large state thathas a troubled regulatory environment.

However, on the other hand, useful reform could come out of thecrisis in Texas. With effective reforms that modernize theregulatory system, Texas will be on the way to improving theinsurance environment for consumers and demonstrating that thestates are up to the challenge.

The Texas situation exemplifies how rigid regulation of formscan limit consumer choices and lead to huge losses. It shows howfraud can enter the system and boost the severity of claims. And itexemplifies the negative role that the trial lawyers can play.

Due to the problems in Texas, the call for reform is universal.Everyone agrees that the current benchmark system is broken and inneed of repair. The question is what types of reform will beimplemented.

Proposals ranging from price controls to rate rollbacks havebeen discussed. However, now that the November elections are over,we are beginning to see proposals that more realistically addressthe serious concerns facing the Texas homeowners insurancemarketplace.

It is clear that consumers, public policy makers, the businesscommunity and insurers all want the same results. Everyone wantsmore affordable coverage and more types of insurance policies fromwhich to choose. We all want more companies writing policies in thestate.

Finally, we all want a regulatory system that stimulates, ratherthan stifles, the competitive market and assures that the insuranceprices are fair.

Any proposal to reform the regulatory system in Texas should bejudged on its ability to meet the goals of creating a fair, openand competitive insurance market.

Consumers benefit from being able to select the policy that bestfits their coverage needs and budget. Greater choice in policiesand more competition among insurers translates to lower insurancepremiums for consumers.

Thats why we think it is important that any regulatory reformshould also provide an incentive for more insurance companies towrite policies in the state. Anything less would be a disservice tocitizens and would make the insurance crisis a perennial politicalhot potato.

Consumers must have the confidence that the price they arepaying for insurance is fair and that their insurance company willbe able to pay all future claims. Regulators must have theauthority to make sure that rates are adequate, not excessive, andnot unfairly discriminatory.

However, bureaucratic control of insurance prices or regulationthat precludes companies from adapting to changes in themarketplace only serve to stifle competition, limit consumerchoices, and drive up the cost of coverage.

The industry has to work together to achieve a favorable resultin Texas.

NAII has tried to bring the various segments of the industrytogether, and to work with insurance organizations to build andbroaden coalitions with other stakeholders, such as realtors,builders, mortgage lenders and conservative advocacy groups.

This is one of the most important battles the industry hasfought in a state in a number of years, and one of the mostdifficult. Im confident that the industry will step up to the plateand work hand in hand with lawmakers to modernize the regulatorysystem in Texas so that all Texans reap the benefits of a stableinsurance environment and healthy competition.

Jack Ramirez is president of the National Association ofIndependent Insurers in Des Plaines, Ill.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, December 30, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.