Now the national spotlight is on Texas. If the industry loses ground in Texas, it will be cited as an example that state regulation isnt improving.

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

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

The Texas situation exemplifies how rigid regulation of forms can limit consumer choices and lead to huge losses. It shows how fraud can enter the system and boost the severity of claims. And it exemplifies 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 in need of repair. The question is what types of reform will be implemented.

Proposals ranging from price controls to rate rollbacks have been discussed. However, now that the November elections are over, we are beginning to see proposals that more realistically address the serious concerns facing the Texas homeowners insurance marketplace.

It is clear that consumers, public policy makers, the business community and insurers all want the same results. Everyone wants more affordable coverage and more types of insurance policies from which to choose. We all want more companies writing policies in the state.

Finally, we all want a regulatory system that stimulates, rather than stifles, the competitive market and assures that the insurance prices are fair.

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

Consumers benefit from being able to select the policy that best fits their coverage needs and budget. Greater choice in policies and more competition among insurers translates to lower insurance premiums for consumers.

Thats why we think it is important that any regulatory reform should also provide an incentive for more insurance companies to write policies in the state. Anything less would be a disservice to citizens and would make the insurance crisis a perennial political hot potato.

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

However, bureaucratic control of insurance prices or regulation that precludes companies from adapting to changes in the marketplace only serve to stifle competition, limit consumer choices, and drive up the cost of coverage.

The industry has to work together to achieve a favorable result in Texas.

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

This is one of the most important battles the industry has fought in a state in a number of years, and one of the most difficult. Im confident that the industry will step up to the plate and work hand in hand with lawmakers to modernize the regulatory system in Texas so that all Texans reap the benefits of a stable insurance environment and healthy competition.

Jack Ramirez is president of the National Association of Independent 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 serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.