Texas FAIR Plan Seeks A Premium Hike

Des Plaines, Ill.-based PCI was formed with the Jan. 8 merger of the National Association of Independent Insurers and the Alliance of American Insurers.

Mr. Hanson said, "Rates must be adequate to cover losses whether charged by an insurer in the voluntary or residual market. The insurance industry has consistently encouraged policymakers to follow this basic principle. When FAIR plan rates are too low it is unhealthy for the marketplace."

"The FAIR Plan has quickly grown to more than 100,000 policyholders. In addition, the low rates in comparison to the risks being insured are troubling. The insurance market of last resort, with its basic policy, is being used as the market of first choice by some homeowners who are willing to take the gamble," said Mr. Hanson.

Jerry Hagins, public information officer for the Texas Department of Insurance, said that after an analysis was made of homeowners insurance rates throughout the state, it was determined that the premiums the plan was charging was too low. He said the increases FAIR is asking for would average 12.5 percent. However, the actual increases range from 3.1 percent to as high as 22.1 percent, depending upon the individual risk exposure throughout the state.

He said the department is currently reviewing the request and would make a decision in early February.

The Texas FAIR Plan was launched in January 2003 to assist policyholders that were having difficulty finding coverage in the voluntary market. At that time, a few major carriers stopped writing new policies due to losses the insurers were experiencing. The plan was designed to provide additional capacity and improve accessibility during difficult times in the insurance marketplace.