Letter From Austin: Trouble with TWIA

by Julie Drenner on March 3, 2011

This week the Texas Department of Insurance (TDI) placed the Texas Windstorm Insurance Association (TWIA) under administrative oversight due to allegations of fraud and mismanagement. Insurance Commissioner Mike Geeslin stated that the state’s insurer of last resort “is in a condition that makes its continuation in business hazardous to the public or to its policyholders, as it appears that its management does not have the experience, competence, or trustworthiness to operate TWIA in a safe and sound manner.”

TDI’s decision came after a legislative hearing where TWIA’s general manager, Jim Oliver, was grilled about everything from excessive severance packages to allegations of fraudulent claims handling. Oliver has since been dismissed by the TWIA board. Several of the allegations of fraud have been turned over to the Travis County District Attorney. TDI as well as the TWIA board, will be investigating TWIA’s actions to determine the truth of these charges.

Most troubling of the revelations concerning TWIA’s handling of policyholders’ claims was the fact that the Office of Public Insurance had set up a mediation process in order to efficiently settle claims without the costs of litigation but TWIA had refused to participate.  The private companies that voluntarily utilized the mediation process had all but one of their claims settled, yielding satisfying results for their customers. Conversely, TWIA’s policyholders who brought suit lost the opportunity for a quick and less expensive settlement through mediation.  Ultimately, assessments to private companies paid for the legal costs involved in litigating these claims.

It has yet to be seen if these ethics complaints will derail the functional reform needed to ensure TWIA’s ability to serve its policyholders without endangering the state’s coffers.

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