Letter from Austin: Fixing Homeowners Insurance in Texas

by Julie Drenner on March 10, 2011

In an effort to eliminate unfair homeowner claim subsidies, the Insurance committee heard a bill that would allow insurance companies to non-renew or surcharge policyholders who consume the greatest amount of the insurer’s premium dollars and whose claiming behavior increases homeowners insurance rates for all Texans.

Current law prohibits companies from choosing their customers.  It permits the state to intervene in customers’ right to contract and intrude into the daily operations of private insurers. Nowhere else is the state government given the power to determine the identity of the customers of a private enterprise.

Ninety-five percent of policy holders are forced to unfairly subsidize the claiming behavior of the other five percent. This small group of policyholders consumes a share of the insurer’s total premiums that is out-of-proportion to their number.

Witnesses testified this week that they have claimants who make multiple claims which are mathematically improbable, like eleven lightening strikes over a decade.  Such behavior increases insurance rates for all Texans since the companies are prohibited from surcharging customers with excessive claims.

Responsible policyholders should be allowed to pay rates that reflect their clean claims records.  Just as automobile insurers give better rates to drivers without accidents or speeding tickets, so they should be allowed to offer better rates to homeowners who maintain their property.

By restoring the ability of homeowners’ insurers to non-renew or surcharge the five percent of their policyholders who consume the largest percentage of insurance premium dollars, we can better allow for lower rates in the future for ninety-five percent of policyholders. But more importantly, we can restore the fundamental right to contract between a company and its customers.

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