On Insurance Reform, Give Consumers Choice

With the announcement on Friday of State Farm Lloyd’s decision not to write new property risk policies, the legislature’s attempt to “fix” the Texas insurance market is clearly not working.

The State’s largest home insurer had already stopped writing policy to new customers, and now they are not going to provide coverage for current customers who move.

The legislature is reacting to the regulatory, political and litigation environment coupled with rising consumer concern, dissatisfaction and some panic. If before the legislative session started, it was the perfect storm brewing, the storm has now in full force.

What is contributing to the problem and what can we do to assure consumer choices and reasonable rates?

Legislative “fixes” passed by the Senate and proposed by House Insurance Chairman John Smithee – though well-intentioned — are exacerbating the problem. We are making Texas a state where insurers don’t want to write policies.

The best regulator is the consumer.

While rate rollbacks and price controls may provide artificial rate reductions, they will ultimately defeat their purpose. Insurance companies won’t do business in a state where they are losing money. And we want a viable insurance marketplace…one in which insurance companies are able and eager to compete for our business.

Well functioning, competitive insurance markets keep rates down, spur innovation among companies, prevent price gouging and allow regulators to focus on monitoring market conditions, market conduct practices and insurer solvency. That is the appropriate role of government, not setting prices and limiting consumer options.

We in Texas need to allow consumers choices in the insurance marketplace. When insurance companies can provide the coverage we want and not a one size fits all approach, we will address the affordability and availability of insurance in Texas.