Home Insurers Face Scrutiny Under Texas Senate Bill
Lawmakers in the Texas Senate are considering reforms aimed at curbing soaring home insurance premiums across the state. Several bills, primarily introduced by Senator Charles Schwertner, a Republican from Georgetown, are at the center of the debate.
Senator Schwertner’s proposals would require insurance companies to seek approval from regulators for any rate increases exceeding 10%. Furthermore, he is advocating for the creation of a new three-member commission to oversee the Texas Department of Insurance (TDI), citing concerns about its effectiveness in safeguarding consumers.
The central issue revolves around the current “file-and-use” system, which allows insurers to implement rate increases immediately after filing them with the state. Schwertner’s bill, Senate Bill 1643, seeks to change this by capping the threshold for unapproved increases at 10%. This is in contrast to states like California, which mandate insurers to obtain prior state approval before implementing new rates.
According to David Bolduc, the public counsel at the Texas Office of Public Insurance Counsel, the shift would mean, “You need to come to me and get me to say yes to that rate… It’s going to make it a little more difficult to get a rate increase.”
The legislation is a direct response to the dramatic rise in home insurance costs. The Texas Department of Insurance reported an average 21% increase in rates across the state in 2023, nearly double the average of previous years. Some homeowners have seen their premiums double within a year.
During a Senate committee hearing, Cassie Brown, who oversees the TDI, explained that under the present file-and-use system, the responsibility rests with the state “to prove that the company is not complying with state law.” A prior-approval system, she asserted, “shifts the burden to the company.”
Insurers, however, are pushing back on these proposals. They argue that the reforms could disrupt the market and hinder efficient oversight. Scot Kibbe, the vice president of state government relations at the American Property Casualty Insurance Association, stated that file-and-use has been “a big part of Texas’ economic success.”
Texas already has some of the highest home insurance costs in the nation. Ann Baddour, the director of fair financial services at Texas Appleseed, voiced concerns that some companies might exploit the 10% threshold by repeatedly filing new rates.
Schwertner’s other bill proposes expanding the TDI oversight commission to three members. He expressed his desire for a more robust oversight system that prioritizes consumer concerns. He stated during conversations with TDI’s commissioner last year that he noted “hesitancy…regarding just how vigorously they’re taking consumers.”
The House of Representatives, however, has yet to introduce similar legislation, and Schwertner noted he hadn’t personally addressed the issue with the House insurance committee chair, state Rep. Jay Dean. The House insurance committee is considering a bill by state Rep. Dennis Paul, a Houston Republican, that would require insurance companies to disclose reasons for dropping or declining coverage to homeowners.
During the hearing, Dean echoed Schwertner’s request for more data on the home insurance market, stating that, “If we’re going to really measure and weigh things that we can do to really be effective at reducing the cost of insurance, we need the data.”
