Lawmaker, insurers at odds over Texas bills aimed at distributing more info about insurance policies
A state lawmaker has filed two bills in the Texas Legislature that he claims would better inform Texas consumers about rate increases and policy changes involving auto, home, health and accident insurance. But insurers object to the bills’ provisions as costly and unnecessary; they say consumers already are well-informed about rate increases and policy changes.
State Rep. Armando Walle, D-Houston, says House Bill 2723 and House Bill 2724 — filed in March 2011 — “will help consumers fully understand the premium increases imposed by insurance companies and will give consumers information on how they can shop around. We absolutely must give consumers the tools they need to be well-informed about their policies.”
HB 2724 would affect auto insurance and home insurance policies in Texas. At the time of a policy renewal, an auto or home insurer would be required to provide a side-by-side comparison of new and old rates, as well as information on any changes in coverage and on how to shop for insurance. The bill would require an insurer to give the deductible as a dollar amount, rather than as a percentage of a policy’s total value.
|Texas state Rep. Armando Walle has introduced two bills that he says would increase competition in the Texas insurance market and would help educate insurance consumers.|
Jay Thompson, an attorney representing the Association of Fire & Casualty Companies of Texas, says the trade organization opposes HB 2724. State Farm, the largest auto and home insurer in Texas, also opposes it.
State Farm spokesman Kevin Davis says that although the legislation is well-meaning, it could have “unintended consequences,” such as tacking on costs for delivering the extra information that the bill would require. Besides, most of that information already is sent to customers as part of the “declarations page” they get when a policy is renewed, Davis says.
“State Farm policyholders can always call upon their agents for further and more detailed explanations regarding their policies, discounts, coverage and how rate changes will specifically affect them. The benefit of an agent’s expertise in explaining policy language and coverage alternatives is obvious,” Davis says.
Another objection from State Farm: The bill would force disclosure of proprietary methods for setting rates, according to Davis.
As for the bill’s mandate to educate consumers about shopping for insurance, Davis says, “we value each of our policyholders and have no desire to direct them elsewhere for their insurance needs.”
Walle says HB 2723 and HB 2724 would benefit consumers by creating a more competitive insurance market, as policyholders would be “more knowledgeable of both prices and the alternatives to their current policies.”
“When we have a goal of encouraging markets to operate efficiently, there is no substitute for well-informed consumers,” says Walle, a member of the Texas House Insurance Committee.
Jennifer Ahrens Cawley, executive director of the Texas Association of Life and Health Insurers, says her group can’t support HB 2723 as it’s currently written. She notes that rate increase information already is sent to people who have individual health insurance plans as well as to employers that have small-group health insurance plans.
“Our industry is not against sending information to our consumers about rate increases,” Cawley says. “Our main concern is that information about rate increases sent to enrollees in a small-employer group plan doesn’t make much sense because the employer makes the decision about whether to carry the insurance.”
Under HB 2723, companies that sell health insurance and accident insurance policies would have to notify consumers of a rate increase at least 60 days before it took effect. The notice would have to include the amount of the increase and information about how to file a complaint. Additionally, the notice would have to list websites where consumers could learn about justifications for a rate increase as well as options for buying other coverage.
“Policyholders deserve clear information about upcoming rate increases with enough time to plan accordingly or shop around if they are unhappy with the product,” Walle says.