BILL TAKES AIM AT INSURANCE RATE HIKES

(AUSTIN) — Insurance companies would have to get approval before they change rates by more than ten percent under a bill approved by the Senate on Wednesday. Increasing homeowners and auto insurance rates are likewise increasing financial burdens on Texans, said Georgetown Senator Charles Schwertner. Data from the Office of the Comptroller show that homeowners premiums are up 50 percent since 2015, with 2023 alone seeing a 21 percent hike in the average rate. Auto insurance isn’t any better, Schwertner said, with personal auto rates going up by a quarter since 2022. “As companies make significant rate changes, it is incumbent upon the legislature to ensure the regulatory environment is giving these filings the level of scrutiny they necessitate.”

Insurance in Texas operates under a “file-and-use” system, where insurers can file a rate increase with the Texas Department of Insurance, and then immediately implement the rate while the agency reviews it and determines whether or not the increase is justified by economic conditions. This can lead to policy holders paying higher rates before the state takes action. In 2023, for example, nearly 3,000 rate changes were filed with TDI. Of those, 160 were withdrawn by the company, 100 were denied for technical reasons, but none were denied by the decision of the commissioner. Requiring pre-approval for rate changes more than 10 percent as proposed in SB 1643, said Schwertner, offers consumers protection while giving underwriters enough room to react to market conditions, like natural disasters, inflation, changing risk profiles, and other variables that cause insurance rates to change. “This provides a certain degree of flexibility for carriers to be responsive to the market while implementing guardrails to protect against significant or even extreme rate increases without proper oversight,” he said. The bill requires pre-approval for a ten percent change up or down; without rules regarding rates moving in both directions, Schwertner said a single company could slash rates, drive competitors out of the market, and then raise rates even higher than before.

Schwertner also saw passage of SB 1642, which would move the Texas Department of Insurance from a single commissioner to a three commissioner panel. This, he said, is intended to improve the agency’s responsiveness both to consumers and policy underwriters. “A regulatory agency overseeing a $290 billion insurance market – larger than the budget of the state of Texas – a single commissioner structure presents significant challenges in both executing a cohesive policy vision and managing the department’s daily operations,” said Schwertner.

The Senate also approved another bill aimed at lowering housing costs, this time for senior citizens or disabled homeowners. Passed just yesterday out of committee, the Senate took up and approved SB 23, by Houston Senator Paul Bettencourt. This bill would raise the amount of value a homeowner can write off before assessment – the homestead exemption – to $200,000 for homeowners aged 65 or older or those with disabilities. This comes after an earlier bill, SB 4, also by Bettencourt, approved earlier in the session that raised the homestead exemption for all homeowners to $140,000, up from $100,000. That bill allowed senior and disabled homeowners to write off $150,000. Taken together, the two homestead exemption bills, and ongoing tax compression passed in previous sessions, will lead to nearly $1,000 in savings on annual tax bills for senior homeowners, said Bettencourt. This will lead to a “super-majority” of seniors paying no school maintenance and operation taxes, typically the largest portion of an annual property tax bill. Lt. Governor Dan Patrick told members this is just another step in providing significant property tax relief to senior and disabled homeowners in Texas. “Just to put this in perspective, in 2015, seniors got about a $25,000 homestead exemption and ten years later they’re getting a $200,000 homestead exemption,” Patrick said before final passage of the measure.

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