Home Insurance Industry Fighting Explanation Policy

The insurance industry pushed back this week against state lawmakers' efforts to require an explanation anytime providers cancel or refuse to renew a Texas homeowner's policy.

It comes as a growing number of property owners in the Houston area, and across Texas, report soaring insurance costs or losing their coverage altogether.

"When insurers have to justify their actions, it enables the legislature to better address issues," said state Sen. Mayes Middleton, a Galveston Republican who authored the measure, during a committee hearing Tuesday.

Under current law, insurance companies have to disclose why they drop or decline coverage to homeowners - but only if consumers ask. Middleton's bill would make it mandatory.

The insurance industry told lawmakers the new requirements would cause an undue burden with little benefit to homeowners.

"If you make that process automatic, then companies are going to have to invest significant resources in developing systems to communicate and aggregate that information," said Jon Schnautz, the legal and legislative advocacy counsel at the Insurance Council of Texas, a trade group representing insurers. "And we don't think the time and expense of that is going to provide useful enough information in most cases to justify going that far."

Regan Ellmer, the director of government affairs for the Independent Insurance Agents of Texas, a trade organization, questioned the utility of telling homeowners why they can't get coverage if it's a reason out of their control, like a company pulling back from a specific zip code. "Many times I think it'll be: 'Does not fit our underwriting guidelines'."

"Sounds like an easy thing to put on a piece of paper and mail to that individual," said state Sen. Charles Schwertner, a Georgetown Republican.

Right now the state doesn't collect data on how many homeowners are dropped by their insurer or why. But that information can help lawmakers understand where insurance is becoming less available as companies pull back from areas of high climate risk, including wide swaths of Texas.

"I've heard reassurances that the insurance market in Texas is robust and strong," said state Sen. Charles Schwertner, a Georgetown Republican. "How do we know that? We don't have data regarding declinations, cancellations, and limited data regarding nonrenewals."

In January, the federal government published a report looking at the impact of climate change on home insurance, including zip code level data on nonrenewal rates. But because the Texas Department of Insurance declined to request that information from insurance providers, the national map included in the report left Texas blank.

"This is a pretty damning map," Schwartner said in the hearing. "The black hole of Texas here, regarding information that can be gleaned from TDI."

At a Wednesday committee hearing, House lawmakers agreed addressing the availability and affordability of home insurance was a top priority this session, and asked for more granular data on what parts of the state were experiencing issues.

TDI already collects comprehensive data on the insurance market, TDI Commissioner Cassie Brown said on Wednesday. "One of the things I've committed to this year is to review that data and see if we are collecting what we need to continue to collect," she said. "Are there things that we're not capturing that we need to capture to help you make informed decisions?"

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