AUSTIN — Although the state has failed to implement clear, predictable and transparent rate regulation for homeowners insurance, the government agency in charge of protecting ratepayers should be eliminated, according to a government watchdog agency.
The Texas Sunset Advisory Commission, a state panel in charge of periodically reviewing the effectiveness of state agencies, recommended that the functions of the Office of Public Insurance Counsel be rolled into the Texas Department of Insurance. The insurance counsel’s role is to advocate for ratepayers.
“Texas needs consumer representation in insurance regulation, but no longer needs a separate state agency to advocate on behalf of consumers,” the commission said in its report Wednesday.
The findings now go to the Legislature, which will use them to craft legislation during next year’s session to modify operations at the Insurance Department and possibly eliminate the insurance counsel.
The findings were welcomed by an insurance trade group but assailed by an independent consumer advocate.
“Texas homeowners need more — not fewer — safeguards from abusive insurance-industry practices. These recommendations are perilous for Texas homeowners,” said Alex Winslow, director of the Texas Watch consumer group.
“They have done their homework,” said Mark Hanna, spokesman for the Insurance Council of Texas, a trade group.
“They have conducted a very fair and thorough review of TDI — we look forward to the public discussion on their recommendations,” Hanna said.
Other recommendationsThe sunset commission al-so recommended that the Insurance Department set new time limits for reviewing and possibly rejecting company rate filings. The new limits would become part of the state’s file-and-use system, under which companies can begin charging new insurance rates as soon as the companies notify the department.
However, the Insurance Department also has the authority to go back later and order rate rollbacks. The sunset commission said the agency should set limits on how long it will review rates after they go into effect.
“From a business standpoint, insurers may not want to implement rates while uncertain about TDI’s acceptance of those rates,” the commission reported. “By creating more transparency in the rate regulation process this recommendation could encourage more competition among insurers.”
The department of insurance also should better define the process for requesting information from insurers, and should better define the factors that could lead to companies coming under more strict regulatory guidelines, the sunset commission recommended.
The sunset commission recommended that staff and functions of the Office of Public Insurance Counsel be transferred to the Insurance Department. It said the change would have no fiscal impact.
Shortsighted advice?But consumer advocate Winslow said it’s a terrible idea.
Without an independent agency like the Office of Public Insurance Counsel, “the Texas insurance market will likely become even more lopsided” in favor of the industry, he said.
Winslow said the recommendations would do nothing to improve the market for consumers.
“Sunset staff makes a series of recommendations that will further limit the insurance commissioner’s already limited ability to protect consumers from out-of-control insurance companies,” he said.
Rod Bordelon, director of the Office of Public Insurance Counsel, said he was still reviewing the recommendations, although he said his 17-year-old agency operates effectively as an independent entity. “I do think some independence is important if you’re going to have the sort of regulations that we have,” he said.