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Wednesday, April 1, 2009

Bills filed for the 81st legislative session (part one)

by Rep. Allen Vaught

Rep. Allen Vaught

The deadline to file most bills in both the House and the Senate was Friday, March 13th, the 60th day of the legislative session. Over 600 bills were filed on the final day as legislators struggled to complete their legislative agenda, hoping that something was not forgotten or overlooked. Over 4,600 bills were filed in the House and over 2,400 were filed in the Senate.

I filed six bills on the last day and thirty-eight in total. Some of the bills I filed were ideas from teachers’ groups, law enforcement, our military personnel and veterans, and others. However, the bulk of the bills came directly from conversations with my constituents over the past couple of years.

In the next few articles, I would like to talk about some of the bills I filed and why I think they would benefit this district if passed into law.

Insurance Reform

Insurance reform is by far one of the biggest issues and concerns brought to my attention since I have been in office, so I filed several bills that seek to address this issue.

Our current system in the insurance market, known as “file and use” allows companies to immediately implement a new rate once it is filed with the Texas Department of Insurance. House Bill (HB) 1609 would require insurance companies to submit their rates for prior approval to the Insurance Commissioner if they have a Complaint Index that is 50% higher than the statewide average. The Texas Department of Insurance compiles a Complaint Index that allows consumers to easily compare the ratio of justified consumer complaints against particular insurance companies. This bill would ensure that companies with a track record of justified complaints are scrutinized more closely before they raise rates again on consumers.

Additionally, I have filed HB 4563 which would mandate that automobile insurance companies cannot use the occupation or educational level of a person insured as a factor in underwriting or rating their coverage. Currently, auto insurance companies divide consumers into several categories and subcategories, including occupation and education, in order to determine their rate. There is no limit on the number of sub categories a person can fit into, and therefore the shared risk of driving (the point of insurance) is negated. Furthermore, companies do not give consumers information on which subcategories they fit into which makes it difficult for consumers to try and lower their rates.

In looking at the bigger picture and where ultimately most of the decisions and power lie, I am a joint-author of HB 173 which would make the Insurance Commissioner an elected position and subject to the voters of Texas. We already elect the Agriculture Commissioner and the Railroad Commissioner among others, yet many of the decisions made daily by the Insurance Commissioner affect Texans to greater degree. I believe we should have the right to hold the commissioner accountable to ensure a fair insurance marketplace and to protect consumers.

Finally, I have filed HB 2010 which would require insurance companies to adequately notify consumers of changes in their policy. My hope is that these bills among others filed by my colleagues in the House and friends in the Senate will protect consumers and protect Texans during these tough economic times. While Texans currently pay some of the highest insurance rates in the country, we cannot afford for this to continue.

I welcome your thoughts and ideas regarding the bills I have filed for the 81st legislative session. Keep in mind that these are the bills as introduced and that details are subject to change as part of the legislative process. Please email my office at District107.Vaught@house.state.tx.us with the subject line 81st Legislative Session Bills.

As always, please feel free to contact my office at (214) 370-8305 with any questions regarding these or other state issues. I look forward to hearing from you.

Staff
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Anonymous

AnnMarie Wilson, says:

Gee what about filing and official complaint with the insurance commissioner and never even receiving an acknowledgment, much less followup?

I sure this is a big surprise to other that have had problems... not.

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7 months, 2 weeks ago
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Scott Doyle, says:

Guess it depends on your complaint. =p But kudos for the bump, not sure how I missed any of his 3 articles.

Why all the actuarial hate, Representative Vaught? Seems reasonable that an occupation involving high mobility is a much different exposure than someone who just goes to and from a desk-job. Guess my overall concern is why this deserves attention above, umm...real problems?

Also, relatively sure the current notification requirement on policy changes is 60 days. How much longer do people need?

This certainly peaked my interest, maybe I'll check out the other pressing issues that have come across your desk...

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7 months, 2 weeks ago
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xdavidwattsx, says:

Why all the actuarial hate? Uh, cause they are crooks? I dunno. Insurance is a license to steal and Texas insurance companies have done a damn fine job stealing. Their margins have been insane for several years while we pay the highest rates in the nation.

Anonymous

7 months, 2 weeks ago
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jtmbls, says:

Doyle - What? - Bucking for a promotion? Just because he wants to alter the spreadsheets utilized doesn't mean he's discounting the positions. Not my issue since I have been with Nationwide (they rock, by the by) for more years than I can even remember. But I have heard of so many stories about how insurance companies manipulate and take advantage of the consumer.

David - Are my eyes failing me or do you actually agree with a Republican?!?!!? Lord! What's next!?!?!

Anonymous

7 months, 2 weeks ago
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Scott Doyle, says:

I don't handle personal lines.

Obviously xdwx is expert. Do you even know how to determine profitability of an insurance company?

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7 months, 2 weeks ago
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Scott Doyle, says:

Also, jtm - hearty lol. Rep stands for Representative. Vaught <a href="http://www.allenvaught.com/">is a democrat</a>.

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7 months, 2 weeks ago
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jtmbls, says:

Not sure if that question was directed towards me but jic - One of my first jobs was for a major insurance company and they were gracious enough to provide classes to their employees. While I probably do not have a full picture of an actuaries' position, I have a general knowledge. I found the courses fascinating though, and cudos if that's what you are shooting for. Requires much brain muscle!

Anonymous

7 months, 2 weeks ago
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jtmbls, says:

Oh! Dang it! Thought I had him there!

Anonymous

7 months, 2 weeks ago
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Scott Doyle, says:

ha, not trying to be an actuary. Though I guess it's not entirely out of question.

Doesn't take an actuary to realize there are reasonable ways to measure risk. And debating something like occupation doesn't seem to be a useful way to spend an elected official's time.

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7 months, 2 weeks ago
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jtmbls, says:

I didn't read it that way. I just thought he was talking about switching up the data they use to measure risk. What did I miss?

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7 months, 2 weeks ago
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Scott Doyle, says:

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7 months, 2 weeks ago
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momzilla, says:

Darned mandatory liability insurance law doesn't mean squat if the insurance companies are permitted to reject claims on the basis that they can't contact their policy holder. All it takes to keep your insurance premiums from taking a hit because of your at-fault accident is to not return their phone calls. This has happened to two young people I know just in the past couple of months and they were just SOL. There is no penalty to the driver at fault, as nearly as I can see.

I'd like to see a requirement that insurance companies cancel liability insurance and notify the state in these instances. These drivers are for all practical purposes uninsured.

Anonymous

7 months, 2 weeks ago
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Pavel Lishin, says:

"Additionally, I have filed HB 4563 which would mandate that automobile insurance companies cannot use the occupation or educational level of a person insured as a factor in underwriting or rating their coverage."

But can you make them take an IQ test to prove whether they are dumb or not?

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7 months, 2 weeks ago
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xdavidwattsx, says:

Good profitability of an insurance company is roughly 58% loss to premium ratio. Texas insurance companies are down below 40 meaning they paid out less then 40 percent of the premiums they took in. Meaning they are bilking us for billions.

http://www.dallasnews.com/sharedconte...

Riddle me that.

Anonymous

7 months, 2 weeks ago
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Pavel Lishin, says:

An interesting story about insurance: http://www.dnalounge.com/backstage/lo...

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7 months, 2 weeks ago
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Scott Doyle, says:

Class time! Once again, a journalist fails to at least give you a reasonable idea of how it works.

Any moron can understand that an insurance company pays out losses...very shortsighted to presume the flip side of the loss ratio is stuffed in mattresses. <a href="http://www.fool.com/personal-finance/insurance/2006/12/12/insurance-industry-basics-combined-ratio.aspx">Combined ratio</a> is the basic name of the insurance game:

Expense ratio + loss ratio = combined ratio

Industry sits around 33% on the expense side, iirc (yes, it actually DOES cost money to operate one of them there companies). So, at most, you could "riddle me" that in 2007 (before Hurricanes Gustav & Ike - 2007 was a light named storm year) there was an attractive combined ratio.

Now, let's take a practical look <a href="http://www.insurancenetworking.com/news/combined_ratio_insurance_property_casualty_catastrophe_mortgage-12089-1.html">at 2007 vs 2008</a>:

According to an A.M. Best Co. statistical study, the total industry registered a 104.7 combined ratio in 2008, compared with 95.1 in 2007. The combined ratio for the top 25 writers based on net premiums written rose to 102.3 in 2008 from a profitable 94.5 the prior year.

That 3-digit number you see there spells doom for shoddy carriers. Combined ratio over 100% means companies are hemorrhaging money. And when the top 25 companies average triple digits, it's no fun for anyone.

Surplus from prior years helps pay claims when you're not making money the current year. Insurance, as many industries, is quite cyclical and it takes a downturn to weed out companies with poor underwriting discipline. Rocket science insurance is not; generally peeps who have their eye solely on the green prize whither and die (ahem AIG ahem).

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7 months, 2 weeks ago
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Scott Doyle, says:

Btw, I'm not necessarily defending the industry as a whole here. imho, if a company sports a ridiculously low long-term combined ratio people should squint their eyes and ask questions.

Seems people are very quick to throw the whole industry under the bus because of a bad apple or a rough personal experience. One carrier's doings or claims practices isn't representative of everyone's, there are wonderful companies with amazing stories of claims being paid in good faith despite not technically being covered under the policy, etc.

Take a deep breath is all I'm saying. Mang.

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7 months, 2 weeks ago
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xdavidwattsx, says:

"Expense ratio".

AKA a big bucket to hide/spend a whole lot of our money. Just like 12b-1 fees except those are actually disclosed if you look deep enough.

Just cause they say it cost them x million in expenses each year doesn't mean it's justifiable. Much of those "expenses" are spent on lobbying, advertising, big bonuses, more lobbying, etc.

You may like paying some of the highest premiums in the nation. I don't. Nor do a lot of other people. Hence, Mr. Vaught's efforts.