Insurance group the American Property Casualty Insurance Association (APCIA) weighed in on proposed Texas legislation that would change its insurance marketplace recently, saying the state can improve the insurance sector without abandoning a market-based approach.
In a statement, APCIA vice president of state government relations Scot Kibbe, said Texas SB 1643 would not have the effect legislators want. The bill would discard the state’s file-and-use system and implement prior approval for insurance rate increases above 10 percent. Kibbe said when state regulators try to suppress insurance rates would force insurers out of the state.
“It breaks the link between insurance rates and the cost of loss that insurers are asked to cover,” Kibbe said in a statement. “It erodes the role that insurance as a key signal for risk. It pushes property holders into state-run residual plans that further hide the price of existing risks, creating moral hazard. The end result is that insurers lose confidence in their ability to operate and begin to exit or reduce their footprint, leaving property holders with fewer options.”
Kibbe said rate increases in the state are linked to growth in areas of the state that are subject to storms and extreme weather events, and unscrupulous attorneys who are driving the number of lawsuits for larger awards which drives up the legal burden on businesses, increased the price of everyday goods, and impacts the price of insurance.
Instead, Kibbe said, APCIA supports SB30 that puts a threshold on non-economic damage awards.
“The best path to moderating rate increases is to create conditions for more competition while curbing legal system abuse and implementing stronger building standards to create a more storm-resilient infrastructure,” he said. “We have seen this approach bear fruit in Florida, where key reforms to the state’s liability laws have attracted more insurers back into the market and moderated price increases.