Texas Insurance Commissioner Votes for Public Option:
Consumers Pay More and Get Nothing in Return
Washington DC, October 19, 2009 –– The following is a statement by Steve Pociask, president of the American Consumer Institute:
The American Consumer Institute is very disappointed by Commissioner Geeslin’s decision to disapprove the rate filing recommended by the government-established and financially distressed Texas Wind Insurance Association. By rejecting an increase that would have made a partial step toward solvency, the Commissioner is jeopardizing the financial viability of the fund and imprudently pushing these costs to other consumers who will receive no benefit from the state-run fund. With the fund’s claims exceeding premiums, private insurance companies are assessed the difference, which they charge to their other policyholders.
Years of setting financially unsound rates have encouraged overdevelopment of coastal properties, which (over time) has put more lives and property at risk, reduced natural storm barriers and led to even much higher average insurance prices across the state. The recent disapproval of the rate increase by the Texas Insurance Commissioner will only accelerate this phenomenon. When the government artificially sets low insurance rates, private insurers will NOT compete, they will leave the market, and the state will be forced to cover Texans’ property risks. In fact, these higher costs have led to a 30% decrease in the number of homeowner insurance companies since 1995. When the government enters the property market in this fashion, it begins a downward spiral from private competition to the public option, and the result will be only higher premiums for consumers. Just this scenario has played out in Florida, where Governor Crist created a “public option” for the property insurance market, and now the state faces a very difficult, if not impossible, financial situation because of it.
The Governor needs to address this fiscal irresponsibility and return these funds closer to solvency, and stop what has become the public option that promises coverage to consumers, while putting private insurers out of business and driving up costs elsewhere.