RESTORE FAIRNESS AND TRUE COMPETITION

Problem: Texans face some of the country's highest premium increases and rates in many categories, including homeowners and healthcare. Texas leads the nation in adults and children without healthcare insurance, by percentage. Texas families' health insurance premiums have increased 91.6 percent since 2000, almost five times faster than earnings have increased for Texans during the same period. Between 2000 and 2008, the percentage of companies across the nation offering health coverage declined by 6 percentage points. The increases in premiums have continued despite coverage offering fewer benefits or having higher deductibles.

The health insurance market in Texas is hardly regulated. The Dallas Morning News explained on February 23, 2010 that, in the health insurance market, the Texas Department of Insurance only reviews premium hikes for individual policies that exceed 50 percent during a one-year period, according to Ana Smith-Daley, the Department's Deputy Commissioner for life and health. It doesn't review any rate increases for companies with more than 50 workers. “Texas officials said they couldn't produce data on recent premium increases. Critics say the insurance department hasn't made such data available for consumers, although officials said they are working to comply with a 2007 state law that directs them to put more information online.”

Texas consumers will be forced to endure a second homeowners rate increase by State Farm Insurance in May 2010.  The insurance giant will be raising the homeowners rate by 4.5% in May, just eight months after an 8.8% increase.

A poor credit report costs consumers 35% more for auto or home insurance. Credit rating is not related to risk of accident; carriers ought not be allowed to base insurability on factors unrelated to insurance risk. Such activity is unfairly aimed at low income, minority and unlucky consumers.

Solution: The Texas Attorney General has the duty to protect insurance consumers, and the power to attack companies for deceptive trade practices and unconscionable activities. The Attorney General has the duty to protect Texas consumers from profiteers seeking to cheat the public. The Texas Attorney General can discover insurance companies hiding true loss ratios (claims paid divided by premiums collected), taking excessive profits, and saddling consumers with unreasonable investment losses and business costs, including risk insulation via costly reinsurance.
If an insurance company had to consider whether it could pass on excessive incurred costs, it would engage in more reasonable business practices. But when guaranteed free rein in passing on costs, insurers will naturally use expensive methods to insure they bear little or no risk. And, with no investigation, an insurance company can pass on the cost of bad investments. The Attorney General has massive investigative powers, obtaining company records via a powerful subpoena-like tool: a civil investigative demand. The Attorney General has tremendous enforcement powers, setting example by going after wrongdoers in enforcement actions.

1.    Discover true risk/loss ratios and abuses, using the massive power of civil investigative demands and enforcement actions

2.    Prosecute anticompetitive profiteering, deceptive trade practices including scrutiny of claims and advertising

3.    Enforce prompt pay rules.

4.    Enforce rules limiting industry lobbying on agency decision makers.

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