I hold an all lines insurance adjuster license and am called to testify as an expert witness in court cases from time to time so this post is going to be more conceptual to limit the insurance companies attorney’s ability to use specific statements in this post in court proceedings.
Insurance reform isn’t a flashy political issue, a homeowners’ insurance crisis is brewing in Texas. Much like property taxes, skyrocketing insurance costs are becoming a major financial strain on families.
Republicans have an opportunity to get ahead of this issue, demonstrating that they are proactively addressing the economic concerns of everyday Texans. Failing to act now could result in higher costs, more policy lapses, and a full-scale crisis that demands reactionary solutions later.
The problems with Texas’ insurance market stem from two major issues:
- The increasing costs of policies
- The difficulties homeowners face when disputing claims
The Legislature needs to act on both fronts to create a more stable, affordable, and fair insurance market in Texas.
Addressing the Cost Side: Reducing Premiums and Risk Exposure
Texans are facing unprecedented increases in home insurance premiums. If left unchecked, rising costs will wipe out the benefits of property tax relief, leaving families in the same financial position despite tax cuts.
This may be one of the rare instances where state economic intervention is warranted—not through overregulation, but through strategic policy changes that stabilize the market and reduce risk exposure.
The premium cost increases are necessary given the payouts that have occurred in recent disasters. However, the trajectory is unsustainable. The problem lies both with the unique nature of the Texas Fair Plan Association, as well as overall need to address ongoing baseline issues that are causing the increasing claims and claim amounts.
- Expanding Texas Fair Plan to Reduce Risk Allocation
The Texas Fair Plan Association (TFPA) is the insurer of last resort—designed for homeowners who cannot find coverage in the private market. However, restricting access to the Fair Plan has artificially increased costs, much like how Obamacare limited private plan options and caused premiums to spiral.
Expand Texas Fair Plan eligibility to spread risk more evenly, preventing high-risk homeowners from disproportionately inflating costs for private insurers. One significant risk homeowners face is they are only able to obtain actual cash value policies.
Require other insurers to accept a portion of TFPA insureds the issue of risk spreading also works in the reverse. Why should other carriers be able to reap the benefit of not having to insure the highest risk properties? While TFPA will still remain necessary other carriers shouldn’t be able to benefit without contributing to the high end of the overall risk pool. When premiums were reasonable this argument didn’t make sense. In the current premium spiral the sequestering of properties to TFPA makes less sense.
Ensure TFPA remains solvent through state-backed risk mitigation pools to prevent future financial instability. If other carriers were compelled to accept a portion of TFPA insured the mitigation pool would also apply to the other carriers on the designated properties.
Increase coverage options to reduce the number of uninsured homes, ensuring fewer uncompensated losses that ultimately drive up rates for everyone.
- Strengthening Texas Fair Plan Dispute Resolution
While expanding TFPA (or creating alternatives) is necessary, the system must also be reformed to ensure fair claim handling. TFPA is already legislatively favored. This should have reciprocal standards of fair dealing and accountability.
- Long-Term Risk Reduction Strategies
Just like state intervention in water resources is needed to prevent a future crisis, Texas must take protective measures now to reduce insurance risks over time.
Sea Walls & Flood Mitigation – Protect coastal and flood-prone areas to reduce catastrophic insurance payouts.
Insurance Crisis Mitigation Pools – Create a state-backed risk fund to protect insurers from catastrophic losses, reducing premium spikes.
Building Standards – Increase minimum building standards and enforcement measures to ensure new homes are more resilient to severe weather, ultimately reducing future claims. Also, standards must ensure that roofs are appropriately maintained and repaired or replaced as necessary. It’s a huge expense, but it also is a driver of premium increases.
By proactively reducing risks, the state can gradually bring down insurance costs over time without forcing insurers to absorb excessive losses.
Addressing the Dispute Side: Making Insurance Claims Fair and Efficient
For some homeowners, filing an insurance claim is just the beginning of a frustrating battle. Insurers often delay, deny, or underpay claims, knowing that homeowners have few immediate legal remedies.
Texas must reform the dispute resolution process to ensure that policyholders can quickly access the benefits they’ve paid for.
- Creating Special Insurance Courts for Faster Resolutions
Currently, insurance disputes enter the same civil court queue as every other case, leading to long delays in claim resolutions. This is unacceptable—a home is often a person’s most valuable investment.
Establish dedicated insurance courts with handle homeowners’ insurance cases. We already have drug courts, emergency relief docket courts, veteran courts etc on the criminal justice side of the judicial system. It’s time to implement insurance courts for insurance claims not involving personal injury elements.
- Enforcing Deadlines & Imposing Consequences for Delayed Claims
Insurance companies must be held accountable when they fail to meet processing deadlines for valid claims. This is especially necessary because they are unilaterally able to obtain an extension on claim processing deadlines. Failure to meet a deadline means that they both missed the deadline and either did not obtain the extension or missed the extended deadline.
Automatic penalties for insurers who miss claim deadlines.
Automatic increase to loss of use provisions if the claim process obtains an extension or misses a deadline. This will expedite claim processing, and ensure the insured is not harmed when claim processing delays occur.
Stronger enforcement of existing bad faith laws.
- Strengthening TDI Oversight: Cracking Down on Bad Faith Adjusters
Most insurance adjusters are honest professionals, but a small percentage cause outsized harm by engaging in bad faith claim practices.
The Texas Department of Insurance (TDI) needs to be strengthened to ensure that bad actors face real consequences. While the Insurance Code already requires carriers to report complaints against their employees this has no oversight mechanism, and insured do not know about this requirement.
Create automatic administrative penalties for carriers whose adjusters are found to have acted in bad faith. The penalties will be redistributed to the carriers insureds every year.
Expand TDI’s enforcement authority to penalize adjusters found guilty of patterned misconduct.
Create a public database of repeat bad faith offenders to increase transparency. Again, most adjusters are honest. This will flush out the ones who are not.
Most adjusters do their jobs correctly. But the few who don’t create widespread harm—and TDI oversight must be strengthened to remove them from the industry.
- Require Insurance Carriers to deposit a percentage of underpayment findings into a state administered fund.
This encourages carriers to self-correct. Requiring insurers to deposit a percentage of underpayment findings into a state stabilization fund would deter wrongful claim denials while creating a financial reserve to stabilize future market volatility. If ABC Insurance underpays a claim by $50,000, they would be required to deposit $5,000 into the fund. This system discourages bad-faith claim practices by making unjustified denials financially costly, while generating reserves that could be used for premium stabilization, consumer relief programs, or emergency insurance crises.
If Texas acts now, it can prevent an insurance crisis before it spirals further out of control. By addressing costs, improving dispute resolution, and reducing risks, the state can create a stronger, more stable insurance market that works for both homeowners and businesses.
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