Re: Do Texas Insurance problems go deeper than mold ?

[Guest guest]

The real problem is the politicians. They forgot that they represnt

the people of Texas rather than the big money and special interests.

The average Texas citizen suffers while the insurance companies have

made big profits for years. Now they complain of losing money. Are

they using the same accountants as ENRON?

It is time for the people of Texas to take back their government. It

is the most powerful tool on earth, VOTING. You voted these people

into office and you can vote them all out. If you want to make things

better you must sacrifice and go and vote.

In many states, like Texas and New Hampshire, citizens will vote

against anybody that even thinks about raising taxes to improve

childrens education or improve the basic quality of life. While taxes

are not always the answer, sometimes it might be the ONLY answer.

You have the power to change things but to do so means getting out

and fighting back. I've been fighting government corruption and

indifference for years. While my fight is not over, at least I can

sleep good at night knowing that at least I tried to make a

difference for my family and others.

Some use our problems for publicity, money, power or to get into

politics. We must watch out for these types of people. They are as

bad as those that build the illegal and unsafe homes, the corrupt

governement building inspectors, the money hungry insurance people

and the local, state and federal politicians that will use any issue

to get votes.

They hold press conferences and give promises of help and then go to

their country clubs with the big campaign contributors. I saw one

case in Detroit where a politician was promising help with Toxic Mold

while in their own district a contractor was returned their builders

license after getting out of prison for arson. Seems the former

arsonist burned down a home that was built illegally. No hearing was

held before returning the license. These types of things happen

everywhere.

Ken Moulton

>

http://www.dallasnews.com/business/stories/092802dnbusinsurance.60fd5.

html

>

> Insurance problems go deeper than mold

> 09/28/2002

>

> By ANURADHA RAGHUNATHAN / The Dallas Morning News

>

> Why is Texas in this homeowners insurance mess today?

>

> The reasons are varied - from a dramatic increase in mold claims to

> concentration of homeowners policies among the three big players to

> decreasing returns on investments, say industry representatives,

insurance

> regulators and consumer groups.

>

> They point to many factors that have complicated the issue.

>

> The first is a simple law of economics: income and loss. Insurance

companies

> are paying out more in claims than they are earning through

premiums in

> Texas, say industry representatives.

>

> On top of that, the declining returns on investment income for

insurance

> companies have made companies more sensitive to mold losses,

according to

> industry observers. But the issue would not have escalated if the

state

> had a rate regulation system in place, say consumer group

coordinators.

>

> Farmers Insurance Group dealt the latest blow in the insurance

crisis on

> Wednesday when it said it was pulling out of the Texas market,

refusing to

> renew the policies of 700,000 homeowners. State Farm Group has

stopped

> writing new policies for homeowners. And many policyholders are

seeing a

> doubling of their bills. The average premium on a $100,000 brick

home with a

> 1 percent deductible is nearly $1,000 a year for residents of

Dallas County.

>

> Income and loss

>

> Insurance companies say that it is financially difficult for them

to operate

> in Texas because their claim payouts are exceeding the premiums

that they

> collect. Farmers said 43 percent of its total underwriting losses

in the

> first half of this year were in Texas. But only 15 percent of its

property

> and casualty premiums came from the state. Allstate Corp. said

that while

> it had collected $516 million in premiums for 2001, its losses and

expenses

> amounted to $785 million, of which $280 million was due to mold.

>

> " Insurance premiums are not able to keep up with the insurance

costs because

> of mold, " said P.J. Crowley of the Insurance Information Institute.

> " Insurers are losing money. "

>

> Mold has been a rising cost for insurance companies in Texas since

early

> 2000. According to the Insurance Information Institute, 70 percent

of the

> mold claims in the country come from Texas.

>

> Figures from the institute show that the number of mold claims in

Texas has

> increased from 1,050 in the beginning of 2000 to 14,706 at the end

of 2001.

> The payout for mold claims for the same period has spiked from $14

million

> to $1.01 billion The average cost of mold per policyholder went up

from

> $23.32 to $444.35. The cost of remediation from mold cleanup has

also jumped

> from $13,719 per claim to $34,538 per claim.

>

> The Texas Department of Insurance does not buy the income and loss

argument.

>

> " The purpose of rates is not to recover the money you lost, " said

Lee ,

> spokesman for the Texas Department of Insurance. " Our actuaries are

saying

> that companies are trying to recover in a single year all the money

that

> they lost in the previous year. When you have a catastrophic year,

you

> spread it out over a number of years. "

>

> Insurers, however, say that the loss payouts for the industry

nationwide

> have been escalating year after year, going from $31.3 billion in

1992 to

> $41 billion in 2001.

>

> Investment income

>

> In the meantime, the other source of income for insurance

companies - the

> income that they get by investing the premiums in the stock market

and the

> bond market - has been declining.

> The percentage of investment gains has dipped from 6.5 percent in

1992 to

> 3.3 percent in 2001.

>

> Insurers say that investment income typically represents only a

small

> portion of the overall income. Bob Hartwig, chief economist at the

Insurance

> Information Institute, says that for every dollar that the

insurance company

> earned in premiums in the last decade, the average investment

income was

> only 4.8 cents.

>

> Nevertheless, insurance companies say that while it is not a major

factor,

> the investment income used to act as a cushion for losses.

>

> " If your earnings target is 12 percent for a business unit and you

make 12

> percent in investment income, you can price the policy at a flat

> underwriting level, " said Mike Trevino, spokesman for

Allstate. " But if you

> make only 3 or 4 or 5 percent in the market, the income from the

operation

> has to be higher. "

>

> Consumer groups, however, charge that consumers are tossed around

every time

> the market hardens or softens for the insurance industry.

>

> " In the days when the market was flying high, companies were

falling all

> over themselves to get new customers and increase market share, "

said Rob

> Schneider of Consumers Union. " They wanted to collect premiums and

invest.

> But as the returns plunge, they are walking away from customers. "

>

> Regulatory environment

>

> The third big factor that created this crisis, according to some

public

> policy experts, is the lack of rate regulation in Texas.

> Nearly 95 percent of the homeowners market is unregulated.

Companies have

> used a loophole in the law to shift their policies into unregulated

> subsidiaries called " Lloyds " companies. This means that they can

charge

> whatever rate they choose.

>

> " We have no meaningful rate regulation in Texas, " said Dan Lambe of

Texas

> Watch, a consumer support group. " Our entire regulatory system has

been

> turned upside-down. Insurance companies are running the show

instead. "

>

> Some lawmakers are calling for more regulation to control rates. The

> industry lobbyists are gravely opposed to it.

>

> Meanwhile, consumer groups say that another factor that made the

state

> vulnerable was that too few players were controlling too many

homeowners

> policies. Together, the top three players - State Farm, Farmers and

> Allstate - made up two-thirds of the marketplace.

>

> " A handful of companies have so much control over availability, "

said Mr.

> Schneider. " And we are talking about a product that is essential.

There

> should be a concern about assuring stability and availability in the

> market. "

>

> E-mail araghunathan@d...

>

> Also Online

> On the Web

>

> Texas Talkback: What can be done about the insurance crisis in

Texas?

> View comments

>

> Homeowners rate guide: View rates by county

> (from Texas Dept. of Insurance official site)

> http://www.tdi.state.tx.us/apps/perlroot/u_cp_homerate/rghome.html

>

> Chart: Homeowners policies and prices offered in Texas

> (from InsureTexas.org)

> http://www.insuretexas.org/homeownerspolicies.pdf

>

> Previous coverage

> 09/24: Insurance frustrations mount

>

http://www.dallasnews.com/sharedcontent/dallas/politics/state/newspape

r/stor

> ies/092402dnmetinsuranceshock.bac.html

>

> 09/24: Nation's highest rates trying the patience of many Texans

>

>

http://www.dallasnews.com/localnews/stories/092402dnmetinsurancesider.

d8f.ht

> ml

>

> Editorials

> 08/25: Legislature must tackle insurance issue

> 08/07: State's insurance practices deserve scrutiny