Texas Department of Insurance Receives 1,115 Homeowner Complaints

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1,115 HOMEOWNERS FILE INSURANCE COMPLAINTS

ASSOCIATED PRESS July 05, 2002

Texas Department of Insurance officials said they have received formal

complaints of price-gouging from 1,115 homeowners in the first half of this

year, 38 times the 29 homeowners who complained about their premiums in the

first half of 2001. (July 6, 2002)

DALLAS (AP) - Texas Department of Insurance officials said they have

received formal complaints of price-gouging from 1,115 homeowners in the

first half of this year, 38 times the 29 homeowners who complained about

their premiums in the first half of 2001.

Also, more than 1,600 homeowners have called the agency to informally vent

frustration about their insurance bills since late February, when a hotline

was established for consumer complaints.

" The sheer number of complaints is shocking, but it should come as no

surprise to anyone who has been following this situation closely, " said Dan

Lambe of Texas Watch, a consumer group active in insurance matters. " It

reflects the magnitude of the insurance crisis we are in and it reflects the

frustration that Texas families are feeling as this impacts their

pocketbooks. "

While the number of complaints is small compared to the number of insured

homeowners, the increase is a strong indication of how upset homeowners are

with premiums that have doubled or more in recent months.

An industry spokesman said the surge in complaints is not surprising

considering the higher rates imposed this year in the wake of massive mold-

and water-related losses.

" Rates are increased for a reason - to have the money to pay the claims that

people file, " said Jerry s, president of Southwestern Insurance

Information Service, rejecting the assertion that insurers have engaged in

price gouging.

" For the past nine years, homeowners insurance has generally been a loss

leader for companies, but even that experience pales in comparison to the

huge losses we have seen the last two years, " said s, citing the record

$1.2 billion in water-related losses last year.

The leader in rate complaints was Allstate Insurance, the third-largest

homeowners insurer in Texas, with 478.

Among the other ``big three'' companies that hold about two-thirds of Texas

homeowner policies, State Farm had 215 complaints and Farmers had 204.

Nationwide had 43 complaints and Travelers had 39.

Allstate spokesman Schmitt told The Dallas Morning News that company

officials are disappointed with the number of complaints lodged against his

company.

" We think some of the dissatisfaction may be attributed to the fact that we

took rate increases in late 2001 that were substantial, " Schmitt said. " It

was not a popular thing to do even though it was necessary and justified. "

Allstate rates increased by an average 53.5 percent, a sizable jump but

comparable to the rate hikes of other companies.

Schmitt said Allstate was the first company to offer an alternative

homeowners policy that preserved most of the previous coverage while keeping

premiums at a lower level by sharply limiting coverage for mold damage.

Allstate, Farmers and State Farm are being investigated by the insurance

department and the attorney general's office because of the rate increases

they imposed this year.

Lee , a spokesman for the Texas Department of Insurance, said all

homeowners who file formal complaints about excessive rates are being told

that the companies' business practices are under review.

If evidence of unfair discrimination or other impropriety emerges, the state

can take punitive action such as ordering refunds or levying fines.

But said those homeowners also are being advised that because most

insurers have shifted their policies to so-called Lloyds subsidiaries, they

are exempt from rate regulation by the state and can charge whatever they

want.

" We also tell them there are efforts under way to establish some kind of

regulation of these companies, and if they want to get involved, they should

contact their state senator or representative, " he said.

Republican Gov. Rick , who is seeking a full term to the office, and

his Democratic challenger, Tony , have called for state regulation of

the Lloyds companies, which hold nearly all of the homeowners insurance

market.

Lloyds companies were originally intended to serve high-risk or

hard-to-insure properties, but insurers used a loophole in the law to issue

virtually all homeowners policies as Lloyd's policies, freeing them from

regulation.

©Tyler Morning Telegraph 2002