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This article is part of a sponsored series by Right Street.

Sometime around mid-afternoon on July 10th, Texas Insurance Commissioner Eleanor Kitzman will sit down at a witness table before the Texas Senate’s Business and Commerce Committee and launch into a discussion based an a on Texas insurance rates from her Texas Department of Insurance. By the standards of the things that flow out of most insurance departments, the report is good, well-written, and honest. The bottom line conclusion鈥攖hat “the primary driver of high premiums is high losses”鈥攊s spot on and much of the analysis of Texas’ insurance environment is perfectly sensible. ( makes many of the same points.) On balance, what I’ve heard leads me to think that Kitzman is doing a good job turning around what may well have been the most dysfunctional insurance department in a big state.

That said, the TDI report Kitzman will use as the basis for her testimony makes a mistake that I myself made in the first few years of putting together a mult-state insurance report card. In particular, it takes statute law at face value when it comes to determining how states regulate insurance. This doesn’t always work. Because it is a complex administrative process, insurance regulation is often going to depend a lot on specific way a state administers its laws rather than the laws on the books. TDI’s report says that Texas has a “file and use” statute in place. And it does. But the report doesn’t mention that under a previous commissioner, staff and the higher officials at the department frequently told insurers that rates would be disapproved if they were filed. To me, this sounds a lot like prior approval. Most insurers have treated it that way. Likewise, the report says that Texas is average for the country when it comes to ease of non-renewals when, in fact, making it easier to non-renew policies was a big priority for insurers in the last legislative session. (Easy market exit is a big incentive to enter the market in the first place because it hugely reduces the downside risk. Painful as it is to be non-renewed鈥擨 was myself two years ago鈥攅asy non-renewal laws are probably pro-consumer on balance.) Finally, the report notes correctly that Texas doesn’t have an elected insurance commissioner but it fails to note that the state is still a place where there’s a great deal of politics in the insurance environment. I could go on.

I don’t think the TDI report is seriously flawed. In fact, it would have been very hard to write an objective comparative report that compiled data any other way. (Although I frankly don’t understand how the report’s authors got their data on ease of non-renewal.) R Street’s partly subjective has taken years of work. But looking at statutes doesn’t tell you everything.

Topics Texas