Homeowner's Insurance in Texas
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Have your
homeowner insurance rates gone through the ceiling? Has your agent cited
mold and water claim and loss history in Texas? Are you seeing increases
of 25-300% or more?
Would you
believe that there are consumers who qualify for mortgages but not the
homeowner's insurance? Yes, it is happening. You may have even heard
from a consumer whose realtor told her that she may have trouble selling
her house due to the "insurance crisis".
Like the auto
insurance industry, insurance credit scoring is now a factor in
underwriting homeowner's insurance. And again, the industry claims that
the Fair Credit Reporting Act (FCRA) allows them to use credit
reports in insurance underwriting yet they appear to ignore the
notification requirements of the FCRA. Adverse action ("credit
surcharges") is being taken without notification. Class Action
Lawsuits have now been filed against Allstate and Farmers for violation
of the FCRA. Governor Perry "scolded the industry for failing to
deal in good faith by letting consumers know if their rates are
increasing because of their credit history".
The industry
claims that poor insurance credit scorers file 40-50% more claims than
their high scoring counterparts and the statistical
data shows that poor credit risks have more severe losses (dollars
per claim). There is much speculation, but again the data cannot tell
why. They speculate that those with poor credit are under more
financial stress and are less likely to maintain their home as well,
fixing and replacing when needed, rather than waiting for a weather loss
and getting everything fixed at once with insurance funds.
However, in a
press release by the Office of Governor Perry on May 16 reveals that
reviews by the Texas Department of Insurance show that the insurance
industry appears to be using a manufactured crisis - mold - to
raise rates. "Preliminary findings indicate that some companies
have repeatedly delayed responding to legitimate claims of water damage.
The intentional foot-dragging then often resulted in the buildup of mold
and much costlier repairs."
Again, disposable
income comes into play as does the industries effort to deny and
delay claims.
There is no
doubt that "insurance credit scoring" will hurt the real
estate market. Mortgage companies are finally relaxing their standards
and looking at reasons why some consumers may have hiccups in their
credit; this is an effort to increase home ownership for lower income
Americans and others who might not readily qualify for a mortgage.
Yet now, the
insurance companies are stepping in to determine through "insurance
credit scoring" whether you will receive the mortgage or not by
accepting or denying the insurance for a home. What right does the
insurance company have to determine this?
"Such practices more often that not
work against a consumer and result in higher insurance prices. And such
credit scoring practices can be particularly discriminatory against
divorced women, the elderly, and young consumers who may have not yet
have established an extensive credit history." - Governor Perry.
As discussed in Industry
vs. Consumer, it also discriminates against those who have
experienced financial difficulty through layoffs, illness and identity
theft to name a few. The Dallas Morning news reported this morning (May
17) that the unemployment rate in Texas is at its highest since 1995. If
it affects the consumers credit, they can expect to be penalized by the
insurance companies.
Because the industry did not act in Good
Faith and have kept their methodologies secret, it makes sense that this
practice should be banned until at which time the industry can prove,
with causation, that insurance credit scoring is not discriminatory. Why
should it be up to the consumer to prove it is? Consumers can see that
it is, the
agents can see that it is. Obviously, the insurance company
executives are too far removed from the consumer to see the adverse
effects of this practice or they simply do not care.
What they do care about is
deregulation. They oppose a more burdensome rate regulatory system
because they feel it could further destabilize the insurance market.
They claim that the only reason such laws remain in effect is the notion
that regulators and legislators can control the price of insurance by
artificially holding rates down.
95% of the homeowner's
insurance market is currently deregulated and this is why
consumers are seeing the significant increases. A loophole in Texas law
afforded the insurance companies to move most homeowner's policies into
the deregulated market.
So why do they feel they can
regulate how a consumer manages his/her finances?
Our Legislature works for you, not the
insurance companies. It is up to you to let our "employees"
know that we will not tolerate a discriminatory practice. If they
do not listen, you can fire them. The important message here? Get out
and VOTE! For now, just
Get Involved!
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