On Friday, July 15, 2011, the Texas Department of Insurance Commissioner issued a ruling stating that the Texas Windstorm Insurance Association (TWIA) had “violated the insurance laws of the State of Texas….” Specifically, the Texas Department of Insurance Commissioner found that TWIA violated state law by deceiving and taking advantage of TWIA policyholders after thousands of legitimate claims were denied or underpaid. The Commissioner concluded that “such conduct constitutes grounds for disciplinary action.”

The Texas Department of Insurance ruling comes soon after passage of the new TWIA law, a law proponents of lawsuit reform have portrayed as a TWIA reform bill. However, this new law does more to limit policyholders’ rights if TWIA again takes advantage of its policyholders the next time a covered peril damages their property. As I stated in last week’s post, the new TWIA law restricts policyholders’ rights to file claims and pursue legal action against TWIA. The new law, which becomes effective on September 1, 2011, eliminates any penalty TWIA would pay if it defrauds or abuses policyholders — the very claims it was found guilty of by Texas Department of Insurance Commissioner. In addition, the new TWIA law restricts policyholders’ right to a trial by jury and forces binding arbitration upon all policyholders. Furthermore, the new TWIA law gives TWIA immunity for many deceptive and misleading practices policyholders experienced after Hurricane Ike.

It should come as no surprise that at the end of the day, policyholders have been placed in a far worse position then they were before Hurricane Ike. And what do policyholders get in return for fewer insurance rights? A reduced premium? Not a chance. As I reported last week, TWIA intends to automatically raise premiums by 5% every year.

  • Greg Stephens

    I went out as an Independent adjuster for The Texas fair plan shortly after Ike hit.

    I can tell you that it was a horrific experience. I have never seen a carrier erect more roadblocks for their adjusters.

    It was impossible to meet their standards for roof replacement.

  • Daniel Friedman

    This is probably the model for the current legislation we are seeing regarding Citizens.

  • I wonder if the department of insurance in other states did the same type of investigation, would they find out that this is a common practice.

  • Sergio Leal

    Thanks for everyone’s comments.

    I agree that all states should perform similar investigations into any quasi-governmental insurance company, such as TWIA. Anytime the public’s tax money is used to fund an entity, there should be some oversight to prevent corruption.

    As for the legislation, the way things have played out, I would’ve preferred nothing over what we got. I believe the laws in place were fine; all we really needed was proper oversight to ensure there’s nothing fishy going on.

  • Dennis Gee

    5% per year? I’m no good at math but last year my windstorm cost was $800, this year it is $1440, that sounds more like 60-70% increase in 1 year.