Last week, I posted several suggestions made by Texas policyholders to the Texas Department of Insurance Commissioner regarding their insurance-related concerns. Here are the Commissioner’s responses to two of those suggestions, along with my comments.

1. Empower consumers to generate real price competition by requiring carriers to offer a standard policy, allowing consumers to make meaningful apples-to-apples comparisons.

I wholeheartedly support enabling consumers to better understand what they are purchasing. When I joined TDI almost a year ago, I noted that while our website contained a lot of information, much of it was hyper-technical, legalistic, jargon-heavy or otherwise difficult to understand. One of my major initiatives has been to provide better, more useful, meaningful and intelligible information to consumers so that they can make informed decisions. We are currently developing an interactive educational tool to assist consumers in understanding common homeowners policy coverages and features. Of course, these coverages and features can vary from company to company. Our tool will include a comparison of the top five homeowners insurers’ policy forms to the “standard” coverages and features. It is important that consumers obtain company specific information and explanation from the company or the company’s agent prior to completing the purchase. This type of service is one of the primary functions of an insurance agent.

We have conducted a survey of other states and have found no state that requires insurers to offer a standardized policy form, so we are unable to determine whether this practice would lead to lower insurance premiums. Despite the absence of a standardized policy form, our review of policy form filings indicates that most policy terms, conditions, coverages, and features are substantially similar. As mentioned above, our interactive educational tool will identify the more common variations.

TDI does not have the authority to require insurers to offer a particular policy form without legislative action.

The Commissioner is right to say that TDI does not have the authority to force insurers to offer any specific policy. With that said, I applaud the Commissioner’s efforts to create additional transparency in the insurance process. If the “interactive educational tool” lives up to the hype, Texas residents will have more insurance-related information at their disposal to help them make more informed insurance choices. Everyone should be in favor of that.

2. Stop insurance companies from shifting more of the burden onto consumers by continually raising deductibles.

Except for the coastal area, Texas has a very competitive homeowners insurance market in terms of the number of insurers actively writing policies, many of which offer lower deductibles. Some consumers choose higher deductibles in order to receive a lower premium. Robert Hunter, former Texas Insurance Commissioner and current Director of Insurance for the Consumer Federation of America, has stated that “[consumers] should be happy their deductible is higher as long as the premium goes down” (Washington Post, October 21, 2011). TDI reviews the effect of deductible changes on premiums to ensure that appropriate offsets are made. TDI believes consumers are best served when they have a variety of insurance products and options from which to select based on their personal circumstances. TDI does not have the authority to prohibit higher deductibles without legislative action.

Again, the Commissioner is correct to say that TDI does not have any authority to prohibit higher deductibles without legislative action. The truth of the matter is TDI is limited in what it can do. TDI cannot unilaterally change or create laws; only our elected officials can do that. What TDI can do, however, is limit rate increases, which it hasn’t done in recent memory.

The Commissioner’s response is a bit unsatisfying. I wish the Commissioner had done a better job explaining deductibles and the role they play in the insurance process. Instead, we’re left with generic statements telling us we should be “happy” with higher deductibles as long as our premiums go down. For most of us, that simply hasn’t been the case.