PCI Urges Caution in Interpreting TDI Report

The following statement regarding new data released by the Texas Department of Insurance on the Texas homeowners insurance market is from Donald Hanson, regional manager and counsel for the Property Casualty Insurers Association of America (PCI):

Based on the insurance loss ratio data released Monday by the Texas Department of Insurance, there may be signs that the state’s homeowners insurance market is beginning to stabilize, but it is premature to make long-term assessments on a measure that is not a true predictor of rates.

The information from TDI provides only part of the picture regarding insurance rates. Loss ratio data is not the sole measure of rates. There is a danger in making assumptions based on short-term loss ratio data.

At this point we don’t know what is behind the numbers. The apparent improvement to loss ratios in Texas could be the result of several factors. The data may reflect policy form changes that resulted from the reforms instituted within the last year. The numbers may also simply reflect the fact that we had fewer claims due to a mild winter. As we all know, Texas is part of tornado alley. As we approach the spring storm season, these loss ratio figures could change dramatically.

We are hopeful that the TDI information is an indicator that there is a trend toward lower claim losses. Moderating loss ratios are a positive sign and if the trend continues, it will help to stimulate competition in the marketplace and be a factor in consumers paying lower rates.

Competition remains the key to achieving lower prices and is the best measure of how successful the insurance reform effort has been. As the Texas insurance marketplace stabilizes and becomes a more attractive place to do business, you will see increased competition. Consumers are beginning to see rate reductions as they renew their insurance policies. It is critical that the regulatory environment continues to encourage insurers to enter and in some cases re-enter the Texas marketplace. Implementing regulatory policies that promote competition will ensure long-term stability and lower rates for Texas consumers.