There’s an old saying: “If it sounds too good to be true, it probably is,” and this latest offer from a Texas insurance company is no exception. On its face, who would turn down up to a 25% discount on their homeowner’s insurance premium? Not many people is my guess. There’s another saying, courtesy of science fiction writer, Robert Heinlein: “TANSTAAFL or There ain’t no such thing as a free lunch.” In exchange for this beauty of a discount, homeowners are being asked to agree to waive any rights they may have to sue the insurer, no matter how much the insurer may act in bad faith. So, would you trade your rights for an insurance discount, Texas?
There’s an old saying: “If it sounds too good to be true, it probably is,” and this latest offer from a Texas insurance company is no exception. On its face, who would turn down up to a 25% discount on their homeowner’s insurance premium? Not many people is my guess. There’s another saying, courtesy of science fiction writer, Robert Heinlein: “TANSTAAFL or There ain’t no such thing as a free lunch.” In exchange for this beauty of a discount, homeowners are being asked to agree to waive any rights they may have to sue the insurer, no matter how much the insurer may act in bad faith. So, would you trade your rights for an insurance discount, Texas?
If you do, you will be stuck with resolving any disputes through mediation and, if that fails, binding arbitration. You will never be allowed to bring your dispute to court.
So what, you say? Trials are messy and expensive you say? Arbitration is just as good you say? Remember the saying about sounding too good to be true?
In this case, the insurer picks and pays for the arbitrator, the arbitration process is secret and the arbitrator’s decision is beyond appeal. Period. Still sound like a deal? Trading your constitutional right to a jury trial for a 25% discount on a $2,000 policy premium ($500)? My guess is that, for some, this is still not a question. Money is money.
For the rest of us, this could be the beginning of a nasty new trend that seriously skews things in favor of insurers and could leave insureds out in the cold (or the rain, as it were). Surely, this would never happen though, right? Wrong.
The Texas Farm Bureau (TFB) is asking the Texas insurance commissioner to OK this exact policy provision. Understandably, the Texas Department of Insurance, a regulatory agency that has long fought to keep arbitration clauses out of insurance policies, is concerned. So concerned, in fact, that it recently announced a rare public hearing to review TFB’s request. They also want your opinion, Texans. You can provide it by using the contact information at the end of this article.
Why is TFB pursuing this provision?
Simple: money. According to Mike Gerik, TFB’s executive VP, “We feel that the current litigation environment around severe storm events has created a situation where we need to offer an arbitration alternative in some areas to preserve our ability to write insurance.”
In plain English, they want to protect their bottom line, which may involve delaying or denying claims, as some insurers do. With the option for litigation removed from the equation, their profits would be secure. Much more secure than your homes, actually. Mr. Gerik also said that lawyers who take storm damage cases make it harder for insurer’s to do business.
Fear not, he says! Customers will be given a choice as to whether to take the discount or retain their constitutional rights. He also promises that agents will explain the policy differences.
“We believe many of our members will appreciate this option. And again, it is optional. Our members will make their own decision if they want to elect it. It is their choice; under no circumstances are they required to accept it.”
TANSTAAFL. As often happens, the truth is in the fine print. In this case, the fine print says, “In certain areas, this endorsement may be the only option available from our companies due to risk exposure.” In other words, say goodbye to your choice if you live in certain Texas counties and want insurance from TFB.
Which counties are the “lucky” ones? Mostly the southern ones, according to TFB, who plans to offer discounts ranging from 10% – 25%:
- Brooks,
- Cameron,
- Duval,
- Hidalgo,
- Jim Hogg,
- Jim Wells,
- Kenedy,
- Kleberg,
- Nueces,
- Starr,
- Webb,
- Willacy,
- Zavala and
- Zapata.
The offer is only 10% if you live in these counties:
- Aransas,
- Brazoria,
- Calhoun,
- Chambers,
- Galveston,
- Jefferson,
- Matagorda,
- Refugio and
- San Patricio.
Interestingly and not-so-coincidentally, many of these areas have been hit with serious storm damage this year. If reports are up-to-date, those damages are in the billions of dollars. When you’re an insurer looking to protect your profits, that’s a world of hurt.
The Fox in Charge of the Henhouse
In 2015, Senator Larry Taylor (R-Friendswood), a former insurance agent, introduced legislation that would permit insurers to pay less for claims and pay them even more slowly than they already do. This idea didn’t go over very well and the Sen. Taylor’s bill died.
It’s not really over, though. The insurance industry is accusing everyone from public adjusters and appraisers to roofers and lawyers, of engaging in fraud to bump up their bank balances. I’m sure that, in some small percentage of cases, this may be true. I’m even surer that the insurance industry hates the idea that this small number of bad apples stole its idea.
Some insurance companies are more skilled in screwing over the very people they’re supposed to be helping than they are in actually helping anyone. You don’t file a first-party claim when life is perfect; you file one when Mother Nature busted out all your windows with grapefruit-sized hail.
It should be noted that homeowner’s insurance isn’t optional. Under current lending practices, if you have a mortgage, you better have a homeowner’s policy. This next statement is not, I repeat, not judgmental: the average consumer isn’t well-versed in the ins and outs of binding arbitration. And, many (I’m ashamed to admit I do it too, sometimes and I have a law degree) don’t bother to read the fine print. They sign on the dotted line, especially if the agent is really upselling the discount.
Senator John Whitmire (D-Houston) and an opponent of Sen. Taylor’s bill summed it up perfectly when he said, “There’s a reason people desperately turn to legal representation. Without that, they wouldn’t have gotten a good settlement.”
Kudos goes to Texas Watch, a pro-consumer, non-profit watchdog group that discovered this issue via filing an open records request. In addition to sponsoring an online petition, the group wrote a letter to David Mattax, the Texas Insurance Commissioner and the man ultimately responsible for deciding TFB’s request. In the letter, Texas Watch said that arbitrators “know which party is buttering their bread when they are selected time and again. If an arbitrator starts ruling too often against that side, they will risk disfavor. … The arbitrator’s paycheck depends upon staying in the repeat player’s good graces.”
There are a lot of questions to be answered, according to Ben Gonzalez, spokesperson for the Department of Insurance. “We have the same questions you pose. Is this a good option for consumers? How will it work? What kind of data are the discounts being proposed based on? And we definitely want to hear from consumers.”
You heard him: they want your input, Texans. Don’t disappoint them. Stand up for your rights and tell the Commissioner what you think of TFB’s proposed policy that would rob you of those rights. You can do so via:
- Email: CommercialPC@tdi.texas.gov
- Mail: Texas Department of Insurance, Property and Casualty Lines Office, Mail Code 104-PC, P.O. Box 149104, Austin, TX 78714-9104
You can also attend the public hearing on July 6 at 9:30AM at the Department of Insurance, William P. Hobby Jr. State Office Building, 333 Guadalupe, Room 100.
Source:
Join the conversation!