Don’t Ask About Auto Insurance in Texas

Texas insurance law has just added new rules for different policyholders about whether you can see higher rates simply for asking your insurer about claims or making changes to coverage.

For home and fire insurance policyholders, the beginning of September meant freedom to call their insurance companies and ask such questions without the fear of seeing rate increases as a result of those questions.

But that’s not the case for Texas auto insurance policyholders.

For several decades in Texas, it’s been legal for insurance companies to increase rates if a policyholder asks hypothetical questions about modifying their coverage or claims. That meant homeowners who called their insurers and asked about installing an extension on their home could have been charged more when they renewed their policy.

The same went for auto policyholders who called their insurer and asked about changing vehicles or potential claims.

The difference now is that a law passed in the last legislative session outlawed those rate increases for home and fire policyholders. The sponsor of the bill, State Senator Kirk Watson (D-Austin), had previously included auto insurance policyholders. However, that provision was stripped.

The watered-down bill passed the legislature overwhelmingly and was signed by Republican Governor Rick Perry.

What to Avoid

According to various government staffers, auto policyholders should avoid asking about increased protection for fire or theft if they want to see their rates remain steady.

The Texas Insurance Code defines a customer inquiry as a  “a telephone call or other communication made to an insurer that does not result in an investigation or claim and that is in regard to the general terms or conditions of or coverage offered under an insurance policy.”

That can include, according to the code, a “term …concerning the process for filing a claim, and whether a policy will cover a loss.”

Policyholders looking to buy a more expensive or valuable vehicle could also see rates rise with some insurance companies if they ask how much the new coverage would be or whether a claim they haven’t yet filed would be covered.

A Legal Inequality

Texas regulators have historically had a cozy relationship with the insurance industry, according to the Dallas Morning news.  Personal insurance agents make up about 10 percent of the part-time state Legislature, and former Texas insurance commissioner Bob Hunter told  Online Auto Insurance News (OAIN) that the insurance lobby in Texas is as “powerful” as anywhere in the country.

“I learned that their ability to put pressure on a regulator to do the wrong thing was astonishing,” Hunter said. “They had many in the Legislature at their beck and call, ready to pressurize the regulator.”

Several government staffers spoke to OAIN on the condition they not be identified because they were not authorized to speak to media. They all said the political pressure from the insurance industry resulted in stripping the auto insurance provision from the bill, leaving auto policyholders exposed to future rate increases simply for asking their company a question.

Getting protection for home and fire policyholders was difficult enough, according to these staffers. Sen. Watson and his allies had to get the proposal placed on a summer study group, called an interim study. After the group agreed to recommend the changes, it was given priority status by Lt. Gov. David Dewhurst.

In a statement to OAIN, Sen. Watson said the removal of the auto insurance provision was due to a lack of support in the state Legislature.

“Carriers have a responsibility to not penalize people over something as basic as a question,” Watson said. “During the past legislative session, I passed a law protecting homeowners insurance consumers with basic questions. I sought similar protections for auto insurance customers, but that didn’t have support in the Legislature.”

However, Watson vowed to continue pushing for the change.

“Still, I don’t see why one group of insurance customers deserves these protections while another doesn’t,” he said. “So, in the coming weeks, I intend to request an interim study on extending these protections to automobile insurance customers as well.”

However, that could be a difficult climb, according to the former Texas insurance commissioner. Hunter told OAIN that the insurance industry has a long history of blocking legislation in Texas, going as far back as his tenure during the 1990s.

“Even with a strong, pro-consumer governor like Ann Richards, the pressure was immense,” Hunter said. “She felt it too.  It was very difficult to accomplish even minor reforms.”

But Alex Winslow, the executive director of consumer watchdog group Texas Watch, thinks the Legislature should take another stab at extending the protection to auto policyholders.

“This should be a no-brainer. We’re talking about the ability of customers to ask a simple question,” Winslow said. “We hope that lawmakers will look at it again.”

While the Texas Department of Insurance (TDI) has surveyed companies on consumer inquiries and rate-hikes, TDI spokesman Jerry Hagins stated he has “not been able to find TDI data about auto rate increases as a result of queries or complaints.”

A Texas insurance expert also said its unclear what other questions could result with increased rates during renewal, and how much those inquiries could cost policy holders.

Several requests for comment to insurance companies operating in Texas, such as State Farm and Allstate, went unanswered.

“Consumers shouldn’t feel fear when they have a basic question about their insurance coverage,” Sen. Watson said.

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