Texas Auto Insurance Report: Market is Competitive, Rates Stable

Dallas skylineThe Texas Department of Insurance (TDI) recently released its biennial report to the legislature, in which the department reports that the state’s personal auto insurance market has seen increased competition, relative cost stability and a decrease in enrollment for the state-run assigned-risk pool.

Between the beginning of 2009 and the end of 2010, nine new insurers entered the market for auto insurance in Texas, and 22 insurers already operating in the state filed new personal auto coverage products.

“These new products and new entrants mean more choices and increased competition for Texas insurance consumers,” the authors of the report wrote.

And just as the number of auto insurers in the state has been increasing, so too has the amount of premiums collected from private-passenger policyholders.

In 2009, Texans paid $13.2 billion dollars in premiums, up $500 million from the $12.7 billion billed in 2008.

But even though the total amount of premiums written increased, the overall change in rates across the state was minimal — close to zero.

This doesn’t mean, though, that no one saw a rate increase in 2010.

Of the 471 rate filings made in the last year, nearly a third reflected rate increases. Fourteen percent showed rate decreases, and the remaining 56 percent had no change.

“The industry statewide rate change was about zero percent,” the authors wrote. “This is down from the average industry rate change of 3 percent in 2009, and influenced by some rate decreases taken by larger insurers.”

Also contained in the document was information regarding two contentious issues — auto insurers’ use of direct repair facilities and the use of data mining by insurers.

The department issued a formal warning to coverage providers earlier in 2010 noting any practices that constituted “steering” — suggesting to customers that they must use specific mechanics or shops to handle repairs in order to have the fixes covered — was a violation of the state insurance code.

Complaints filed with the department about cases of steering led to an investigation about the use of direct repair facilities, which are repair shops that have signed contracts with coverage providers in order to have business directed to them.

“TDI has also received complaints that insurers are informing claimants that they may be responsible to pay for certain repair costs if the claimant selects a repair facility that is not on the insurer’s list of  direct repair facilities,” the authors wrote.

The department surveyed the top five auto insurers in Texas in 2010. In 2009, the top five insurers were State Farm, Farmers, Progressive, Geico and Allstate. Of the five insurers, “all had some sort of contract/agreement with direct repair facilities or had selected repair facilities to be on a preferred list.”

As a result of these findings, the department is urging the legislature to pass laws that require more explicit information to be provided to consumers about their repair choices.

Data mining is another practice gaining heavy use by insurers in Texas.

Defined as the use of sophisticated analysis tools to discover “previously unknown, valid patterns and relationships in large data sets” to find new variables that can help assess and predict risk, data mining was used by 73 percent of the auto coverage providers surveyed in March 2010.

The authors of the report assert that the use of these previously unutilized types of data is becoming increasingly refined.

“At the end point,” the authors wrote, “rating systems will become so refined that each individual is effectively self-insuring, and ‘insurance’ will have morphed into a form of self-financing.”

The department called the increased accuracy in assessing risk “both efficient and fair in that it improves loss prevention incentives and makes the right people bear the cost of the risks they voluntarily choose to take” and that the use of data mining should be further monitored before any regulatory initiatives to contain it are formed.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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