Feeling heat, insurers hire lobbying firm

7/28/02

Austin, TX – Five of the state’s biggest insurance companies are joining forces to lobby the Legislature. Some lawmakers already are calling for more regulation to address skyrocketing premiums and shrinking coverage for homeowners.

Some legislators also want to curb the use of credit scoring, the secret rating systems that many insurers use as a factor in setting premiums.

The new insurance group, called the Texas Coalition for Affordable Insurance Solutions, has hired Public Strategies Inc., an Austin lobbying firm, to help press its case during the legislative session that begins in January.

The insurers in the coalition are State Farm, Allstate, USAA, Nationwide and the American Insurance Association, a group of smaller insurers.  They say they seek to head off legislation that would strengthen the state’s control over insurance rates and any limits on credit scoring.

The coalition also wants to thwart any effort to rein in Lloyds companies or county mutuals, the unregulated subsidiaries that now account for 95 percent of the Texas homeowners insurance market and a growing percentage of the auto insurance market.

“Basically, the individual insurance companies are coming from a position of common ground,” said Beaman Floyd, a lobbyist who is director of the group. “Because they are involved in the same system, everyone wants to have affordable and accessible insurance for Texans.”

The insurance companies say they have suffered heavy losses in Texas because of steeply rising mold claims and regulations that require them to provide broader coverage than in other states.

But consumer advocates say the insurance companies are the culprits in the crisis.  “The insurance companies flat-out don’t want to be held accountable as far as this insurance crisis, so they are turning to high-priced public relations and lobbying teams to help protect their profits,” said Dan Lambe, executive director of the consumer advocacy group Texas Watch.

“We’re confident the Legislature will see through this charade,” Mr. Lambe said.  Texas Watch and other consumer groups are preparing their own legislative strategies, including collecting information about rising premiums and denial of coverage.

The insurers hired Public Strategies to consult and Mr. Floyd to head up the group.  Mr. Floyd wouldn’t say how much the insurers spent to start the coalition, and the new group is not yet registered with the Texas Ethics Commission.

Farmers Insurance Co., the state’s second-largest insurer, declined to join the group.  A Farmers spokesman said the company didn’t agree with the coalition’s plans to conduct focus groups and research to identify the issues.

“I don’t think it takes a rocket scientist to figure out what the issues are,” said Mark Toohey, a spokesman at Farmers’ Los Angeles headquarters. “We’re not joiners. We like to go at things ourselves.”