Texas Governor Rick Perry, the newly minted?Republican?Presidential Candidate, plans to run a campaign touting heavily his free market philosophy and success in bringing jobs and economic growth to his state, even during a recession. While there are many free market successes that Governor Perry can rightfully claim under his watch, one portion of the economy has not seen the same growth.
Under Governor Perry, Texas? property and casualty insurance industry has suffered from high?insurance?rates, a financially burdensome state run insurer and?over regulation. This is one area where Governor Perry?s policies could use improvement.
In a new article recently published in the Frum Forum, Eli Lehrer, vice president for DC Operations critiques Governor Perry?s insurance policies in Texas, how its state run insurer, the Texas Windstorm Insurance Association, has driven out private insurers and left taxpayers on the hook for millions in potential losses through assessments.
?Certain parts of the insurance market are downright?socialist. The state?s homeowners? insurer of last resort for people who can?t find insurance in the private sector?the Texas Wind Insurance Association (TWIA)?is the country?s second largest entity of its type (only Florida writes more property insurance backed by taxpayers) and several of its top executives resigned earlier this year. Although severe hurricane risks mean that some similar entity would probably exist in Texas no matter what happens, TWIA has continually set its rates in direct competition with those in the private market while Perry appointed regulators have refused efforts to raise them. As a result, it?s big and?if a major storm strikes Texas?could end up having to impose huge special taxes called ?assessments? that would end up driving many insurers out of the state and boosting rates for all consumers.?Unlike most other so-called residual markets?which focus on providing insurance to people of reasonably modest means who really can?t find it elsewhere?TWIA also writes insurance for homes with a structure value over $1 million. ?(Unique among hurricane-prone states, Texas? coastal counties are poorer than those inland.)?
Eli does give Governor Perry credit for his recent efforts to reform TWIA. In a recent special session of the Texas Legislature, Perry did push legislators to pass reforms that stabilized TWIA. However more work remains to be done to make Texas? insurance market competitive again.
?Admittedly, Perry has done something about TWIA. Following TWIA?s CEO?s resignation and an outcry from the insurance industry, Perry kept the legislature in session earlier this year until it passed a number of reforms that?stabilize?TWIA. While these reforms will probably stave off a mass?exodus?of insurers, they still leave ordinary Texans on the hook for beachfront mansions. And the overall system for setting insurance rates remains unchanged. ?In any case, nearly everything that happened emerged from the legislature rather than Perry?s office.
Were Perry running on something other than his own conservative, free-market small government credentials, a lot of this might be pretty trivial. In fact, insofar as his special session contributed to legislation that?stabilized?TWIA, Perry has shown that he?s not entirely disengaged from the state?s realities. But his record on insurance shows that Rick Perry just isn?t he free market paladin many on the Right want.?
Eli argues that until Governor Perry takes efforts to minimize the growth of TWIA and scale back the state onerous regulatory system where the state approves rate changes, part of his free market message may ring hollow.
?When I rated all of the states? insurance environments, Texas under Perry?ranked next-to-last with a grade of F. The problems are most prominent in two areas: rate oversight and the state?s ?public option? insurer of last resort.
Rate regulation first. Here, Texas offers the worst of all worlds: the state?s homeowners? insurance rates are among the highest in the country even though the laws intended to exert government control over them are the nation?s most onerous. While Texas? law specifies that insurers can more-or-less set their prices based on supply and demand, state?bureaucrats at the Texas Department of Insurance (TDI), as a practical matter, need to approve even minor rate adjustments before they happen. And the Department, led by a Perry appointee, employs more people than any other of its type.
All this oversight doesn?t really keep rates down (the state ultimately needs to let insurers charge enough to stay in business) but it offers insurance companies an enormous?disincentive?against cutting rates when costs decline. ?Rate regulatory policies have generally encouraged insurers to charge more inland to keep rates down near the coast so the system has also provided an enormous incentive to destroy coastal wetlands. ?Businesses don?t like it: the state has one of the country?s most concentrated homeowners? insurance markets and, given its size and rapid growth, fewer auto insurers than one would expect.?
Eli?s article, ?Perry?s Failing Grade on Free Market Insurance,? can be found online at: http://www.frumforum.com/perrys-failing-grade-on-free-market-insurance
Source: http://outofthestormnews.com/2011/08/16/perry-fails-on-free-market-insurance/
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