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Wednesday, August 27, 1997

Insurance rollbacks of $555 million considered during hearing

By CHIP BROWN / Associated Press Writer

AUSTIN (AP) -- Texans were overcharged $1 billion in 1996 by insurers who failed to pass on savings from reforms in the civil justice system, according to a consumer advocacy group.

D.J. Powers of the Center for Economic Justice made the accusation against the insurance industry at a public hearing Tuesday by Insurance Commissioner Elton Bomer.

Bomer, who is considering a proposed $555 million insurance rollback that would go into effect for 1998, rejected Powers' claims.

The rollbacks are meant to reflect cost savings from laws passed in 1995 that capped civil damages and were intended to limit frivolous lawsuits in Texas.

"So-called tort reform isn't providing savings for Texans, it's providing a $1 billion windfall profit for insurers," said Powers, a former general counsel of the Department of Insurance who says his non-profit group represents the interests of low-income consumers.

"If the rates were reduced as they should have been, consumers would have paid $1 billion less than they did. That averages out to $100 per car overcharge in 1996 alone. That overcharge will be even bigger in 1997.

"Citizens have lost their rights without receiving anything in return," he said.

Powers said the next rollback should be $1.5 billion for automobile liability insurance coverage alone, and the total rollback for all types of coverage more than $2 billion.

Bomer took the testimony under advisement and will announce later whether he will adopt the Insurance Department's recommendation of $555 million in rollbacks or set his own amount.

He disagreed with Powers' figures.

"That's not true," Bomer said. "We've looked at the filings. We know from those filings that they put the tort reform savings down there. It's in black and white. We look at it, and if it's not there, we call their hand on it."

Powers said some insurance companies simply ignored rate rollbacks meant to reflect roughly $800 million in tort reform savings over the past two years. He said others reduced rates in automobile liability insurance -- the most commonly written policy -- but then increased rates for automobile property damage coverage.

Insurance industry spokesman Rick Gentry, of the Texas Insurance Organization, said the market is too competitive for insurers to try to shift costs by raising other premiums.

"There's more than 300 insurance companies in Texas, and they are all fighting it out to offer the best deal," he said.

According to a study commissioned by the Insurance Department, the savings in private passenger automobile rates for 1998 would be $213 million.

Rod Bordelon of the Office of Public Insurance Counsel said that wasn't enough and recommended rolling back those rates by more than $350 million, bringing the total rollback to more than $700 million.

"There's no question there has been a sharp decrease in losses from bodily injury claims as a result of tort reform," Bordelon said.

Powers said, "If the rollbacks for automobile liability insurance are any less than $1.5 billion, insurers are pocketing excess profits and failing to pass savings on to the consumers."

Several insurers said the department's recommendation of $555 million was too much, contending it was speculative and based on faulty data.

Richard Geiger of the Texas Insurance Organization said personal injury lawsuits stemming from auto accidents are continuing to go up in Texas, eating up cost savings from so-called tort reform.

"We are fearful we may be going too far too fast and we urge the commissioner to consider leaving the factors at their current levels," Geiger said.