The Facts

* Senate Bill 14 (2003) called for a transition to a file-and-use regulatory system for homeowners’ insurance, with the intention of having a file-and-use system in place as of December 1, 2004.

* Texas’ system of rate regulation for homeowners insurance includes pre-market and post-market regulatory tools, where rates can be rejected before or after they are first used in the marketplace. This prevents insurers from basing rates on actuarial principles and reduces competition in the marketplace.

* TDI’s belated implementation of a 1997 provision allowing insurers to use national forms, along with lawsuit abuse, caused premiums to rise dramatically. This delay ultimately cost consumers more than $900 million. After TDI allowed insurers to use non-standard forms in 2002, mold claims plummeted and rates stabilized.


* Adopt a true file-and-use system allowing the Commissioner to disapprove only rates in use.

* Shift the focus from blocking “excessive” rates to guarding against inadequate or discriminatory rates.

* Implement a true file-and-use system for policy forms, and focus policy-form regulation on the wording and clarity of an insurance form rather than the content of a form.

* Allow the Commissioner to place under prior approval only those companies whose financial positions warrant increased supervision in order to maintain solvency.

* Permit insurers to non-renew, or add a premium surcharge to, high claim policies, especially where those claims were a product of negligence or misuse of the claims process.