I have long preached that I think the Texas Department of Insurance did consumers a disservice when it allowed insurance companies to offer non-standard policies.
It is hard to buy insurance. Policies are written in legalese so that even attorneys spend their lives fighting over the meaning of certain provisions or phrases. How is a typical consumer supposed to read and understand a policy when buying insurance?
That problem is now more important than ever. Several years ago, insurance companies offered standard policies. For example, in the homeowner’s insurance context, 95% or more of all policies were standard HO-B policies. You could go to a number of different insurance companies, and they would all typically offer you the HO-B form policy.
While you might not understand everything that was in it, you were at least assured that the policies were the same. That allowed you to take a quote from multiple different companies and know that you were comparing apples to apples when you compared prices.
But then the Department of Insurance began allowing non-standard policies. So you can call three different companies, get three different policies, with three different prices. Because these policies are written by lawyers for lawyers, it’s almost impossible to know which policy is the best deal and what type of protection you’re really buying.
But maybe there’s some light at the end of the tunnel.
As you probably know, the Texas legislature is in town for its bi-annual session. Last week, the Texas Senate Committee on Business and Commerce, chaired by Sen. John Carona, issued its recommendations for the current legislative session. Among those recommendations was a recommendation that the legislature adopt legislation that ensures that policyholders are offered a standard home insurance policy option.
I hope this legislation passes. If there was one lesson from the Bastrop fires, it is to make sure that you know what insurance you have and that you have enough insurance. This legislation will help make that easier.
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