The Texas homeowners insurance market is like many other competitive markets. Consumers can discover the pricing and availability of homeowners insurance with only a few clicks of a button just as they do when shopping for cell phones, electricity, and computers.
For instance, searching for “Texas homeowners insurance quotes” yields 11 ads and 10 links to options on the first page alone.
Or three clicks on the Texas Department of Insurance’s website gets shoppers to a form where answering four quick questions brings up 32 quotes for homeowners insurance in the Austin area, 25 in Houston and 33 in Harlingen.
The cost of coverage for a $150,000 house on the TDI site ranges from $652 to $5,653. That’s a big difference dependent on several factors such as claims history, type of house, and consumer preference.
Despite the availability of many low-priced policies, a recent article in the Dallas Morning News claims that the higher quotes for homeowners insurance spell bad news for Texas consumers. A spokesman for Texas Watch, a liberal advocacy group in Austin, said in the article that the high price quotes from one company are part of a “history of unwarranted, excessive charges for homeowners insurance.”
The article goes on to note that “[d]espite the high rates, [the company] consistently maintains its position as Texas’ largest insurer.” Which begs the question, how can a company that consistently charges “unwarranted, excessive” prices be the state’s largest insurer?
Apparently because Texas consumers are either helpless or stupid. Certainly, Texas Watch offers no indication that it understands that consumer choice is what determines the market share a company maintains.
Instead, the Texas Watch spokesman says the Texas insurance market “is extremely hard to shop” because “the insurance industry has dictated terms and can get away with unwarranted rate increases time and time again.”
Yet consumers don’t seem to be concerned. Complaints against homeowners insurance companies are at a 15 year low, according to the Texas Department of Insurance, with only 0.5 complaints per 10,000 policies in 2012-that’s 0.005 percent.
By railing against big business, “consumer advocates” seek to hide their disdain for markets and the consumers that shop in them. What they really are advocates for is big government telling consumers and business what product they can buy and sell, the features the products can have, and the prices at which the products can be bought and sold.
This disdain for consumer choice is not confined to advocacy groups. Despite its reputation for being a business friendly state, Texas has for a long time subjected the homeowners insurance market to heavy regulation. Texas has also placed tight controls on other markets such as electricity, title insurance, and health insurance.
But Texas regulators make the same mistake as the liberal advocacy groups by thinking that in attacking business they somehow help consumers-they don’t.
One example of regulation gone wrong involves the nonrenewal of homeowners insurance. Texas law allows insurers to non-renew an insurance policy only if the insured has filed three or more claims under the policy in any three-year period. The unintended consequences of this requirement is the neglect of homes or even fraud by certain policyholders whose multiple claims wind up driving up premiums for everybody else.
We should keep in mind such unintended consequences when interpreting actions taken by regulators. For instance, the Texas Public Utility Commission is holding hearings to determine if it should adopt a capacity market to increase the reliability of the Texas electricity market; the heart of the matter, though, is that a capacity market will force electricity customers to support subsidies for generators through higher prices.
Texas consumers are smart and savvy. They know what they want, how much they want to pay for it, and where to find it. If they don’t like the prices one company charges, they’ll keep shopping until they find a company with the price they like. It’s simply not true that companies can “get away with unwarranted rate increases time and time again.” Unless, of course, regulators force consumers into a situation where they don’t have a choice.
Texas regulators should stay out of the way of Texas consumers and let them keep their freedom to choose in a free market.
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