In mid-June Texas Governor Rick Perry signed into law Senate Bill 14 and House Bill 4. The first bill reforms the way home and auto insurers are regulated in the state; the second places a cap on non-economic damages in jury awards in an effort to ease the upswing in medical malpractice insurance rates.
SB 14 moves homeowners insurers to a “file and use” system and closes loopholes through which the majority of homeowners insurers in Texas have been able to avoid regulation in the past. Under the new law, companies will be required to file their rates with the Texas Department of Insurance within 20 days of the governor’s signature. According to TDI, staff will review those filings and could order rate reductions for some companies within 60 to 90 days. Rate reductions of 25 percent are expected in some cases but the regulatory agency cautioned that not every homeowner will see lower rates as a result of the bill.
“This comprehensive reform measure will stabilize the home and auto insurance market, rid the insurance industry of fraudulent practices and ensure Texans have access to fair rates offered in a competitive market,” Perry stated at the signing ceremony for SB 14.
The bill gives more authority to the insurance commissioner to determine whether a company’s rates for both auto and home coverages are justified. It allows companies more flexibility to offer more coverage options and provides TDI with the authority to offer rate and filing flexibility to small companies. It also limits the use of geographical factors to determine rates.
Auto insurers will also move to a file and use system under the bill. All companies, without exception, will be required to file and explain their rates. Small county mutuals specializing in high-risk drivers and non-standard markets will be allowed more flexible filing standards.
HB 4, the medical malpractice legislation, caps non-economic damages in jury awards at $250,000. The cap applies to all doctors involved in a case. In addition, there is a $250,000 cap on non-economic damages against a single institution and a $500,000 cap on all health care institutions combined. Additional liability limits apply to hospitals that provide charity care.
The governor’s office said doctors across the state have seen skyrocketing malpractice insurance rates, and insurance carriers have refused to renew some policies—even for doctors who have never had a malpractice claim filed against them.
“We are removing the incentive personal injury trial lawyers currently have to file frivolous lawsuits and run doctors out of business,” Perry stated.