This is the third in a series of insurance myths, published by the consumer group Texas Watch.
When Texas lawmakers considered how to address the 2003 insurance crisis, the insurance industry whispered “trust us” in their ears. The promises from the industry were that deregulation would bring more companies into the market, which would in turn create more competition and choices for consumers, lowering prices. They continue to push this decade-old argument today.
This sounds good, but there is one key detail the lobbyists leave out – all of the major insurance companies that are large enough to impact the market were doing business in Texas before lawmakers deregulated it in 2003, and they remain here today. Despite their occasional scare tactics about leaving, they aren’t going anywhere. Texas is a big state with a lot of drivers and homeowners who need coverage. There is a lot of business to be done here – a lot of premium dollars for them to collect and invest in the stock market.
As you can see in the chart below, the Texas insurance market remains incredibly concentrated with just a few companies cornering the market. It was the case in 2003, and it remains so today.
|# of homeowners’ ins. cos./groups||101/62||117/68|
|% of market written by top 5 carriers||67.96||66.63|
|% of market written by top 10 carriers||83||81.6|
|# of personal auto ins. cos./groups||200/67||183/83|
|% of market written by top 5 carriers||66.48||59.16|
|% of market written by top 10 carriers||82.79||79.66|
The insurance market is different than other types of businesses because our laws and lending practices require you to buy these complex legal contracts. Carriers don’t have to fight for business in the same way as most other industries. So, the only way to make this market competitive is to have strong oversight to prevent gaming by powerful insurers and to empower consumers to make informed decisions about the best company for them. Instead, Texans are left with “deregulation” which means less protection for policyholders without meaningful competition.
The industry keeps banging the drum that more companies are better; but ultimately, the number of companies isn’t the most relevant information. It’s simply the wrong measure. Focusing your attention there would make as much sense as scoring a football game based on which team racks up the most yards. All that matters in the end is the scoreboard, and when we look there, it is clear that Texans continue to pay more and get less coverage.