I am so tempted to sing the song from The Wizard of Oz — “Ding Dong! The Witch is dead. Which old Witch? The Wicked Witch! Ding Dong! The Wicked Witch is dead.”
But that would be just plain mean. So instead I’ll simply post some excerpts from an article in the Dallas Morning News that detailed the departure of the Texas Insurance Commissioner Eleanor Kitzman, about whom I have written many times.
Profits for Texas home insurers jumped sharply in 2012 as two of the largest companies, State Farm and Allstate, beat the industry average in a year in which they raised rates. The profits were so favorable that outgoing Texas Insurance Commissioner Eleanor Kitzman — who declined to block any big premium hikes during her tenure — kept the numbers confidential while she was still trying to win confirmation from the Senate.
It didn’t help: Democratic senators, along with some Republican colleagues, refused to support her appointment, forcing her to give up the office Monday. Gov. Rick Perry promptly named a replacement to the job, which Kitzman had held since August 2011.
Several senators and consumer groups repeatedly criticized Kitzman for favorable treatment of insurance companies as she declined to use her authority to question double-digit rate hikes imposed on Texas homeowners last year.
Insurance premium and loss figures for the previous year are typically released in early April. This year, the Texas Department of Insurance put off repeated requests by The Dallas Morning News for the information. People close to the department said the figures were withheld on orders from Kitzman until this past weekend.
“This is symptomatic of the reasons she had such a bipartisan problem in the Texas Senate,” said Sen. Kirk Watson of Austin, chairman of the Senate Democratic Caucus. “I continue to be disappointed in her actions as insurance commissioner, but I am not surprised” by the delayed release.
Overall, insurers paid out an average 54.4 percent of their premiums to cover property losses in 2012. It was a significant improvement from the previous year, when companies had to use 71.5 percent of premiums to pay for losses. A “loss ratio” of 60 percent is considered a good target for profitability, and most large companies hit that benchmark in 2012.
State Farm, the largest property insurer in Texas, showed a loss ratio of 47.5 percent. That made 2012 one of its most profitable years recently. The next two largest companies, Allstate and Farmers, were at 50.8 percent and 66.3 percent.
The positive numbers for State Farm were of particular interest to the insurance commissioner, because she declined to block — or even question — a 20 percent increase in insurance premiums that the company put in place last year.
When State Farm notified the Insurance Department it was raising rates last December, it cited an increased number of claims across the state and higher roof replacement costs from hailstorms, particularly in North Texas. The company claimed it was spending $1.09 on claims and other costs for every dollar collected in premiums in Texas. The new loss and expense figures for 2012 indicated that State Farm paid out 86.8 cents on the dollar.
Under the state’s file-and-use system, auto and home insurers in Texas can raise rates once they have notified the Insurance Department. The agency reviews all rate changes and can challenge any increase considered excessive.
When Kitzman took no action on the State Farm rate hike, the state’s consumer advocate, Public Insurance Counsel Deeia Beck, jumped in and challenged the rate filing in state court as unreasonable and excessive. A two-judge panel heard the case in late April, and a ruling is pending.
Alex Winslow of Texas Watch, a consumer group that watches insurance issues, said the new loss figures “tell a wildly different story than the one industry lobbyists have been telling lawmakers.” Homeowners, he said, “are paying more and getting less.” Winslow said it has become more evident that the current regulatory system in Texas favors powerful insurance companies and their lobbyists over consumers.
“Governor Perry should take this opportunity to help re-balance the market by appointing an insurance commissioner who will stand up and fight for policyholders,” he said.
Last year, according to the Insurance Department, Texas companies collected $6.1 billion in homeowner premiums from their policyholders, while paying out $3.3 billion for insured losses.
Gov. Rick Perry announced Monday that a longtime aide to Lt. Gov. David Dewhurst will be the next insurance commissioner.
Julia Rathgeber of Austin, deputy chief of staff for the lieutenant governor, will replace Eleanor Kitzman as the state’s chief insurance regulator. Rathgeber, University of Texas law school graduate, is a past director of research for the Texas General Land Office and a former division head for the Texas Natural Resource Conservation Commission.As the Legislature opened its special session, Dewhurst introduced Rathgeber and senators applauded her selection for the insurance job.