I received an email Friday afternoon from an insurance agent. It concerned the recent story on Fox 26 Houston TV in which I appeared. Here’s what the letter said:
I believe the reporter in this publication has misquoted you or misunderstood what he was told. It has been my understanding as a professional agent for many years, and also that of my associates, that should TWIA become insolvent that insurance companies doing business in Texas will be assessed for millions of dollars and losses that then exceed those sums will be paid from the General Funds of the State of Texas. To rely on such a system is totally unacceptable—the delays in claim payments to policy holders would be unacceptable. However, the statement that the State has no obligation to pay those claims remaining after the assessment is totally false.
If I am misinformed, please let me know the error of my ways. I am correct, please ask the reporter to print a correction. If I am correct, this misstatement is not only confusing but can do irreparable damage in further confusing the buying public. The matter is already complicated enough .
Thanks for your interest in this topic and your taking the time to send me a polite email. I was walking the dog when I received your email so I just tapped out a brief reply. I would be delighted to speak with you by phone at your convenience. You can reach me on my cell at xxx-xxx-xxxx. The short version, however, is that the Fox 26 reporter basically got it right and, unfortunately, I can not claim to have been misquoted. I would be happy to explain this to you in more detail. To get you started, you might want to look at any of the following:
- http://www.insurancejournal.com/news/southcentral/2009/07/30/102629.htm (discusses major changes made in 2009 by the Texas legislature to the older scheme under which insurers and, derivatively, the State of Texas indeed had major responsibility)
- www.tdi.texas.gov/pubs/pc/pctwiabrief.ppt (TWIA’s 2013 report to the Texas Department of Insurance — look at Slide 37 and note the “up to” qualifier)
- http://www.statutes.legis.state.tx.us/Docs/IN/htm/IN.2210.htm (current law, look particularly at Subchapter B-1 and Subchapter J and Subchapter M)
- http://www.senate.state.tx.us/avarchives/ramav.php?ram=00005768 (this is recent testimony by Texas Insurance Commissioner Eleanor Kitzman — go to time mark 1:31 to about 1:35 in which she says that TWIA is limited to $180 million in the CRTF, that the bonding scheme does not work, and that maybe TWIA can get some reinsurance)
- http://catrisk.net/?p=970 (a blog entry by me that explains some of this)http://catrisk.net/?p=584 (reprinting memos from the Texas Public Finance Authority showing that it will be difficult to sell Class 1 Bonds to raise money for TWIA following a storm)
- http://catrisk.net/wp-content/uploads/2012/08/charttwiadoesnotthinkyoucan-understand.png (what TWIA was saying a few months ago — unfortunately, this analysis has proven too optimistic, as the Texas Insurance Commissioner recognizes)
David Crump, another Texas citizen interested in these issues, and an insurance agent also sent my emailer a polite and helpful response.
Later Friday night I received a reply from the insurance agent. Here’s what he said.
Dr Chandler, thank you for all the information you have provided. I am embarrassed that my understanding is so outdated. Armed with this information I am at least better equipped to explain to our clients the problems they face when the next hurricane comes. We can only hope and pray that our Texas legislators find the wisdom and political courage to do whatever is necessary to resolve this issue–and do so in time. At the moment it is difficult to place adequate coverage for our clients, but that is better than the impossibility that it may become without a resolution.
Again my sincere thanks for taking the time to correct my misinformed understanding.
I then felt really good. First, a civil exchange between two people who might initially have been taking adverse positions had ended in some agreement. Second, I’d educated someone who sells insurance to the public. That agent and his colleagues are now in a position to give the public better guidance in their choices. And third, I recognized that I’d actually covered a lot of ground in this blog and that it was a very useful source of information and education. The only sad part was that what the agent wrote back was precisely correct: “We can only hope and pray that our Texas legislators find the wisdom and political courage to do whatever is necessary to resolve this issue–and do so in time. At the moment it is difficult to place adequate coverage for our clients, but that is better than the impossibility that it may become without a resolution.”