Senator Eliot Shapleigh - El Paso, Texas

Senate Media

AUSTIN – In a major win for insurance companies, the Senate – voting along party lines – Monday rejected a Democratic-backed proposal that would have required home insurers to get prior approval from the state before raising rates.

Senate Republicans also beat back several other Democratic attempts to tighten regulation of insurance companies, including a proposal that would have required health insurers for the first time to file rate increases with the Texas Department of Insurance.

Both of those proposals and several others were tabled on identical 18-12 votes, with 18 of the chamber's 19 Republicans voting to kill them. One GOP senator was absent.

The party-line votes were on amendments to the "sunset" bill for the Texas Department of Insurance – legislation that would extend the life of the state agency for six years. Sunset bills typically are used by lawmakers to enact new state requirements.

After debating the Democratic amendments for much of the afternoon, senators approved the insurance sunset bill by the same 18-12 split Monday evening. Consumer groups have vowed to press their case for tighter regulation of insurers when the bill moves to the House.

Sen. Juan Hinojosa, D-McAllen, led the effort calling for prior state approval of all home insurance rate increases, arguing that Texas homeowners are paying the highest rates in the nation because state regulators don't have enough authority over companies.

"We need to protect Texas homeowners, who are being fleeced by their insurance companies," said Hinojosa, who noted that the average $1,409 a year that Texans pay for homeowners coverage is about $600 more than the national average.

His amendment, backed by consumer groups but vigorously opposed by the insurance industry, would have required all home insurers to get approval from the state insurance commissioner before increasing rates. The commissioner would have been given 30 days to approval or reject the rate filing.

Hinojosa said the current file-and-use system – which lets rates be increased immediately after the Insurance Department is notified – has allowed some companies to impose excessive rates and then keep them in place while they battle the department in court.

"Our homeowners are getting ripped off," he said. "They pay excessive rates year after year while their insurance company keeps the rate case tied up in court."

Sen. Glenn Hegar, R-Katy, author of the sunset bill, argued against prior approval of rates, saying that most states have moved away from such a system and instead seek to encourage more competition among companies – which he said can lead to better rates for consumers.

"I don't believe a prior approval system will drive down rates," he told other senators.

Hegar said his bill would address companies that overcharge customers by giving the commissioner the ability to invoke prior approval in limited circumstances – such as when a company has a history of unfair rating practices.

The GOP senator also accepted a Democratic amendment to his bill that would impose stiffer financial penalties on companies that levy rates deemed excessive by the commissioner.

"This will take away the incentive for companies to keep fighting the state in court," he said.

Republicans also rejected Democratic proposals to impose tighter regulation of health insurance companies, standardize insurance policies in the state, ban use of credit scores by insurance companies and provide for the election of the state insurance commissioner. The commissioner currently is appointed by the governor.

Several Republicans said that the reform proposals of Democrats should be considered in separate bills, not as part of the Insurance Department sunset bill.