TDI Sunset Review Hearings

It was clear that most of the legislators on the Texas Sunset Commission viewed TDI’s primary function as “protecting the solvency of insurance companies” rather than controlling insurance rates.

The following information was provided by Insurance Commissioner Mike Geeslin at Texas Sunset Advisory Commission hearings last week: 

Insurance is a huge $100 Billion industry in Texas, with a market size that puts our state among the top 10 or 11 National markets worldwide. The Texas Department of Insurance (TDI) has 1,493 employees and an annual budget of $104 Million.

Contrast that $104M budget to the meager $1 million budget of the Office of Public Insurance Counsel (OPIC), which represents consumer interests instead of the insurance company interests. OPIC is funded by assessments on insurance policies totaling $3.2 Million annually, of which $2.2 Million is returned to the General Revenue Fund of the State of Texas. 

The Austin American Statesman recently ran an article about TDI and the insurance issues in the upcoming elections that stated that there are currently 121 registered lobbyists representing the insurance industry. That’s almost 1 insurance lobbyist for every legislator since there are 181 legislators.

Commissioner Geeslin testified about how tough the last two years have been for the insurance industry in Texas for homeowners insurance. He said the industry loss ratio was 171% in 2008 and 102% in 2009, including all overhead and expenses. He failed to say that the industry had just come off of 5 years in a row of record and excessive profits.

The Dallas Morning News (4/13/10, Page 3A) reported the loss ratios for years 2003 through 2007 without expenses added in. Since the typical cost of overhead and expenses is about  30% to the “claims paid” loss ratio, you can add 30% to each of these numbers, subtract that figure from 100%, and determine profit levels, which don’t include investment income: 

YEAR              LOSS RATIO             PROFIT

2007                39%                             31%

2006                38%                             32%

2005                59%                             11%

2004                25%                             45%

2003                57%                             13%