Feb
23
Written by:
Mark Lavergne
2/23/2011 11:41 AM
The House Insurance Committee started off with a bang yesterday, pressing Texas Windstorm Insurance Association general manager Jim Oliver with questions regarding management of the quasi-governmental windstorm coverage provider.
The questioning of Oliver covered over two hours and covered a myriad of both ongoing and recent developments that give lawmakers reservations about the management of the what is intended to be the insurer of last resort in Texas, but is considered by some to be more like the insurer of only resort.
Issues covered included:
- what many lawmakers have considered to be the excessive litigation costs paid by TWIA in Hurricane Ike slab (i.e. pretty much total destruction) claims,
- TWIA's inadequate funding structure, and
- recent management decisions made by Oliver and in some cases seemingly without the involvement of TWIA's 10-member governing board, including a severance package paid to a former vice-president of claims, whose time at TWIA ended in December 2010, and
- possible solutions, including liquidating TWIA or making it a pure state agency, ways to rehabilitate the agency, and possible alternative resolution processes to keep claim disputes out of court to avoid future hefty litigation costs.
Insurance Commissioner Mike Geeslin also spoke with the committee. House Insurance Chairman John Smithee (R-Amarillo) discussed with him the possibility of placing TWIA under receivership. The first step would be to place TWIA under "supervision," in which TWIA continues to operate and carry out its functions as it has, but under the oversight of another party, perhaps the insurance commissioner. (It would likely not be Geeslin himself, as he has announced his intent not to seek re-appointment.)
If that supervision does not improve the situation, the next step would be to place TWIA under receivership, Smithee told LSR following the hearing. This would consist of dissolving the present TWIA governing board and placing a single receiver in charge of either rebuilding TWIA or liquidating it.
Based on discussions among the committee members, it appears they are faced with a kind of fundamental option. Right now, TWIA is a "quasi-governmental" entity, which Deeia Beck, executive director of the Office of Public Insurance Council, said is the "worst of both worlds."
One suggested solution is to make TWIA a pure state agency. But Oliver warned that if legislators go that route, the state will be liable for the losses. He said TWIA's expenses are 22 percent of premiums, which is low for an insurance company, he said.
Conversations got relatively heated between Oliver on one side, and Smithee and Larry Taylor (R-Friendswood) on the other. Smithee pressed hard on management issues while Taylor pressed him on the findings of his open records requests and the court challenges that delayed, for nearly four months, Taylor's acquisition of those records.
Oliver openly criticized Taylor for sending his letter requesting the records to others before sending it to him. He said if Taylor had called him first he would have gotten the records to him immediately before any trial lawyers or anyone else could have objected. He said he never had any intention of hiding the slab settlement information from Taylor.
Although they had some differences on precisely how to calculate what percentage of the total claims the attorneys made in fees, Taylor and Oliver ultimately agreed that the fees were excessive.
If a claimant's name was listed on the slab settlement, even if it had been determined that the claimant had already been fully compensated, the claimant received a $10,000 minimum settlement, Oliver admitted when Taylor questioned him. That must change, Taylor said.
Oliver said that previous hurricanes before Ike – Dolly and Rita – had over 9,000 claims with very few lawsuits comparatively.
One thing Oliver and Beck both seemed to agree on: what's driving the costs at TWIA are not the commission rates paid to insurance agents.
More on this to come in this week's issue.