Proposed insurance discount gives homeowners less options

Tammy Fisher's home in Buda sustained $100,000 worth of water damage after an upstairs toilet malfunctioned.

The cost of insuring your home in Texas is going up, and so are the number of weather related insurance claims. Home insurers in Texas raised their premiums an average 7 percent to 8 percent in 2015, despite healthy profits and below-average property losses.

As the rates keep going up, homeowners looking for a way to save money might be enticed by a new option currently being proposed by one major Texas insurance company. If the Texas Department of Insurance approves of the proposal, consumer advocates warn the “discount” could have a potentially huge cost to every homeowner in Texas.

In Texas, anyone with home, car or life insurance coverage has the ability to take the insurance company to court where an impartial judge or jury can hear the evidence and make a public ruling. Texas Farm Bureau is asking the Texas Department of Insurance for permission to offer customers a "reduction in premium" if they agree to give up their right to sue. Instead, customers promise "their dispute shall be settled by arbitration."

For many, the right to sue their insurance company over a coverage dispute has been necessary to recover money needed to fully cover the costs of repairing or rebuilding their homes after a fire or flood.

When Tammy Fisher's home in Buda sustained $100,000 worth of water damage after an upstairs toilet sprung a leak, she figured her insurance would cover the cost of repairs. Her insurance company said it would not pay for the full amount and instead offered to give her $3,000 for the water damage.

Tammy Fisher's home in Buda sustained $100,000 worth of water damage after an upstairs toilet malfunctioned.
Tammy Fisher's home in Buda sustained $100,000 worth of water damage after an upstairs toilet malfunctioned. (Photo Courtesy of Fisher Family)

“I thought… we're losing the house. That was my thought. My feeling was utter despair and hopelessness,” says Fisher. Since the $3,000 wasn’t even close to the amount needed to fully repair the home, Fisher filed a lawsuit in Hays County court, eventually forcing the company to pay for the repairs. “I trusted the insurance company, I trusted that they were looking out for my assets, and they didn't.”

Alex Winslow with the Austin-based non-profit Texas Watch, an insurance industry watchdog group, is worried if Texas Farm Bureau gets its way, customers like Fisher would be forfeiting their right without really knowing the consequences.

“This is just the latest effort by the insurance industry to make it harder for Texas homeowners to get paid what they're owed under the terms of their insurance policy,” says Winslow. “Instead of allowing you to go to a court of law, and have your dispute between you and your insurance company resolve there like you've always been able to, they want homeowners forced into a private, closed, secret kangaroo court where they've rigged the rules of the game against you.”

The insurance watchdog says it's not a real discount because Texas Farm Bureau has already raised rates, and now they want to give you a discount that's equal to the amount of the rate increase.

This month, Texas Watch and others urged Insurance Commissioner David Mattox not to approve the new policy.

"It is time, we believe, to give our policyholders in Texas this option. We ask that you approve our endorsement filing," said John Stephens with Texas Farm Bureau during the hearing.

Texas Farm Bureau claims it was hit with an unprecedented number of disputed claims in recent years. The largest number was filed following 2008's Hurricane Ike and other storms around eight southeast Texas counties and the Gulf Coast. The company is asking to only offer the optional discount in those areas, but hinted it may ask to do it statewide.

Stephens says the customers know what they’re signing if they sign-up for the discount and made it clear that it is all optional.

“No one has to have it on their policy. It will always be our members’ choice as to whether they want the discount of that endorsement,” said Stephens in the hearing. “Second, we are only proposing this for a small area of Texas where we've actually experienced the worst problems. We would not expand the offering to other areas without submitting a revised underwriting guideline.”

Consumer groups are worried if the proposal is approved, every other insurance company will try to offer the same type of policy.

"This issue effects every homeowner in Texas. Despite what insurance industry lobbyists are saying, this isn’t about one company wanting to make a change in a handful of counties," explains Winslow. "If Commissioner Mattax approves Texas Farm Bureau’s plan to push homeowners into binding, secret arbitration, the flood gates will be open. Insurance companies large and small will rush to the insurance department to get the same special protections."

After the ordeal she went through with her insurance company, Fisher concurs with Winslow. "It's absolutely not worth it. It sounds appealing to save the money, however much that is...a few hundred dollars. But in my circumstance, if you were in my shoes, you are going to lose thousands and thousands and thousands,” says Fisher.

There is no deadline for the Insurance Commissioner to make his decision. KXAN Investigates will continue following this proposal and if the commissioner approves it.

If you have a dispute with an insurance company you can file a complaint with the Texas Department of Insurance.

What Insurance Usually Covers

Most Policies Cover: Most Polices Don't Cover:
Fire and lightning Flooding
Sudden and accidental damage by smoke Earthquakes
Explosion Termites, insects, rats or mice
Theft Freezing pipes while your house is unoccupied
Vandalism and malicious mischief Losses if your house is vacant for the # of days specified by policy
Riot and civil commotion Wear and tear or maintenance
Aircraft and vehicles Wind or hail damage to trees and shrubs
Windstorm, hurricane and hail (coverage may be excluded if you live on the Gulf Coast) Mold, except what is necessary to repair or replace damage caused by a covered water loss
Sudden and accidental water damage Water damage resulting from continuous and repeated seepage
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