The Texas Department of Insurance (TDI) adopted emergency rules directly affecting policyholders of the Texas Windstorm Association (TWIA).
One particular rule could have an impact on a policyholder’s pocketbook. This rule establishes a minimum retained premium and provides that any policyholder who cancels their TWIA policy prior to the end of their policy period may have to surrender up to 180 days of premium and receive no coverage after the cancellation date. As a result of this rule, the Office of Public Insurance Counsel (OPIC) has prepared a policyholder notice that explains what happens if you decide to cancel your TWIA policy prematurely:
IMPORTANT NOTICE
IF YOU CANCEL YOUR POLICY BEFORE 180 DAYS, YOU COULD SURRENDER A SIGNIFICANT PORTION OF YOUR PREMIUM
Your windstorm policy is subject to a minimum retained premium of $100 or 180 days, whichever is greater. If you cancel your policy within 180 days of the effective date of the policy, TWIA will keep the remaining portion of the premium necessary to cover 180 days of the policy period and no coverage will be provided beyond the date of your cancellation. If your premium was paid in full, any portion of the premium beyond the minimum retained premium of 180 days will be refunded to you on a pro rata basis.
If you finance your policy through a premium finance company and you cancel your policy within 180 days of the effective date of the policy, you will owe to TWIA any unpaid balance of the minimum retained premium resulting from your cancellation. You will not be eligible for windstorm coverage through the Association until any balance due has been paid. Payment of the unpaid balance does not provide coverage for any damage that may have occurred between the date of cancellation and the payment of the balance.
Exceptions: Your windstorm policy is not subject to a 180 day minimum retained premium under the following circumstances:
- cancellation of your policy by the Association, unless you are cancelled for non payment of premium,
- you insure your property in the voluntary market,
- sale or foreclosure of the property,
- your property suffers a total loss, or
- death of the policyholder.
If any of the above exceptions occur, the $100 minimum retained premium still applies. Any portion of the premium beyond the minimum retained premium of $100 will be refunded to you on a pro rata basis.
OPIC believes that policyholder notifications provide an insured with a much needed tool to comprehend otherwise confusing policy language and/or point the policyholder to a major change in policy procedures that could significantly impact them. Please note that this notice applies only to the minimum retained premium portion of the rules. Other notifications may be necessary, and OPIC will post these as they become available.
The TWIA Emergecy Rules can be found at HERE.
If you wish to download the policyholder notice, please click HERE.
IMPORTANT NEWS
GOVERNOR SIGNS WINDSTORM INSURANCE BILL
On June 19, 2009, Governor Rick Perry signed House Bill 4409, which changed the funding structure of the Texas Windstorm Insurance Association (TWIA). The bill provides for up to $2.5 billion to be funded through post-storm bonds to pay for TWIA losses in excess of those paid by premiums and any on hand reserves from the Catastrophe Reserve Trust Fund (CRTF). Previously, TWIA losses were paid through a combination of premiums, reserves from the CRTF, reinsurance, and company assessments. While TWIA is still authorized to purchase reinsurance under this legislation, it is no longer required to do so, freeing up funds typically spent on reinsurance for deposit in the CRTF, which was wiped out by losses from Hurricanes Ike and Dolly. The bill also authorizes TWIA to enter into financing arrangements with other market sources, as needed, to enable them to pay their losses.
Several other issues were addressed by HB 4409, including establishing a method by which TWIA is to act as an insurer of last resort by requiring a policyholder to receive at least one declination from a company writing in the standard market. The bill also requires TWIA policyholders that reside in certain designated flood zones to purchase flood insurance. Changes were made regarding the inspection program used to determine building code compliance, tightening up the compliance requirements for determining a dwelling’s eligibility for insurance through TWIA.
HB 4409 also authorizes TWIA to use rating territories and catastrophe models when setting their rates, both of which TWIA has been unable to use previously. In addition, TWIA no longer needs approval from the commissioner of insurance for any rate increase of 5% or less; however any rate increases over 5% must be approved by the commissioner prior to its use.
The bill sets up a Legislative Oversight Board to monitor TWIA’s activities and requires the Texas Department of Insurance to develop an incentive plan to encourage more companies to voluntarily write windstorm coverage on the coast.
ABOUT OPIC
The Texas Office of Public Insurance Counsel (OPIC) acts as an advocate for insurance consumers primarily before the Texas Department of Insurance (TDI). OPIC's statutory authority is found in the Texas Insurance Code Title 5. Subtitle A. Chapter 501.
OPIC represents the interests of consumers as a class on matters involving rates, rules and policy forms affecting various personal lines of insurance such as auto, homeowners, title, and credit insurance, and in rulemaking for life, accident, and health insurance.
While OPIC does not represent individual consumers, individual complaints may point to a larger issue, suggest a pattern of insurance practices, or affect a significant number of policyholders, and therefore trigger OPIC's involvement. The agency represents consumers in hearings before the Texas Department of Insurance, the State Office of Administrative Hearings, other state agencies, and in the courts.
OPIC welcomes your comments and suggestions. And, please come visit us again soon.
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