Insurance

Study: Minorities face loan disadvantages
University Wire 10/29/02

Black and Hispanic home buyers still face disadvantages compared to whites when they apply for home refinance loans, according to a study released Monday by Consumers Union.

The study, which surveyed four years of data regarding home refinance loan rates for minorities, the elderly and women in Texas, was conducted by the Southwest Regional Office of Consumers Union, the publisher of Consumer Reports, along with the Austin Tenants' Council, the National Association for the Advancement of Colored People and the League of United Latin American Citizens.

The study found that minorities are more likely than whites to borrow from a subprime lender, paying greater interest fees on home loans. Subprime lenders are those whose interest on loans is at least 3 percent higher than the prime rate set by the Federal Reserve Bank. Rob Schneider, a senior staff attorney for Consumers Union, said many families whose credit ratings would qualify them for prime loans are unaware of the consequences of borrowing from a subprime lender and spend thousands of dollars paying high interest rates.

Study: Race and Ethnicity Play Key Factor in Sale of High-Cost Refinance Loans in TX
AScribe Newswire 10/28/02

Black and Hispanic families who refinance their homes in Texas are finding out that race still matters, according to a Consumers Union study released today. The study shows that Black borrowers are 3.9 times as likely to end up with a refinance loan from a high-cost "subprime" lender than White borrowers, while Hispanics are 1.6 times as likely, even after factoring out income and the loan-to-income ratio.

In general, borrowers who refinance their homes using subprime loans pay almost $2,000 more per year in interest alone, said Rob Schneider, senior staff attorney for CU's Southwest Regional Office.

The Consumers Union study used four years of data [1997-2000] to ensure a large number of minority refinance loans at every income level and in every neighborhood. It used data from the Home Mortgage Disclosure Act, cross-referenced with 2000 census information. Subprime loans are typically set at a higher price and are designed for persons unable to qualify for prime mortgage loans. However, some people who pay subprime rates actually have prime -- or first class -- credit.

Article includes Consumers Union's Tips for avoiding high-cost loans.

Texans split on who's to blame as insurance woes hit home
Austin American Statesman 10/27/02

Major insurance companies in Texas have raised premiums, reduced coverage for water and mold damage, and imposed stricter requirements for whom they will insure.

Collectively, Texans are paying $1 billion more for insurance than they did a year ago, according to the Center for Economic Justice, a consumer advocacy group.

Legislators, consumer advocates and industry executives agree that the state is in the grip of an insurance crisis, although they disagree about the reasons. The list includes legislative inattention, light-handed or outdated regulation, the political clout of the insurance industry or exploitation by trial lawyers of public hysteria about mold.

Some consumer groups tried to raise the alarm that the growing unregulated market created the "potential for massive rate increases" if there was a major natural disaster, such as a hurricane, or some other setback hit the industry.
No one paid attention, said Rob Schneider, senior staff attorney for Consumers Union. "The Legislature didn't act, and the governor didn't make it a priority."

Texans split on who's to blame as insurance woes hit home
Austin American Statesman 10/27/02

Collectively, Texans are paying $1 billion more for insurance than they did a year ago, according to the Center for Economic Justice, a consumer advocacy group.

Legislators, consumer advocates and industry executives agree that the state is in the grip of an insurance crisis, although they disagree about the reasons. The list includes legislative inattention, light-handed or outdated regulation, the political clout of the insurance industry or exploitation by trial lawyers of public hysteria about mold.

But consumer advocates and legislators from both parties say that the root cause is the state's failure to act as the insurance industry effectively deregulated itself during the past 20 years, moving all but 5 percent of its policies to subsidiaries whose rates are not under state control.

Some consumer groups tried to raise the alarm that the growing unregulated market created the "potential for massive rate increases" if there was a major natural disaster, such as a hurricane, or some other setback hit the industry.
No one paid attention, said Rob Schneider, senior staff attorney for Consumers Union. "The Legislature didn't act, and the governor didn't make it a priority."

Governor declares 3rd disaster
Corpus Christi Caller-Times 10/26/02

With a fatality, several injuries and millions of dollars in damages resulting from Thursday's storm, Gov. Rick Perry has declared Nueces County a disaster area for the third time since July, raising the question of what will happen to insurance rates in the area.

Rob Schneider, an insurance analyst with the Consumers Union in Austin, is skeptical that the series of disasters won't affect future rates.

He said insurance companies have been moving away from spreading out losses over the whole state over a long period of time, and have been adjusting rates more quickly.

"The practice is that they're trying to recoup their losses,'' Schneider said. "Losses creep into prediction of future losses, but one bad year doesn't dramatically affect that."

Providence Journal, R.I., Cybertalk Column
Providence Journal 10/21/02

There is little haggling in today's automated retail world of bar codes and do-it-yourself checkout lines. A big exception is buying contact lenses.

Prices can vary dramatically, with some online and mail-order companies selling the lenses for as much as half off what you might pay at an eye practitioner's office.

Is it safe to buy lenses through the Internet rather than through an eye-care professional?

"The contact lenses that we're talking about here are disposable contact lenses," said Lisa McGiffert, senior policy analyst for Consumers Union, publisher of Consumer Reports.

"You wear them a couple days or weeks, and throw them away.

They come in a shrink-wrapped package. As long as you have the right prescription, [ophthalmologists and optometrists] don't do anything else with it."

She added that it is important to have the right prescription and to check the expiration date on the lenses.

Voters turn up heat over insurance rates
Fort Worth Star Telegram 10/20/02

Media consultants and professional politicians have not made insurance the No. 1 issue of this year's elections. People...have. And instead of leveling off, the public's anger grows with each new premium increase, reduction in coverage and dropped policy.

"This is not a made-up issue. This is not manufactured by political consultants," said Rob Schneider, a senior staff attorney for the Austin office of Consumers Union. "This has become an issue in the campaigns and stayed an issue in the campaigns because people are upset."

Insurers drop customers
The Wichita Eagle 10/13/02

When Farmers Insurance Group decided not to renew the coverage on Sheryll and Dale Gibbens' home near Crestview Country Club, the couple was flabbergasted.

The homeowners insurance industry is "tight all over the nation," said Rob Schneider, senior staff lawyer for Consumers Union, which publishes Consumer Reports.

Until a few years ago, the industry was in a "soft market," Schneider said. Companies did whatever they could to maintain and increase market share, including lowering rates.

Now the industry is in a "hard market" and companies are backing away from growth, being more picky about who they insure.

"What typifies a hard market is companies don't care about losing customers," Schneider said. "They don't even care about losing good customers.... It all adds up to a situation where homeowners are bearing the brunt of a market that they really don't have much control over."

Texas Insurance Department to Help Cover for Homes Now Insured by Farmers
Knight Ridder Tribune Business News 10/11/02

Texas Insurance Commissioner Jose Montemayor plans to issue an emergency order today to cover the state's 700,000 residents who have homeowner's policies through Farmers Group of Insurance Cos.

Farmers announced last month that it would cease renewing homeowner's policies due to an ongoing legal battle with the state over price increases. Montemayor's plan would expand an existing state program that helps underserved areas. Insurance department officials said Thursday the new "last-resort" insurance plan should be up and running by mid-November. The unprecedented step is the department's way of getting around the legal and logistical issues that are holding up Montemayor's initial proposal to expand the Texas Windstorm Insurance Association to address the problem.

"I think having last-resort coverage available is a good thing," said Rob Schneider, senior staff attorney at the Consumers Union in Austin. "But I'm certainly not jumping for joy. However, an HO-A policy is better than nothing."

State to assign coverage
San Antonio Express-News 10/11/02

Texas Insurance Commissioner Jose Montemayor plans to issue an emergency order today to cover the state's 700,000 residents who have homeowner's policies through Farmers Group of Insurance Cos.

Under the order, the department's Market Assistance Program, which helps consumers find insurance coverage, will be expanded to cover all parts of the state and include all insurance companies.

Consumer advocates cautioned Farmers customers against feeling safe now that the MAP will be open to them.

"I think having last-resort coverage available is a good thing," said Rob Schneider, senior staff attorney at the Consumers Union in Austin. "But I'm certainly not jumping for joy. However, an HO-A policy is better than nothing."

Women, minorities get more subprime loans, study finds
The Dallas Morning News 10/11/02

Women - particularly black women - are more likely to get home refinance loans at a high interest rate in Texas than any other segment of the population, according to a study released Thursday by Consumers Union. . "It appears that subprime lenders are targeting women, minorities and the elderly," said Rob Schneider of Consumers Union, which publishes Consumer Reports magazine. "The wealth in communities is disappearing and is being paid to subprime lenders."

Stopgap insurance order in works
The Houston Chronicle 10/11/02

The state plans to to set up a temporary last-resort insurer to offer coverage to homeowners who can't find insurance anywhere else in Texas' troubled market.

Rob Schneider, a senior staff attorney with Consumers Union, said it's appropriate for Texas to join many states in setting up a plan for those who can't find coverage elsewhere, which is known as a residual market.
But he cautioned that such policies likely won't measure up to the coverage offered on the voluntary market.

"It's going to be expensive. It's going to offer narrow coverage. It may not get off the ground if insurance companies sue," Schneider said.

Women, Minorities in Texas Get More Subprime Loans, Study Finds
Knight Ridder Tribune Business News 10/11/02
Women -- particularly black women -- are more likely to get home refinance loans at a high interest rate in Texas than any other segment of the population, according to a study released Thursday by Consumers Union.

• "It appears that subprime lenders are targeting women, minorities and the elderly," said Rob Schneider of Consumers Union, which publishes Consumer Reports magazine. "The wealth in communities is disappearing and is being paid to subprime lenders."

Report criticizes insurance companies' influence over politicians
University Wire 10/09/02

Insurance companies in Texas pay out large sums of money to influence Texas legislative candidates and reinforce a loophole that allows homeowners' insurers to charge the highest premiums in the nation, according to a report released Tuesday by Campaigns for People.

According to the report, a significant amount of the contributed money is being used to give an upper hand to candidates likely to side with homeowner's insurance companies, with rate-unregulated insurance enveloping 95 percent of Texas homeowners.

Bills introduced to close the "Lloyd's Loophole" in the last three legislative sessions haven't been effective, the report said. The loophole has been blamed for allowing insurance companies to increase the rates Texas insurance consumers pay without any oversight from the state.

And, with the loophole in place, homeowners are subject to unregulated price hikes. In the event of catastrophes -- ranging from hurricanes to mold -- this loophole gives insurers the freedom to raise premiums at will, said Rob Schneider, senior staff attorney for Consumers Union, an independent and nonprofit testing and information organization for consumers.

Insurance reform is on agenda in Austin
San Antonio Express-News 10/09/02

Texas legislators can't file bills for the 2003 session until after the November elections. But some legislators already plan to place insurance reform on the agenda.

"At this point, everyone is for insurance reform," said Rob Schneider, senior staff attorney for the Consumers Union regional office in Austin. "But the leader on reform will be the governor, whoever that is. The governor's proposal will get massaged and tweaked by the Legislature."

Some Texas Legislators Plan to Add Insurance Reform to Agenda
Knight Ridder Tribune Business News 10/09/02

Texas legislators can't file bills for the 2003 session until after the November elections. But some legislators already plan to place insurance reform on the agenda.

"At this point, everyone is for insurance reform," said Rob Schneider, senior staff attorney for the Consumers Union regional office in Austin. "But the leader on reform will be the governor, whoever that is. The governor's proposal will get massaged and tweaked by the Legislature."

Longtime L.A. insurer facing pressures
Los Angeles Business Journal 10/07/02

It's been a tough time all around for the insurance industry, but perhaps nowhere more than at Farmers Insurance, Los Angeles' venerable 75-year-old financial-services giant.

The company has seen its ratings downgraded in the face of continuing underwriting losses. It has pulled out of the huge Texas homeowners' market, where it's being sued by the state and mold claims are sky high. And it's had to fend off rumors that its financially ailing Swiss-based parent, Zurich Financial Services Group, wants to put it on the block.

The hardball move by Farmers has not gone over well in the state, leading to charges that the company is trying to coerce regulators into dropping the lawsuit by disrupting coverage for nearly a million residents.

"They have given themselves a big black eye. Their problems just snowballed' said Rob Schneider, an attorney for the Austin branch of Consumers Union. "I don't think they are the reason for the insurance crisis in the state, but now they are getting painted as the reason."

Texas Home Insurance Crisis Roils Residents and Top Race
The New York Times 10/04/02

Hundreds of thousands of homeowners in Texas are expected to lose their insurance coverage in the next year while others are seeing huge increases in premiums in a crisis that could harm the state's economy. It has already become a central issue in the governors' race.

Experts say the situation in Texas is the most extreme in the nation, at a time when homeowners' insurance has become harder to attain and more costly in every state, with insurers saying it is a marginally profitable part of the business at best. As a whole, the insurance industry is in a difficult period, as companies have suffered huge losses from the stock market collapse and from the aftermath of the Sept. 11 attacks. The problems in Texas with homeowners' insurance, though, derive mostly from unique circumstances that have left policyholders paying the highest premiums in the nation even as insurers complain that they have lost billions of dollars on homeowner policies in the state. Not only is Texas a magnet for bad weather, like Tropical Storm Allison last year, but analysts say its regulatory structure has managed to hurt both insurers and consumers.

The event that has caused the most public anxiety occurred on Sept. 24 when Farmers Insurance announced plans to end its coverage for its 700,000 homeowner customers in Texas, beginning in November. The company is the second biggest insurer in Texas and will cancel about 58,000 policies each month as they come due over the coming year.

But advocacy groups like Consumer's Union and Texas Watch, while agreeing that insurers have lost money on mold claims, also say the companies have exploited a loophole. For more than a decade, insurers in Texas have been allowed to form unregulated subsidiaries, initially intended as a way of providing homeowner coverage to riskier policyholders. This allowed companies to charge higher premiums to compensate for their additional risk.

Gradually, though, insurers have shifted regular homeowner policies to these subsidiaries. Now, 95 percent of homeowners have their policies in this unregulated market. Consumer advocates say this has allowed insurers to raise premiums without government oversight and has left homeowners with little control over the costs of their policies.

"The bottom line is it's an essential product, and you've got to have it," said Rob Schneider, a senior attorney with Consumer's Union in Austin. "If rates double overnight, too bad -- you've got to pay it."

Will Farmers departure lead to an insurance meltdown?
San Antonio Express-News 10/01/02

Just when most Texas homeowners were calming down after their home insurance bills rose anywhere from 50 percent to several times more than last year's, 700,000 of them got another rude shock. Farmers won't insure Texas homes anymore, so they'll have to find new insurers.

Farmers' departure "has sent the insurance market into a meltdown," says Rob Schneider of Consumers Union. And he fears that another stunner may be coming. Consumers Union has been urging the Legislature to stiffen insurance regulation for years and calling for outlawing of credit scores in the setting of policy premiums.

BODY: Just when most Texas homeowners were calming down after their home insurance bills rose anywhere from 50 percent to several times more than last year's, 700,000 of them got another rude shock. Farmers won't insure Texas homes anymore, so they'll have to find new insurers.

Farmers' departure "has sent the insurance market into a meltdown," says Rob Schneider of Consumers Union. And he fears that another stunner may be coming. Consumers Union has been urging the Legislature to stiffen insurance regulation for years and calling for outlawing of credit scores in the setting of policy premiums.

No correlation has been established between creditworthiness and risk, the group says, and erroneous credit reports are common.

Consumers Union has also been a longtime critic of a loophole in Texas' 1991 insurance regulations under which insurance firms have shifted policies from regulated carriers to so-called "Lloyds" insurers that charge what they want.

"We were calling for regulation of Lloyds (firms) in 1997," Schneider recalls. "They wouldn't listen then, but they're listening now."

Lloyds insurers have been doing business in Texas for years. Initially, they were small specialty insurers writing policies on properties no other insurers would take, or they offered lower-premium policies to very low-risk policyholders. In 1983, they accounted for 16 percent of

Both Gov. Rick Perry and Insurance Commissioner Jose Montemayor say that Texas' insurance market can readily absorb Farmers' spurned clients, though neither says at what price.

And Schneider raises another point: "When they say: 'There's plenty of capacity,' it only means that there's sufficient capital and surplus that if (other insurers) want, they could write policies.

"But it doesn't mean that they will write them," he says, adding: "A lot of people aren't going to have coverage. People who have had a claim or who have bad credit, or who don't start (looking for an insurer) a couple of months ahead are going to be at very high risk of having no coverage."

Now, rumors are circulating among insurance agents that another of Texas' insurance giants may also retreat or stop writing home policies altogether.

That could be as disastrous as a "rare October hurricane" slamming into the Texas coast.

Texas Homeowner Insurance Industry Suffers from Several Ills
Knight Ridder Tribune Business News 09/28/02

Why is Texas in this homeowners insurance mess today?
Consumer groups...charge that consumers are tossed around every time the market hardens or softens for the insurance industry.

"In the days when the market was flying high, companies were falling all over themselves to get new customers and increase market share," said Rob Schneider of Consumers Union. "They wanted to collect premiums and invest. But as the returns plunge, they are walking away from customers."

Navigating Texas Homeowners Insurance Market Can Be Tricky
Knight Ridder Tribune Business News 09/15/02

Even with State Farm and Farmers Insurance pulling out of Texas, more than three dozen companies are still writing homeowners insurance in Tarrant County, according to a rate guide posted online by the Texas Department of Insurance. Premiums vary widely, as do the financial backgrounds of the insurers.

State Farm, Farmers and Allstate among them serve about 70 percent of Texas homeowners. They each received approval last year from the Texas Department of Insurance to change the standard HO-B policy that most homeowners carry. Others have followed suit.

The new policy, called HO-A amended, limits water damage coverage and completely eliminates coverage for subsequent mold removal. The new policy puts Texas more in line with the rest of the nation in terms of coverage, industry officials say.

In negotiating a rate with an insurer, consumers are often raising their deductible to offset rising premiums.

"Consumers should try to self-insure as much as possible with a higher deductible," said Rob Schneider, senior staff lawyer for the Austin advocacy office of Consumers Union. "Insurance is there for catastrophic coverage."
Schneider also recommends having money on hand for fixing those damaging water leaks.

"What used to be covered by insurance is now an out-of-pocket expense," he said.