By Terrence Stutz / The Dallas Morning News
AUSTIN - Lawsuit reforms in Texas have not
produced the huge savings for insurance
consumers that some have claimed, a national
consumer group said Monday.
A study by the Consumer Federation of America
said premiums are rising more slowly in Texas
since reforms were approved in 1995, but
restrictions on lawsuits have been only a
minor factor in controlling insurance rates.
"Let's give credit where credit is
due," said J. Robert Hunter, author of
the study and the top insurance regulator in
Texas under former Gov. Ann Richards.
"Slowing of insurance rate increases in
Texas is due to the same reasons rates are
stable or lower across the nation - safer
cars, the aging of the baby boomers [leading
to fewer accidents] and increasing competition
between insurance companies."
The study also said the Texas Department of
Insurance's estimate that Texas consumers have
saved $2.9 billion over five years because of
lawsuit reforms is greatly exaggerated. Mr.
Hunter said actual savings were closer to a
quarter of that. Furthermore, he said,
insurance company profits have
"skyrocketed" in Texas in the last
Current state Insurance Commissioner Jose
Montemayor disputed his predecessor's numbers,
saying the $2.9 billion savings estimate is
"This isn't a matter of conjecture. I
know the savings are there," said Mr.
Montemayor, who was appointed by Gov. George
The 1995 reform laws are designed to make it
harder for people to sue. Restrictions are put
on where a case may be tried, punitive damages
are limited and penalties are imposed on those
who file frivolous lawsuits.
Mr. Montemayor, who ordered a $685 million
decrease in insurance premiums this fall to
reflect lawsuit-reform savings, noted that the
state "requires insurance companies to
demonstrate that they have built these
mandatory savings into their rates."
When the lawsuit reforms were passed,
supporters said fewer frivolous suits in Texas
would reduce insurance costs. Lawmakers
ordered insurers to pass those savings on to
The problem, according to Mr. Hunter, is that
after the premium rates are lowered, insurers
are allowed to offset those cuts by raising
rates for other reasons.
"They [state officials] say they are
cutting rates, but they don't take into
account that insurers increase premiums at
other times of the year. They also can do
things like move customers into higher-cost
companies," he said.
Jerry Johns, an industry spokesman, disputed
the results of Mr. Hunter's study.
"Certainly, safer cars, aging drivers and
better roads have contributed to lower
insurance rates, but in Texas we have
virtually eliminated frivolous lawsuits - and
that has been a major contributor to lower
insurance rates," he said. "We
believe the savings to consumers has been in
the billions of dollars."
Mr. Hunter said it is interesting to note that
insurance premiums in Texas have risen only
slightly less than in states that have enacted
few lawsuit restrictions. He also said that
while Texas officials say consumers have seen
big savings in insurance rates, total premiums
for liability coverage rose 8.2 percent from
1995 to 1998.
Liability protection represents about half the
cost of a typical auto insurance policy in
"It is strange to claim savings when
premiums are rising," Mr. Hunter said.
The Consumer Federation of America represents
about 240 consumer groups across the nation
with a combined membership of 50 million
Back to Top