SOURCE: American Consumer Institute

American Consumer Institute

February 28, 2011 09:02 ET

ACI Study Finds Texas Homeowner Regulation a Dismal Failure -- Leading to Higher Not Lower Consumer Prices

WASHINGTON, DC--(Marketwire - February 28, 2011) - Price regulation of property and casualty insurance in Texas is leading to a dysfunctional property insurance market that is increasing consumer prices and reducing solvency, according to a new ConsumerGram released by the American Consumer Institute (ACI). The study shows that Texas is following the very same mistakes observed in the Florida insurance market, where prices are the highest in the nation. 

"The study shows that regulating prices ironically leads to higher consumer prices and more insolvent insurers -- exactly the opposite of want consumers want," says ACI president Steve Pociask.

The study shows that artificially low prices are pushing the healthiest and most stable insurers out of state, particularly away from the coast, while leaving somewhat smaller, generally undercapitalized and riskier firms to shoulder major catastrophic storms. That has led to more pressures on price and significant decreases in policyholder surplus, the reserve necessary for insurers to pay consumer claims. 

"Encouraging price flexibility, attracting capital back into the state and curbing regulatory costs are among the ways that policymakers could strengthen the market and protect consumers from catastrophic losses," added Pociask. 

About The American Consumer Institute Center for Citizen Research
The American Consumer Institute Center for Citizen Research is a 501(c)(3) nonprofit educational and research institute. The Institute focuses on economic policy issues that affect society as a whole, and seeks to be a better and more reasoned voice for consumers, by using economic tools and principles to show that markets work best for the benefit for consumers. For a copy of the Texas ConsumerGram, please visit our Texas website at www.acitexas.org; and for more information about the institute and our other research issues, please visit www.theamericanconsumer.org.