Texas lawmakers and regulators are evaluating whether insurers should be allowed to require consumers to bundle home and auto insurance policies with the same company.
The issue has drawn attention from consumer groups and policyholders who say they were told they must bundle to maintain coverage.
The Texas Department of Insurance (TDI) reported receiving nearly 40 complaints as of early December from consumers who said they were required to add an auto policy to renew their homeowners insurance.
While bundling is typically optional and marketed to receive a discount, some consumers have expressed concerns about being given no choice in the matter.
Bundling home and auto insurance policies is a common practice in the insurance industry. Insurers often encourage this by offering discounts and streamlined services. However, while bundling is promoted through discounts and convenience, critics say making it compulsory could infringe upon consumer rights and limit market competition.
For instance, the National Association of Insurance Commissioners (NAIC) notes that while bundling can offer benefits like combined deductibles and simplified management, it may also raise regulatory concerns related to anti-inducement or anti-rebating laws, unfair competition, and unauthorized sale of insurance.
While insurers generally favor bundling as it increases customer retention, mandating bundling could lead to regulatory challenges and potential consumer backlash.
Regulatory stances on bundling vary by state and jurisdiction. Some states have anti-rebating laws that restrict the incentives insurers can offer to prevent unfair competition. These laws can impact the extent to which bundling discounts are permissible.
The Council of Insurance Agents & Brokers (CIAB) said that anti-rebating rules, which vary by state, can pose challenges for insurance producers, especially with the advent of new technologies and value-added products.
State Senator Royce West of Dallas has introduced Senate Bill 213, which would prohibit insurers from making the purchase of both home and auto policies from the same company a condition for coverage.
The Senate Committee on Business and Commerce heard testimony from consumer advocacy groups who argued that requiring bundling limits consumer options when shopping for competitive rates.
Ware Wendell of Texas Watch said that requiring customers to purchase an auto policy alongside homeowners coverage reduces insurers’ incentive to maintain competitive auto rates. He also noted that smaller insurance companies could be disadvantaged when larger insurers impose bundling requirements.
Ann Baddour of Texas Appleseed said that requiring bundling limits competition by preventing consumers from comparing policies and selecting the best option for their needs.
Farmers Insurance, in response to the original report from NBC, said that it does not require homeowners customers to purchase an auto policy, adding that the proposed legislation does not apply to its current guidelines. The company said it updated its guidelines in December to allow customers with existing home policies to renew without bundling.
The Insurance Council of Texas, a trade group representing insurers, said that it is working with West’s office to ensure that any legislation supports consumers while maintaining a competitive insurance market in the state.
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