Can math alone decide a windstorm insurance rate hike for the Texas coast?

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Corpus Christi business leaders are preparing for a big fight Thursday against windstorm insurance rate hikes. On that day, the Texas Windstorm Insurance Association’s Actuarial & Underwriting Committee will meet in Austin.

WHAT’S AN ACTUARIAL COMMITTEE

It might help to know, first, what an “actuarial” is. The insurance industry employs people called “actuaries” who practice a discipline known as actuarial science. Actuaries are the people who tell insurers how much they need to charge you in premiums to pay insurance claims and still stay in business. They use math and statistics to assess risk. 

The windstorm association wants to be sure you understand the difference between the committee that will meet Thursday and the full board. The committee doesn’t have the power to raise your rates. The board does.

TWIA may want you to feel reassured that it’s only a committee. Don’t be. The purpose of the meeting, according to TWIA, is to make recommendations to the TWIA board “concerning rate filings as permitted by law, rate adequacy issues and strategies.”

WHAT DOES THAT MEAN? 

The Actuarial & Underwriting Committee already has submitted something called a rate adequacy analysis to TWIA, concluding that windstorm rates are inadequate by 41.7% for residential coverage and 50% for commercial coverage.

Actuaries deal in numbers, not emotions. While those percentages are numbers and therefore emotionless, you might have an emotional reaction to them. 

CAN RATES GO UP THAT MUCH?

It would be politically and economically disastrous. But the analysis strongly suggests that the question isn’t whether there will be a rate hike. The more likely question is how big of one.

In August, coastal business and political leaders succeeded in stopping the TWIA board from approving higher rates for 2020. But that was only a temporary victory, a postponement until the board meets again in December. The board could decide 2020 rate changes at that meeting. 

More: TWIA board of directors votes to keep insurance rates unchanged for now

Think of the August victory as a filibuster not unlike what Wendy Davis did in 2013 when she talked a restrictive abortion bill to death. Think of the December TWIA board meeting as not unlike the special session that Gov. Rick Perry called to address the abortion bill after Davis’ filibuster. In that session, the Legislature approved the bill Davis killed with her filibuster. 

That’s not to say the TWIA board will approve a hike in December. But you can bet that the recommendations of the actuarial committee — the same committee that already said the rates are severely inadequate — will figure heavily into the final decision.

Think of this struggle as heart vs. head, with the coastal people — the people speaking on your behalf — as the heart and the actuarial committee as the head.

But it’s not really that simple. There also is the question of what the market will bear. People with mortgages don’t have the option of forgoing windstorm insurance. Raising rates too high runs the risk of pricing too many people out of the dream of home ownership.  

It is, of course, important to know what TWIA is and why it exists. It’s not a state-funded state agency. But it was established by the state in 1971, in Hurricane Celia’s aftermath, as a windstorm insurer of last resort for the Texas coast. It exists to take on a risk that many insurers choose to forgo, for actuarial reasons.

It also might help to know the makeup of the actuarial committee. It has seven members, former Port Aransas mayor Georgia Neblett and six people from some aspect of the insurance industry.

Tom Whitehurst Jr. analyzes, explains and, when appropriate, opines on what’s important in your life. Help support local journalism with a digital subscription to the Caller-Times.

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