Fort Worth Star-Telegram, Texas, Watchdog column [Fort Worth Star-Telegram, Texas]

June 29--I've been hearing from consumers that the Texas Insurance Department hasn't been -- how shall I put it? -- as helpful as in the past.

Previously, I heard success stories: Aggrieved customers filed complaints against insurers, the department contacted the insurers, and often enough, Texans got their money.

Lately, consumers tell me the opposite: Their complaints against insurance companies are declared without merit and dismissed.

I checked. The dollar amount that the department says it worked to restore to Texans after their claims were denied or low-balled has dropped in one year from $40 million to $26 million. That's the lowest amount in five years that has been returned to consumers because of actions by state regulators.

Add to that a decision -- apparently by Insurance Commissioner Eleanor Kitzman, appointed by Gov. Rick Perry 10 months ago -- to remove from the department's public website a list of bad players in the insurance industry and the enforcement actions against them.

After The Watchdog complained, the names were put back online.

Is the department becoming less consumer-friendly?

Fair question, and one that is getting attention with recent homeowners insurance rate hikes, such as Allstate's increase of 5.7 percent on average and Fire and Casualty Insurance Co.'s request for an average statewide hike of 9.8 percent, approved by the department in late March.

Kitzman also didn't object this year to a Farmers Insurance hike of nearly 10 percent.

The issue also came up recently after Kitzman, at the insurance industry's request, created two fraud prosecutor positions in San Antonio and Houston.

Will they go after customers who cheat companies, companies that cheat customers or both?

Keeping consumers and businesses on an equal footing is the job of the state commissioner, J. Robert Hunter said. He was appointed by Gov. Ann Richards in 1993 as the first insurance commissioner operating solo without a three-member insurance board. It was part of a big reform package that was supposed to fix the industry.

He remembers going to work each morning and seeing a line of insurance company representatives waiting to see staffers who were "bombarded by the industry presence."

Any similar bombardment from consumers? "Nothing," said Hunter, now director of insurance for the Consumer Federation of America.

"There's not much pressure from the public," he said. "You really have to be an advocate if you want to balance the scales. Most insurance commissioners just go along with whatever the pressure is, and the pressure is all from the industry."

Yet "the first responsibility of an insurance commissioner should be to protect the public. The industry can pretty much take care of itself."

Alex Winslow, head of the consumer group Texas Watch, says the public can't count on Kitzman as an advocate.

"Since taking office last year, Eleanor Kitzman, who is a former insurance executive, has shown a bias favoring the insurance companies over their customers," Winslow said. "She has not stepped in to oppose a single rate hike. She allowed companies to dramatically increase deductibles, shifting huge out-of-pocket costs to policyholders. She doesn't even grasp the notion that insurance companies are selling junk policies that slash basic coverage."

I sent Winslow's statement to the department. It did not respond, but officials sent me records showing insurance companies' requests for homeowners rate increases.

Since Kitzman took office, companies announced 91 rate increases, including 27, 29 and 44 percent. Kitzman rejected three, records show.

Winslow and other critics point out that Texas has some of the highest rates in the nation for homeowners and auto insurance while coverage has shrunk.

That's not what the Legislature expected in 2003, when it deregulated the industry. Rates were supposed to drop.

In many cases now, companies need only inform the department of plans to raise rates. After the increase, the commissioner can rule whether the rates meet legal requirements. (Many other states employ that "file-and-use" system, although in some a commissioner must approve rates before increases take effect.)

The department cited in a strategic plan last year that it must "ensure rates are not excessive, inadequate or unfairly discriminatory, while assuring companies are financially sound." Spokesman Jerry Hagins said there is no set number to determine whether a rate is excessive. A state law says a rate is excessive if it "is likely to produce a long-term profit that is unreasonably high in relation to the insurance coverage provided."

While Kitzman has been mostly hands-off with the rate increases, she shifted the budget to make room for fraud units that go after consumers who file false claims, agents who break the law and, sometimes, insurance companies that rip off consumers.

Since the first Dallas fraud prosecutor began a pilot program in 2005, there have been 250 criminal indictments and $7 million in restitution to fraud victims, the department says.

Kyson Johnson, the Dallas fraud prosecutor, says 3 in 4 cases are against consumers, doctors, body shops and others who try to cheat insurance companies. The rest are against agents, adjusters and companies.

In a big case announced this month, Loya Insurance Co. was fined $300,000 by the department because, it said, Loya made false claims in its advertising.

Mark Hanna of the Insurance Council of Texas says the industry has been asking for help prosecuting "the huge amount" of insurance fraud in Houston and San Antonio. After the commissioner shifted her department's budget to make it happen, he said, "we were very, very impressed with her."

"It's not trying to protect companies," he said. "It's dealing with crimes that have been under the radar for a long time. A lot of district attorneys don't have the time or expertise. In many of these cases, these are high-dollar crimes where consumers are getting ripped off."

Yes, that's true. But the industry has the National Insurance Crime Bureau, a nonprofit that brings together resources to prevent, detect and deter insurance crime. Profitable insurance companies also have resources to pursue fraudsters.

On their own, consumers can't take on insurance companies that cheat.

State Rep. Todd Smith, R-Euless, says the dilemma is that in many states, insurance commissioners are appointed by governors. These governors, in turn, must raise millions of dollars to run campaigns. The insurance industry gives millions in campaign donations to governors and state legislators.

Because of that, Smith said, "There is a reason to be concerned about the possibility of individuals being appointed who are beholden to or biased in favor of insurance or anti-consumer interests."

Smith said he was not specifically talking about Perry and Kitzman but about the general appointment process.

Sunday: The North Texas Tollway Authority gets tougher with fines -- if that's possible.

Dave Lieber, 817-390-7043

Twitter @DaveLieber

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