This is what's wrong with TWIA ...

Malcolm Dieckow, Jim Riedel, and Shana Brader, were just a few of many who addressed the House Insurance Committee

(Editor’s note: This is the second part of a two-part series about the House Insurance Committee hearing in Rockport Wednesday, Jan. 15. The first part was published in the Jan. 18 edition. This story is much longer than what is usually published, but the subject matter is of vital importance to the future of Aransas County.)

The Texas House of Representatives Insurance Committee held a hearing Wednesday, Jan. 15 at the Saltwater Pavilion. The subject of the hearing was the operation of the Texas Windstorm Insurance Association (TWIA), and its compliance with the provisions of HB 1900, which amends TWIA operations and funding practices.

It lasted almost five hours.

Insurance Committee Chairman Rep. Eddie Lucio III invited TWIA representatives to speak first as invited testimony, including General Manager John Polak, Vice President of Legal & Compliance David Durden, and Vice President of Communications & Legislative Affairs Jennifer Armstrong.

Polak said TWIA had a mobile claims office open in Rockport within 72 hours after Hurricane Harvey made landfall, and has served more than 10,000 people, paying out $863 million within 10 weeks.

He said TWIA has handled 76,500 claims and paid out $1.3 billion.

“Ninety-four percent of the claims have been closed without dispute,” said Polak.

He noted TWIA is on pace to implement, on schedule, everything called for in HB 1900.

“There will be no rate hike considerations until our August meeting,” said Polak. “Statutorily, that’s when we have to look at it.”

Armstrong said it takes years to recover form a storm such as Harvey.

“The economic well-being of the coast is critical to the health of the Texas and the entire U.S. economy,” she said.

She said TWIA gets its revenues from premiums (rate payers), and Hurricane Ike claims were paid by premiums for years after that storm.

Armstrong said member (insurance company) assessments will run about $391 million, with the ultimate Harvey cost reaching $1.7 billion in claims.

She said TWIA will not reach the level at which reinsurance is used.

Rep. Lucio confirmed TWIA pays roughly $100 million annually for reinsurance.

Armstrong then discussed provisions of HB 1900, and where TWIA is in regard to meeting those requirements.

Rep. Todd Hunter said he doesn’t agree with TWIA’s concept of having a “miracle group” that comes up with rates.

“The problem is (you need to stop hiring) actuaries to tell us why we have to raise rates,” said Hunter.

Lucio said the intent of his committee is to ensure more transparency.

“I still don’t have an answer to if TWIA is a private or public entity,” he said.

Dr. Greg Bonnen, MD, the author of HB 1900, said TWIA was created by the legislature, but it’s not a private insurance carrier.

“It’s not set up to earn money for shareholders,” he said.

Committee Member Julie Johnson asked what percentage of TWIA policies is replacement vs. cash value.

Armstrong said 90 percent of the policies are replacement coverage.

Johnson said the problem is policyholders get money up front, but not enough to actually replace (their homes).

“They have to come up with money themselves, then fight over getting the extra (money),” she said.

“Are there any plans to solve the problem of policy holders not getting what they think they’re getting?” asked Johnson. “People pay a premium for replacement then have to pay premiums to actually get what they paid for.

“I want to investigate how replacement cost policies are administered.

“People have to spend thousands of dollars to get what they paid for.”

Polak noted again TWIA has paid out $5.6 billion in claims (through the years) and collected $6.1 billion in premiums.

“How long does it take to get an acknowledgment of a claim?” asked Johnson.

“Sixty days,” said Polak.

“Sixty days to acknowledge accepting a claim is along time,” said Johnson.

Armstrong noted that is the legal requirement.

“We must give adjustment of claim by then,” she said.

Committee member Tom Oliverson, MD said he talked to many people who had questions about starting repairs, but TWIA had not yet settled a claim.

“It would be incredibly frustrating for me if I was ready to go (make repairs), but TWIA said (not to start repairs),” said Oliverson.

He said then there are issues of ongoing damage due to repairs not being made, which are costlier for TWIA.

Lucio said, “Our hope is that we’re rushing to aid our policy holders. This shouldn’t be an adversarial relationship.”

Rep. Mayes Middleton said the pressure is on to pass reinsurance costs to ratepayers to the benefit of the insurance companies.

He asked one TWIA member on the panel, “I remember very vividly (during a break in an earlier hearing) you saying, ‘It’s time to get back to screw over the Gulf Coast.’”

The TWIA rep said he didn’t recall saying that.

Committee Member Dennis Paul noted TWIA claims 94 percent of claims were settled without dispute, and the remaining six percent are in lawsuits.

TWIA’s Durden said that is a much better experience than TWIA had after Ike.

Other testimony

Aransas County Judge C.H. “Burt” Mills noted the county set a recovery goal of three to five years.

“We work our recovery plan list every day,” he said. “TWIA’s continued delays of payment delays our recovery.”

Mills said he knows of 85 cases where people have simply given up and left Aransas County.

“We don’t want to fight this another six years,” said Mills.

He also said administrative burdens put on communities is quite complex.

Lucio noted there have been no greater voices (in Austin) than those from Aransas County elected officials, individuals, and elected officials representing Aransas County.

Committee member Sarah Davis asked about the hospital situation in Aransas County.

Mills said the county is seeking a micro-hospital, and that Harvey destroyed the hospital in Aransas Pass, which is not going to reopen.

“It’s shocking, and embarrassing to know that there is no hospital in the area,” said Davis.

Fulton Mayor Jimmy Kendrick talked about his $7,000 trip to a Corpus Christi hospital after suffering a heat stroke.

“This community needs help,” he said.

Mills noted the county is subsidizing Code3ER so it can continue operating.

“Thank God they opened (right before Harvey),” said Mills.

It was noted about 80,000 people on this side of the bridge are not serviced by a local hospital.

Mayor Pat Rios said, “John Metz (of the National Weather Service) said we were in front of a fire hose for 11-1/2 hours.

“Rockport was ground zero.

“You’re going to hear nightmare stories (during testimony today).

“The underlying message we hear is (TWIA) is consistently inconsistent.

“They had adjusters from across the country and different people got different answers (for similar damage).

“Some had to deal with multiple adjusters. That’s a cost of added misery we didn’t need.”

The mayor noted the properties on Key Allegro (pointing across Leggett Light Channel) are not representative of Aransas County’s rank and file resident.

“Most of our full-timers are on a fixed income, or dual incomes barely making ends meet, and many don’t understand the intricacies of TWIA,” said Rios.

“Make TWIA more accountable and be more user friendly.”

Rios said there should be certified standards for anyone working for TWIA.

“Twenty-nine months after the storm and many residents are still dealing with TWIA and they’re exhausted physically and mentally.

Rios thanked Representatives Geanie Morrison and Hunter for their leadership.

“I look forward to the changes I believe are going to happen,” concluded Rios.

Fulton Mayor Jimmy Kendrick opened his comments saying, “We’ve had (TWIA) people say today that 99 percent are happy with TWIA.

“I ask people (in this room) to raise their hand if they’re happy with TWIA.

“I don’t have to turn around and look who is raising their hand … there are no hands raised.”

Kendrick said his insurance has been cancelled, reinstated, and cancelled again.

“That usually happens after I’ve raised hell,” said Kendrick.

“We’re being treated like a third world country.

“The only way we’re going to fix this is to stand together as Texans.”

He complained about having to justify every action before it is taken.

“I had to wait so long (to settle), we struggled,” said Kendrick. “TWIA money goes to the mortgage holder (and they hold up funds, as well).

“It’s not just TWIA’s fault. We don’t have regulations to project our citizens.”

He noted there are no lawsuits with TWIA.

“It’s called arbitration,” said Kendrick.

“If we didn’t pay lawyers, just think what could be done with that money.

“We’ve lost faith in TWIA. There are some board members who should step down.

“We shouldn’t have to live in fear of TWIA.

“We need your help. We need new laws.

“Today, history can be made by ya’ll.”

Kendrick closed his comments noting God calls us to care of your people, adding, “I’ve been non-Christian (in response to) the way we’ve been treated.

“I’ve talked about people committing suicide. I’ve been there.

“Folks, we need your help.”

Rep. Hunter noted TWIA serves the 14 coastal counties and it should have its offices somewhere along the coast, not in Austin.

Steven Alexander, an actuary, said he has 30 years experience in Florida and other coastal states.

He noted TWIA went for the jugular when it tried to raise rates right after Harvey.

“After a crisis is when people are most vulnerable,” he said.

He questioned TWIA’s conflict of interest when buying reinsurance (that isn’t being used).

“The person selling reinsurance to the customer (TWIA) does all the actuarial work.

“TWIA should have its own computer modeling staff,” said Alexander.

He noted TWIA has lost 25 percent of its business as it continues to raise rates.

Alexander said the reasons TWIA needs to raise its rates is so it can buy large amounts of reinsurance (that’s not being used), and the winner is the seller of the reinsurance; it is not using profits to pay off high interest debt; and it uses computer modeling that is inflated (computer modeling showing much higher occurrence rates than historical data).

He said TWIA has many stakeholders and their interests often conflict.

He noted TWIA made some suspicious decisions at critical times (i.e. – deadlines) which begs the question, “Who is their real customer?”

He noted $900 million has been spent on reinsurance, and the interest earned on that money could have been put to much better use.

One committee member noted a quarter of TWIA’s premiums are use to pay debt at eight percent.

“That’s basically a junk bond,” he said. “There are a lot of consequences for getting modeling wrong.”

David Day, a structural engineer, said TWIA’s initial offer to customers is exceptionally low.

“A contractor says they can’t (do the work) for 10 times the amount (of the initial offer),” he said.

“Then the customer goes back and gets a little more money, but it’s still not near enough (to cover expenses).

“Every homeowner I’ve been involved with had to hire a (public adjuster) or lawyer to get what they deserved. Every case I’ve been involved in I’ve gotten the money deserved. That means I’m very smart, or they offer the low settlement (at first on purpose).”

He said TWIA should be statewide.

“The coast subsidizes others, but West Texas doesn’t subsidize the coast,” said Day.

Juan Garcia, a civil/structural engineer, said TWIA acts like a private insurer.

“Homeowners are stuck in a battle, and its still going after Harvey,” he said.

“There are at least 30 national engineering firms that work exclusively for insurance companies and they all disagree with us.

“Why does an insurance company get to pick the engineer 100 percent of the time (and those engineers) will make a report in the insurance company’s favor?”

San Patricio County Judge David Krebs said TWIA is a big gorilla that is way out of control.

“TWIA defies any rules y’all have set up,” he said.

Krebs said TWIA needs to be abolished, and insurance companies who operate in the state should be forced to provide windstorm coverage.

“I don’t envy your job, but you’ve got to do it.

“We don’t need any more hindrances to growth, he said.

Port of Corpus Christi Chairman Charlie Zahn said the port is the third largest in the nation.

“We have 91,000 port-related jobs and they are all affected (by insurance rates),” said Zahn. “Our workforce has to be able to afford to live here and windstorm insurance is a big part of that.

“We needed TWIA back in 1971, but it has gotten out of hand.

“The insurance companies are pressing TWIA to raise rates (so they don’t have to pick up any of the tab). I guarantee you (the large) insurance companies aren’t going to leave Texas (even though they threaten to).”

Other testimony highlights

• Malcolm Dieckow – “Working with TWIA is like working with FEMA. It’s a nightmare.

• Jim Riedel – “One TWIA adjuster said it was a Cat 2 storm that hit my father’s condo at the Racquet Club.

“It’s criminal the state supports an agency like this.

“My business was with a private carrier, thank God, or I probably still wouldn’t be open.”

• Shana Brader – “The TWIA reps talked about what a great job they did. They set up an air-conditioned trailer and we stood outside four to six hours. We were severely underserved. My business income is down 38 percent compared to 2016 (pre-Harvey) and they want to increase rates?”

• Kevin Jamison – “I eventually got everything I was due (but it took a long time). Big insurance companies pressured the Texas Department of Insurance to let them out of covering windstorm, so they, if effect, started this problem.

“It’s time for risk to be spread across the entire state. I guarantee you hail claims are greater than all of the Harvey claims.

“TWIA said 95 percent of claims are closed now. I’d say 95 percent just got tired.”

• Craig Griffin – “We had a natural disaster followed my a manmade disaster. The first (TWIA) offers were 30 to 40 percent (of actual repair/replace cost) across the board, based on what people have told me. The second offer was about a 50 percent, and then a P.A. got it up to about 90 percent.

“Not having our hotels up really affected our economy.

“Some of the condos may open this summer. It didn’t take three years to build them initially.

“When dealing with TWIA, they make you feel like a liar.

“When I came back into town I thought I was insured and I’d be okay … little did I know.”

• Richard Park – “The people living on the Texas coast have been discriminated against since the separation of windstorm (from policies). TWIA should be abolished.”

• County Commissioner Jack Chaney – “We spent 108 days in a hotel room. We got a settlement that was woefully inadequate. We finally just moved back into our house and stayed away from the holes in our roof.

“Then I started seeing what TWIA was doing to my constituents and it just broke my heart.

“I don’t know if TWIA needs to be abolished. But they do need direction … upside the head.”

• Greg Smith – “For every dollar we pay, we get back 50 percent. We have a governance issue with TWIA. A five percent increase in rates adds $200,000 to Texas Farm Bureau revenue.

“TWIA is a patch on a repair on a sore. Don’t put another Band-Aid on this problem.”

• Richard Beck (President of Key Allegro Condominium HOA) – “Getting paid in a timely manner, or getting paid at all is an issue. Our board has met every two weeks for the past two years.”

• Key Allegro Condominiums’ public adjuster – “We fight for what we feel is fair and reasonable. The windstorm claim has been a real struggle. TWIA representatives didn’t understand the complexities of what was going on. Much of my time was spent trying to determine (the motivation behind TWIA’s actions).

“TWIA challenged us at every turn. We got a $270,000 initial offer for HVAC. Finally got $607,000.

“They said our claim was largest claim in the state. If the $7.5 million paid (to us is their largest claim), then TWIA is severely underserving policyholders.

“At the Racquet Club, the TWIA adjuster said it was only a Cat 2 storm and we were in the safest part of the storm (the eye wall), and TWIA upper management wouldn’t back down on that assessment.”

• Key Allegro Condominium property manager - “Our initial estimate was $6.5 million. We have $16 million in coverage. Mr. Durban (TWIA legal counsel) is part of the reason we still aren’t settled.

“We’ve been through everything everyone has told you today.

“The difference between us and many others is we didn’t stop fighting, and we aren’t going to stop.

“We were finally guaranteed that we’d get paid the limit … and we’re still fighting (for what we’re owed).

“Agreements you make with TWIA, even if written, mean nothing.

“I’ve got 100 units. Twenty are complete, 23 are nearly complete, 33 are dry wall only, and 24 are still in studs all because of the way TWIA abused facts. I’m made to feel like I’m guilty of insurance fraud.

“Many (or our owners) have left, and some have died.”

• Executive Director of Texas Watch – “The anger in the rooms (at previous hearings) was thick. It shows me reform is not working. TWIA is not performing for people on the Texas coast.

“TWIA’s modeling is not in compliance with HB 1900.

“I’ve filed three open records requests and haven’t received any of them.

“They haven’t answered what they have paid Texas Farm Bureau.

“It’s time for us to come together to manage this catastrophic risk.

“There are tarps still on roofs today.”

• Portland city councilman – “Texas is the only place I’ve lived were different areas are treated differently. Take a big picture look at the problem we’re facing. It’s not set up for success.”

• Key Allegro widow – “One hundred of 600 Key Allegro homes have been torn down. I’m a widow and this storm was a very difficult time for me. An adjuster finally came by and spent 30 minutes. Later I got a $22,000 check from TWIA. My neighbor got a check for $63,000 (for similar damages) and it included $200 for a mailbox and $8,000 for a fence. I didn’t get that. I was very frustrated. Todd Hunter referred me to a public adjuster that was a lifesaver.

“TWIA sent out different adjusters (and they had no idea what information the other adjusters already had).

“When they finally gave me the final amount of $34,000, I just walked away.”

• Corpus Christi Chamber of Commerce representative – “Rising rates have a tremendous impact on the economy. Balance the TWIA board. It’s dominated by the insurance industry.

“Don’t make us pay Dallas’ hail storm claims if they don’t pay ours.

“They (TWIA) lowballs people and hope they are out-lasted.

“There is something definitely wrong with TWIA.”

• Barbara Gurtner – “Our church hired a public adjuster and he got 25 percent (of the increased payment). We never got enough to do all the repairs.”

Lucio closed the hearing saying, “When you personalize the problem, it really hits.

“Texas is a great state and you deserve better.”

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