Texas’ High-Risk Auto Insurance Pool Continues to Shrink

Published January 23, 2011

The number of high-risk drivers using the Texas Automobile Insurance Plan Association to obtain coverage has continued to plunge, according to the latest biennial report from the Texas Department of Insurance (TDI).

The Texas Automobile Insurance Plan Association (TAIPA) was created to help secure auto insurance for high-risk drivers who could not find coverage on the voluntary market. Drivers may obtain policies through TAIPA if at least two insurers have refused to offer them coverage because of their high-risk status.

Motorists are considered high-risk if they have had a large number of moving violations or involvement in crashes or have poor credit.
From 800,000 to 8,000
Only 8,193 policies were written through TAIPA during the first 11 months of 2010. That represents a 20 percent decline from total TAIPA enrollment for 2009, and it’s down nearly 75 percent from 2005, when the high-risk pool wrote 31,517 policies.

In the 1990s the number of policies written through TAIPA topped 800,000, said Mark Hanna, spokesman for the Insurance Council of Texas.

“A lot has to do with having a more competitive marketplace in Texas,” Hanna said. “We now have more than 200 companies offering auto insurance, so there is a place to put almost every one of our drivers.

“At one time we had more than 800,000 drivers in the pool. Then they finally raised the rates to be more in line with where were supposed to be, and the number of drivers in the TAIPA has been dropping ever since.”

TAIPA coverage is usually barebones and more expensive than policies in the voluntary market, which includes some insurers that specialize in covering high-risk drivers.

Tribute to State’s Economy
Hanna credits former Insurance Commissioner Elton Bomer, who served in the 1990s, for raising the rates auto insurers were allowed to charge in the state, to make Texas a more attractive market for insurers and easier for insurance buyers to obtain coverage in the voluntary market.

Julie Drenner, director of the Austin, Texas office of The Heartland Institute’s Center on Finance, Insurance, and Real Estate, said Texas has gained more auto insurers than any other state market in recent years.

“The shrinkage [in the number of drivers insured through the high-risk pool] is a tribute to Texas’ relative economic prosperity and population growth, which has resulted in the entry of new insurers,” she said. “Texas deserves some credit for making it reasonably easy for new insurers to set up shop, but this is more a tribute to Texas’ overall economic climate than anything about its insurance climate per se.”

Steve Stanek ([email protected]) is a research fellow at The Heartland Institute and managing editor of Finance, Insurance & Real Estate News.