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AUSTIN, Texas 06/17/2002 (BestWire)-
In 2000 and 2001, mold claims cost Texas insurers slightly more
than $1 billion, according to a report released by the Department
of Insurance.
The estimated number of claims in the first quarter of 2000
were only 1,050, but the figure rose to almost 15,000 by the
fourth quarter of 2001, the report said. The total number of
claims for the two years was more than 44,000.
Mold problems began in 2000 and grew, department spokesman Mark
Hanna said, adding that the department saw only a handful of
cases in the 1990s. Costs of claims rose, too.
Although the number of mold claims jumped after Tropical Storm
Allison hit the eastern part of the state in 2001, Hanna said
most of the damage was insured through the national flood insurance
program and didn't hit homeowners insurance.
Previous estimates found that homeowners insurance in Texas
had a loss ratio of 82.4 in 2000, up from 50.6 in 1999. The
increase reflects a rise in average paid losses for water-damage
claims, which rose to $500 in 2000 from $300 in 1999, with an
estimated $700 expected in 2001 (BestWire, Feb. 22, 2002).
Part of what's fueling claims is that mold is on everyone's
minds in Texas, Hanna said. A multimillion-dollar lawsuit in
the state over mold infestation that caused serious health problems
was followed by all the major network news programs and in the
New York Times, he said. Local weather even rated the day-to-day
severity of mold risks on television.
"People got a dose of it just about every day, and all of a
sudden mold became an ugly word even though we've had it for
a very long time," he said.
With the increased costs related to the outbreak of mold cases,
all of the state's major insurers have come to the department
looking to change their policies, Hanna said, and many stopped
selling policies to new customers. Allstate Insurance Co. said
earlier this month that it would stop writing new homeowners
policies for some applicants in response to adverse market conditions,
including a rising number of mold claims (BestWire, June 3,
2002).
Companies also are raising rates. Preliminary findings and data
from the state attorney general's probe into the state's top
three homeowners insurers found that rates are soaring, with
200% increases reported in some cases. Gov. Rick Perry scolded
the companies at a news conference last month for the increases
and also for using credit-based insurance-scoring practices
that he said discriminate against some groups (BestWire, May
17, 2002).
Insurance Commissioner Jose Montemayor helped the situation
by eliminating the practice of stacking of claims, which was
a big cost driver, and allowing reduced coverage for mold, Hanna
said. Consumers now have the option to buy mold coverage back
at 25%, 50% or 100%.
A mold remediation task force also recommended that consumers
use preventive maintenance by watching old washing machines,
water heaters and dishwashers for the first signs of mold. It
also recommended that consumers buy new appliances once they
were 10 years or older. It only takes mold 48 hours to form,
so the department urged consumers to take care of a water leak
immediately by drying the area and having it repaired.
"Many people in Texas know of at least one family who is not
in their home right now because of mold," he said. "They're
staying at hotels or apartments and have done so for months."
The elimination of stacking and preventive maintenance should
help the numbers go down. "We would like to think that the numbers
have peaked," Hanna said.
To avoid abuse and prevent future increases, the Legislature
will be looking at whether or not to regulate or license mold
remediators who evaluate and repair mold damage, he said.
The top five writers of homeowners multiple peril coverage in
Texas, according to A.M. Best State/Line product information
based on direct premiums written for 2000, were: State Farm
Group with a 30.6% market share; Zurich/Farmers Group, with
20.1%; Allstate, with 15.5%; USAA Group, with 6.8%, and Travelers/Citigroup
Cos., with 4.4%.
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