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The Junk Auto Insurance Problem In Texas

Junk Policies
As a Houston personal injury lawyer, I see car accidents frequently and am never shocked when I find a situation where there is no insurance coverage to cover a car accident.

The number of drivers in Texas who do not have valid insurance would shock you and for that reason, we recommend everyone obtain underinsured or uninsured motorist coverage on their own auto policy. Underinsured and uninsured motorist coverage protects you if you get into an accident with someone who doesn’t have insurance or who has not enough insurance.

One of the problems that have reared its ugly head in Texas is that of the “junk policy” that was sold in the state of Texas. There was a time when everyone had to issue automobile insurance on the same form. By having a uniform form for all of Texas, consumers could compare apples to apples and oranges to oranges when shopping for insurance.

Unfortunately, a recent Texas Insurance Commissioner opened up the floodgates for sale of junk policies within the state. Some of the junk policies included provisions, which were called “named driver” policies. These policies only cover drivers actually named on the policy and anyone else using the vehicle would not have insurance coverage.

In the past, if you loaned your car to someone who was not specifically excluded from coverage, they were covered under your automobile policy. However, the “named driver” policy allowed insurance companies to bank windfall profits and left Texas families holding the bag.

Recently, political leaders attempted to solve the problem by requiring disclosure of named driver policies in an effort to educate consumers about what they were actually buying. The following language must now be a part of a named driver policy.

“WARNING: A named driver policy does not provide coverage for individuals residing in the insured’s household that are not named on the policy”.

Well, while that is a step in the right direction, many consumers don’t look at their policy or truly understand what it really means. The only way to remedy the junk policy problem is to go back to the old system of a uniform policy that insures cars on Texas highways carry coverage.

Not only are victims of another’s negligence left holding the bag when there’s no insurance coverage but also the family expecting that there is coverage only to find out after the accident that there isn’t – is also left a loser.

The only winner for allowing junk policies in the state of Texas is the profits of the insurance company.

Insurance was developed in order to spread the risk between many different people and allowing the insurance company to take a small percentage off the top for handling the transaction. In Texas, automobile and homeowners insurance has a whole new business model and that is to maximize profits for insurance companies.

When the state of Texas fails to regulate insurance company profits, guess who’s left footing the bill – yes that’s right Texas families. Some states and insurance commissioners require the insurance company to spend a certain percentage of premiums collected with the state on actual claims.

This serves two purposes for the consumers within the state. First, it ensures that the cost paid by the consumer stays low and bears a reasonable relationship to claims actually paid. Second, it ensures that most of the premium dollars collected within the state are actually used toward claims and not windfall profits.

[dropshadowbox align=”none” effect=”lifted-both” width=”800px” height=”” background_color=”#ffffff” border_width=”1″ border_color=”#dddddd” ]When insurers actually pay 38 cents on claims for every dollar out of a Texas families pocket- Yes- Texas WE HAVE A PROBLEM![/dropshadowbox]

Texas is in desperate need of insurance reform and with real insurance reform will come lower premiums and better treatment by insurance companies.

Call your state representative and tell them you want real insurance reform for Texas.