A right to appraisal bill approved nearly unanimously by the Texas Senate went before the House Insurance Committee Wednesday, and while it remains pending, proponents voiced hopeful support for the legislation that is years in the making.

In March, testimony showed support for SB 458 from repairers and insurers alike. The bill would mandate that an appraisal clause be included in all Texas auto and home insurance policies.

SB 458 is one of two similar appraisal bills proposed during the current legislative session. Legislators, the Auto Body Association of Texas (ABAT), Texas Watch, and others have advocated for the legislation for several years.

Generally, the mandatory appraisal bills seek to:

• • Require an appraisal procedure in all personal auto insurance policies
  • Allow appraisal requests by an insurance company or insured person within a certain amount of time
  • Require the vehicle owner and insurance company to appoint competent appraisers

The insurance commissioner would consider the qualifications and selection of appraisers and umpires for appraisals, according to the bill.

SB 458 states the appraisal provision “is intended to provide a type of dispute resolution process solely to determine the amount of loss when that amount is in dispute between the policyholder and the insurer.”

Last year, the results of a data call by the Texas Department of Insurance (TDI) from 10 auto insurers on appraisal use and outcomes showed it was used in less than 0.02% of payable personal auto claims.

However, when appraisal was used, nearly half of the personal auto appraisal awards were for settlements ranging between $13,000 -$38,000 and resulted in $2,100 - $5,900 more than the insurer’s initial offer. In 94% of the claims, appraisal was initiated by the claimant.

In 2023, consumer advocacy group Texas Watch analyzed 1,246 auto insurance claims settled through independent appraisers. They found that, across all auto insurance claims, the appraisal award was an average of 40% higher than the insurance offer.

The Texas Office of Public Insurance Counsel (OPIC) recommended the right to appraisal on insurance claims be a mandatory part of policies in 2023.

Insurance Committee Chair Rep. Jay Dean (R-District 7), sponsor of the House companion to SB 458, said during Wednesday’s hearing that appraisal clauses used to be the norm until about a decade ago, when some companies began removing the provision.

“OPIC made a legislative recommendation and preserved their consumer rights to invoke appraisal in dispute resolution,” he said. “I appreciate all the stakeholders coming together here with a policy that I think is good for Texas consumers and predictable for Texas insurers.

“The bill directs TDI on rulemaking and gives the agency the authority to act as an umpire for the appraisal process… I believe appraisal provides a less expensive, more efficient alternative to litigation to settle the amount of loss. This means someone should be able to get their car fixed sooner after a collision or their home restored sooner after a storm.”

In support of the bill, Insurance Council of Texas Executive Director Albert Betts Jr. said the bill presents a balanced approach to the issue.

“We all probably didn’t get exactly what we wanted in the bill but I think it’s something our industry can live with,” he said. “It preserves the right for companies who already have an appraisal provision in their policies to keep those policies as long as they comply with this law. And I think it’s good for addressing this issue that has really arisen over the last couple of years, as companies have modified, not eliminated, but modified appraisal provisions in their policies.”

Ware Wendell, Texas Watch executive director, called the bill “very fair and balanced.”

“Appraisal legislation got so close last session, it was on the very last Senate intent calendar and it was just a casualty of the clock,” he said. This time, it’s out of the Senate, it’s over to the House, and we’re very hopeful that it can make it across the finish line and get to the governor’s desk. It’s going to help a lot of consumers… Cars are rolling computers these days, they’re very complex, so appraisal can help.”

A second appraisal bill, SB 369, hasn’t been scheduled for a hearing.

Images

Featured image: Insurance Committee Chair Rep. Jay Dean (R-District 7) speaks during Wednesday’s House Insurance Committee hearing on right to appraisal legislation. (Video screenshot)