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Summary: Under current Texas Insurance Code, insurance companies are not allowed to give any sort of gifts to prospective policyholders. This law was initially set up to prevent kickbacks and allow for the merits of the policy to be the only deciding factor. HB 1905 would soften this regulation and allow gifts of $25 or less.
Analysis: Insurance providers operate in a heavily regulated industry. To the extent that such an industry can be made more competitive and responsive to time-tested free market principles, that industry will be more innovative and offer broader and better options for their potential customers. Current statute works against the interests of competitive innovation by preventing insurance companies from using basic marketing and branding techniques including giving away low-value branded promotional items such as hats, pens, stuffed animals, and mouse pads. These gifts essentially constitute a marketing gimmick and are unlikely to factor more heavily in a consumer's insurance policy decision than the merits and cost of the actual policy itself. Other industries, and indeed insurance companies in other states, use these branding techniques on a routine basis. We encourage the legislature to remove this unnecessary regulatory intervention in the insurance market.
Recommendation: While we support HB 1905, we believe there is room to strengthen the bill. In our view the $25 limit is an arbitrary amount that will reduce in value over time due to inflation. One way to improve this legislation would be to start the allowed amount at $25 and peg it to a sliding scale indexed to inflation.