Texas auto insurers can now decide when a policyholder hasn’t cooperated with the company’s investigation, settlement, or defense of a liability claim — and drop the driver when their policy comes up for renewal.
After giving drivers written notice and 10 days in which to cooperate, insurers must now issue non-renewal notices to uncooperative drivers, according to a new regulation from the Texas Department of Insurance (TDI). The rule only applies to liability claims.
“If you or a driver listed on your policy causes an accident and the other driver files a claim with your insurer, you must cooperate with your insurer during the claims process,” says Jacob Gee, a licensed auto insurance agent with Insurify. “Failure to respond to your insurer’s requests may be considered non-cooperation. By law, the insurer must then notify you in writing if it decides not to renew your coverage when your auto policy is up for renewal.”
The rule doesn’t apply to drivers with coverage through the Texas Automobile Insurance Plan Association (TAIPA).
Texas auto insurers paid out more than $11.3 million in claims in 2023, according to TDI data. Texans pay the 11th-highest car insurance rates in the country, at $3,003 annually for full coverage and $1,428 per year for liability-only coverage, according to Insurify data.
Details of the rule change
The new rule establishes a series of notifications that insurers must use to give policyholders an opportunity to cooperate with the processing of a liability claim. The rule requires insurers to:
Reasonably attempt to notify policyholders of what cooperation is required, whether it’s submitting police reports, giving a statement, or allowing inspections;Notify drivers of the consequences of failing to cooperate;Send a notice of non-renewal to the policyholder within seven days of deciding the driver hasn’t cooperated in the claims process; andProvide drivers with 10 days to begin cooperating after receiving the notice.
The rule also requires auto insurers to notify policyholders of a non-renewal or cancellation decision 60 days before the end of their coverage. And insurers must reverse their non-renewal decision if a policyholder begins cooperating at any time before the end of their policy term, even if it’s long after their 10-day response window has closed.
New rule’s effect on Texas drivers
An insurance non-renewal could be an expensive prospect, even for drivers who find new coverage quickly. At-fault accidents, which can ultimately lead to non-renewals for uncooperative drivers, can increase insurance rates by 26% or more, Insurify data analysts say. And a lapse in coverage can increase rates by 25%.
What’s next? The rule in practice
The rule changes apply not only to main policyholders but to all drivers insured under their policies. This means if a person listed as a covered driver on a policy causes an accident and fails to cooperate with their insurer, the insurance company must non-renew the policy, even if a different driver is the actual policyholder.
An auto insurance policy is a legal contract between an insurer and a policyholder, attorney Paul Cannon writes on the blog of Simmons and Fletcher, P.C. As part of the contract, the insurer pays to defend you in at-fault accident cases and pays any judgment that results.
“You, in turn, agree to certain terms and conditions for the coverage to apply,” Cannon writes. “One of these conditions is that you will cooperate with the insurance company so that [it] can defend the case. If you fail to cooperate to the detriment of [its] ability to defend the claim, you are in breach of contract. Now, the insurance company has the right to withdraw coverage due to your breach.”
