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Report: TWIA Improves Claims Processes

After years of controversy and legal wrangling, a bit of good news for the Texas Windstorm Insurance Association came today in a report from the State Auditor's Office: The insurer's claims process is improving.

U.S. Air Force member conducted search and rescue operations on Galveston Island after Hurricane Ike on Sept. 13, 2008.

The Texas Windstorm Insurance Association on Friday received a positive report from the State Auditor’s Office, which monitored TWIA’s claims process and other activities from January 2011 to March 2012.

The state's windstorm insurer of last report is paying claims more accurately and efficiently, while meeting the Texas Department of Insurance's accounting standards, the report found. The report comes after years of controversy and legal wrangling over the association's handling of homeowner claims following major hurricanes on the Texas Gulf Coast. TWIA has been under administrative oversight by the TDI for more than a year.

John Polak, TWIA's general manager, said the association has drastically improved the claims process since Hurricane Ike ravaged the Texas coast in 2008. Polak was hired after the association’s poor handling of policyholder claims following the hurricane resulted in thousands of lawsuits. As this Tribune interactive shows, the state spent millions defending and settling lawsuits after the storm.

“In 2008, we did not have a call center, we did not have specific firms under contract to provide adjuster services,” said Polak in a February. When Ike hit, TWIA only had seven employees in the claims department, said Polak. Now it has almost 40. 

According to the SAO’s audit, from January 2011 to March 2012, the agency processed 24,411 claims and 88,408 payments. The majority of those payments, 57 percent, were made in cases that involved in some sort of litigation. During the time the association was audited, TWIA paid $25.2 million to legal firms to defend and settle $333.6 million in claims litigation.

The SAO offered a few suggestions to further improve the claims process, including monitoring which employees process which claims to identify potential conflicts of interest and create “reasonable time frames” to pay policyholders for living expenses.

TWIA also spent $123.6 million during the time of the audit on non-claims-related contracts. “Those expenditures were generally supported and authorized,” according to the SAO’s report. “However, auditors identified certain weaknesses in the association’s contracting process.” Specifically, the SAO found inconsistencies in the contract database, such as duplicate entries, incorrect dates, expired contracts and documents unrelated to the contracts. The report also found seven contracts for workers with Odyssey Information Services, Inc. that did not adequately describe the services those workers would provide. TWIA paid the company $1 million in 2011. 

TWIA management agreed with the SAO’s findings and detailed at the end of the report how the association would implement the recommended changes.

There are still concerns about TWIA financing that the report did not examine. In 2010, lawmakers passed major reforms to the association — the semi-state run windstorm insurer of last resort — giving TWIA the ability to adjust policyholder's premium rates in different regions of the state depending on the risk of damages. The board of directors at TWIA delayed a vote on territorial rate changes in May, and policymakers are still debating how to properly finance the association.

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