The Texas Department of Insurance (TDI) announced today that it is working to ban tying home and auto policies.

The proposed insurance code modification would prohibit agents and insurers from tying together the sale of personal automobile policies and residential property policies either through a purchase requirement or as an underwriting guideline.

According to the TDI, the proposed new §21.1008 implements Insurance Code §541.003 by “specifying that making the purchase of a residential property insurance policy contingent on purchasing a personal automobile insurance policy from a specific person, or vice versa, is an unfair act or practice in the business of insurance.”

The TDI added that the language “solely addresses business practices where the purchaser does not have a choice of buying the tied products separately.”

Tying and bundling are not the same, according to the state agency.

Tying requires a customer to purchase a product tied to another by the same seller; whereas, bundling offers a customer the choice to add another product to the one being purchased to receive a discount.

The proposed language does not prohibit insurers or agents from offering Texas consumers the option of choosing to purchase personal automobile and residential property policies from the same person, the TDI said.

It also does not prohibit insurers from offering an actuarially justified premium discount if a consumer chooses to “bundle” multiple products that are separately available for sale.

The rule treats tying and bundling discounts differently because the consumer protection concerns for these business practices are different, The TDI explained.

“A bundling discount introduces an added opportunity for a consumer to save money by purchasing multiple policies from the same company while preserving the consumer’s ability to shop for a better price or coverage by purchasing separate policies from unrelated companies,” the TDI stated. “Tying achieves the opposite: a consumer who chooses, for example, a homeowners policy from a company engaging in tying then loses the ability to shop for an auto policy from another company. By purchasing or renewing a tied homeowners policy, the consumer’s marketplace options for auto insurance are reduced from many to just one.”

The state insurance agency said that tying policies puts pressure on consumers and offers an unfair market advantage for agents and insurers.

Under the new modification, tying of auto and home insurance policies through a specific purchase requirement or via underwriting guidelines would be considered an unfair trade practice under Insurance Code Chapter 541.

The rule does not apply to all insurance products.

For example, the rule does not prohibit insurers from tying commercial insurance products. It also does not prohibit tying products that supplement underlying coverage, such as personal umbrella or excess insurance policies.

The TDI emphasized the rule’s prohibition focuses on the tying of policies that provide coverage for two separate risks: the risk of damage to a person’s home and belongings versus a person’s risk as a driver and vehicle owner.