Texas’ new insurance chief being closely watched by consumers, lawmakers and industry

AUSTIN — Five months on the job as Texas’ top insurance regulator, Houston native and former insurance executive Eleanor Kitzman is under close scrutiny by consumer groups, lawmakers and insurers as she deals with the first major rate filings of her tenure.

As head of the agency that regulates the state’s multibillion-dollar insurance industry, Kitzman will make decisions that directly affect the pocketbooks of most Texans — those who buy auto, home, health or other types of insurance — as well as the business fortunes of hundreds of insurers.

Her lengthy background in the industry — including the auto insurance business she started in South Carolina — gives her a leg up in overseeing the market, but also makes some consumer groups skeptical about whether she will hold companies accountable for anti-consumer practices.

“I have a different agenda than I did when I was running my insurance business or working as an attorney for insurance companies,” Kitzman said in a recent interview. “I know how the business works, so I know what insurance companies can do.”

‘First big test’

Kitzman insisted her background and knowledge of insurance put her in position to “better serve consumers in every way.” But, she added, “having a robust, competitive market is very good for consumers.”

She added: “I can also recognize gratuitous whining [by insurers] when I see it.”

But consumer advocates fear she’s already shown her tendency to favor insurers.

In her first major decision last fall, Kitzman approved a rate plan by the state’s largest insurer, State Farm, that will begin switching many of the company’s homeowner policies to a higher deductible. Policyholders will have to shoulder a greater share of their property losses — while paying slightly higher rates.

The overall rate increase was only 2 percent in North Texas, but Kitzman acknowledged to a Senate committee that State Farm customers will be getting less coverage for their money because of the new deductible.

A leading consumer group, Texas Watch, accused her of giving in to the “biggest bully” in the Texas insurance market.

“This was Commissioner Kitzman’s first big test, and she failed miserably,” said the group’s Alex Winslow. “Insurance companies and their lobbyists are crowing over the decision.”

Kitzman counters by pointing to her record as South Carolina’s chief insurance regulator in South Carolina, saying her reputation was “not one of undue favoritism or partisanship.”

And she argues that maintaining strong competition among companies is the best way to keep the cost of insurance down — something that is important in a state that in recent years has had the highest homeowner insurance rates in the nation. Auto insurance rates, by contrast, are closer to the national average, reflecting greater competition in that market.

Law pursuits

For Kitzman, 55, the path to her dream job as insurance commissioner of Texas began in the most difficult part of her life.

She found herself at rock bottom in 1974 when, as an 18-year-old high school dropout and recently divorced mother of a young son, she had no idea what to do next.

But her favorite uncle, a role model, had built a successful law practice. And she was an avid reader, despite her 10th-grade education.

“The combination of those two things allowed me to overcome and move beyond what usually are very debilitating circumstances for a lot of people,” she said.

After she returned to school at night — while working days as a legal secretary — she went on to earn degrees from the University of Houston and South Texas College of Law.

After graduating from law school, Kitzman worked as a Texas Supreme Court clerk and then practiced insurance law for Akin, Gump, Strauss and Feld in Austin for several years, before moving to Louisiana, where she restored a failing auto insurance company to profitability.

At her next stop in South Carolina, she decided to launch her own auto insurance business in 1999. She built the company, Drivers Choice Insurance, from six employees in one office to more than 50 employees in seven offices before selling the firm.

In 2005, she was tapped to become South Carolina’s director of insurance, roughly the same position she would later take in Texas. But two years later, she left the post after a disagreement with then-Gov. Mark Sanford over problems in the state’s coastal insurance market.

Kitzman got the political bug in 2010, deciding to run for lieutenant governor of South Carolina, but she lost in the Republican primary. A fellow Republican she strongly supported that year, Nikki Haley, captured the governorship, and Kitzman joined her administration.

Six months into that job, the insurance commissioner’s office opened up in Texas — and Kitzman saw a golden opportunity to return to her native state. She applied for the job when the previous commissioner left the agency.

“It was a no-brainer,” she said of her decision to return to Texas. “I was very happy in South Carolina, but my son and grandkids are in Austin.” Her son is a lawyer in the attorney general’s office.

Haley hailed Kitzman when she left as having “laid the foundation for continued work on much-needed reform” in the executive branch, adding: “Governor [Rick] Perry and the people of Texas are fortunate.”

Even former South Carolina Gov. Jim Hodges , a Democrat whose own insurance director was replaced by Kitzman after Hodges lost his re-election bid to Sanford, said Kitzman performed well as the state’s insurance chief.

“I didn’t hear a lot about consumer complaints while she was in office. She did a pretty good job as director,” Hodges said. “The employees seemed to like her at the agency because she let them do their job. Based on her performance here, I think she will probably be a good insurance commissioner in Texas.”

Kitzman was introduced to Texas politics last fall when she appeared before the Senate Business and Commerce Committee and Democrats posed several questions about her past and her future plans as commissioner.

She was quizzed about her race for lieutenant governor in South Carolina and her meeting with Perry when she interviewed for the job. In Texas, the insurance commissioner is appointed by the governor, subject to Senate confirmation.

Political office

Asked by one senator whether she discussed politics with Perry — who considered South Carolina crucial to his presidential bid before dropping out of the race last week — Kitzman replied that “politics did not come up at all” during their meeting.

She also played down the notion that she will ever seek political office again in her recent interview.

“I never say never about anything, but I am not sitting around thinking about what I can do [to run for office.] If I could be insurance commissioner for life, I would do it,” she said. “I feel this is the job I was meant to do.”

Kitzman said she was not involved in Perry’s campaign efforts in South Carolina or any other state, and she disputed reports that she organized a political fundraiser for Haley in Texas that raised money from insurance companies, though she did attend the event.

“I have had no contact with the [Perry] campaign, and they haven’t asked me to do anything,” she said. “I haven’t even contributed.”

One of her goals for insurance consumers, she said, is to streamline the process for lodging complaints. She recently merged three divisions at the department — consumer protection, enforcement and fraud — into one division that receives complaints, investigates and takes action when warranted.

“We want to do what we can to make this process more consumer-friendly,” she said. “This is part of my charge to make all the pieces fit together in a way that works for the consumers of this state.”

AT A GLANCE

Eleanor Kitzman

Position: Texas insurance commissioner, for a term set to expire in 2013. Her salary is $175,000.

Age: 55

Education: University of Houston, South Texas College of Law

Career: Insurance lawyer for Akin, Gump, Strauss and Feld in Austin; founder of Drivers Choice Insurance in South Carolina; director of South Carolina Department of Insurance; executive director of the South Carolina Budget and Control Board; lost 2010 race for lieutenant governor of South Carolina

Family: Single, one adult son