Texas appraisal rules could determine impact of new mandatory auto insurance right

Texas has made the Right to Appraisal mandatory in personal auto policies, but consumer advocate Robert McDorman says the new rules will determine whether insureds can actually use it. The Texas Department of Insurance is finalizing implementation details that could shape how much money policyholders recover and how independent the process will be.

Why it matters: - Texas lawmakers created a mandatory contractual Right to Appraisal in personal auto insurance policies, a change meant to help policyholders recover more of their actual loss. - The law’s impact will depend on how the Texas Department of Insurance writes the rules that govern notice, access and umpire selection. - Consumer advocate Robert McDorman says weak rules could turn a major consumer protection into a process that is hard to use or controlled too early by insurers.

What happened: - Texas moved to require the Right to Appraisal in personal auto policies. - The Texas Department of Insurance is preparing to post the implementation rules for the new requirement. - TDI has proposed pushing back the date insurers must comply with the new rule requirements to Sept. 1, 2026, to give carriers more time to update their systems. - McDorman, founder of Auto Claim Specialists, argues the rules matter as much as the statute itself.

The details: - TDI’s December 2024 Appraisal Experience Data Call Report showed 446 completed personal auto appraisals in Texas in 2023 among the top 10 private passenger auto groups. - Those appraisals produced awards averaging $5,252 above the insurers’ initial offers. - 98% of completed appraisals resulted in awards above the insurer’s original offer. - Despite that success rate, appraisal was used on only a tiny share of Texas auto claims. - Auto Claim Specialists says low consumer awareness and policy language that either omitted appraisal rights or required insurer consent before appraisal helped limit use of the process. - Using TDI’s data, Auto Claim Specialists estimates those 446 appraisals reduced under-indemnification by about $2.34 million for Texas auto policyholders. - Texas has about 7.4 million privately registered automobiles. - Auto Claim Specialists applies an 8.1% annual claim frequency and a 23.1% total loss frequency to estimate 138,522 total loss claims and 461,142 repair claims each year. - Based on the firm’s experience on thousands of appraisal claims, average increases are about $4,044 on total loss claims and $6,111 on repair claims. - If 10% of Texas auto claimants used appraisal, the potential reduction in under-indemnification could reach about $56 million on total-loss claims, $281.8 million on repair claims and $337.8 million overall. - That could mean more than $335 million in additional indemnification for Texas insureds compared with the $2.34 million achieved in 2023. - McDorman says at least 80% of auto claims are being significantly under-indemnified, based on Auto Claim Specialists’ experience.

Between the lines: - The rulemaking fight is less about whether Texas policyholders have a right to appraisal and more about whether they can actually exercise it in a fair, independent way. - A key concern is a proposal that would let a carrier build a vendor-based umpire-selection process into the policy when it is issued, before any claim exists. - McDorman says that could weaken the independent third-party function that appraisal is supposed to provide. - McDorman argues the insured should choose the umpire when submitting a claim, not when buying the policy, and should still be able to ask a court to appoint one if needed. - Auto Claim Specialists says rules without enforcement are ineffective, and McDorman wants steep penalties for noncompliance.

What’s next: - TDI is expected to finalize and post the appraisal rules. - Auto Claim Specialists is urging Texas policyholders and other stakeholders to stay engaged as the rules are completed. - The final rule package will determine whether the mandatory appraisal right becomes a practical consumer tool or a right with limited real-world value.

The bottom line: - Texas has created a meaningful new insurance right, but the rules will decide whether it delivers real indemnification or just a paper promise.