Texas’ New Appraisal Rules Could Reshape Home Insurance Disputes

After years of homeowners and drivers sounding the alarm that they were losing leverage in claims disputes—and at a time when Texans are paying some of the highest insurance costs in the country—the state is moving to mandate a fairer claims dispute process.

The Texas Department of Insurance released a draft of new rules that would require home and auto insurance policies to include appraisal provisions, giving both policyholders and insurers a clearer path to resolve disagreements over the value of claims in less time and with less cost than taking disputes to court.

The move comes amid mounting consumer frustration. Premiums in Texas have more than doubled over the past decade, spurred by hurricanes, hail, wildfires, and other disasters, while more than 1 million homeowners have dropped coverage altogether.

Against that backdrop, the proposed appraisal rules could mark a turning point in how disputes with insurers get settled. And beyond Texas, the effort may serve as a blueprint for other states facing similar affordability pressures and rising claims conflicts.

How Texas got here

The push for mandatory appraisal rights has been years in the making.

Earlier this year, lawmakers unanimously passed Senate Bill 458 after reports surfaced that some insurers had removed appraisal provisions from their policies. These provisions give policyholders with denied or underpaid claims the option to challenge an insurer’s valuation through an independent appraisal process. It’s a critical alternative to litigation, and one that can resolve disputes more quickly and at a fraction of the cost of going to court.

Advocacy groups, such as the Auto Body Association of Texas, and repair specialists lobbied hard for the measure for more than six years, arguing that without these provisions, policyholders had little leverage to dispute claims because of how costly the litigation process can become. 

They even framed it as a public safety issue. Or, in the words of Robert McDorman, general manager of Auto Claim Specialists and longtime right-to-appraisal advocate, “Safe repairs save lives.”

Their concern over denied claims wasn’t hypothetical, either.

Weiss Ratings reported earlier this year that USAA and its affiliate insurers closed nearly half of all homeowners' claims nationwide in 2023, the most recent year for which data is available, without making a payment—one of the highest rates in the country and well above the national average of 37%.

For its part, USAA disputed the report’s methodology, but the controversy underscored a broader frustration among Texas policyholders: Too often, homeowners believe they lack recourse when an insurer says “no.”

What the draft rules say

Since SB 458 now requires appraisal provisions in all Texas home and auto insurance policies, the Texas Department of Insurance has been tasked with drafting rules to spell out exactly how the process should work. The agency’s recent proposal offers the first glimpse of what those rules could look like.

Under the draft, policyholders and the insurer would each choose their own appraiser, and if those two can’t agree, a neutral “umpire” would issue the binding decision. Umpires must be qualified professionals, such as engineers, architects, adjusters, public adjusters, or general contractors. 

The decision reached through this process would be binding, with limited exceptions in cases of material mistakes or conflicts with state law.  

Timelines for resolution would differ by coverage type, with auto insurance appraisers having 75 days to reach an agreement, and residential property disputes getting up to 180 days.

The proposal also makes clear that the rules would not apply to every type of insurance. Commercial policies and those issued by the Texas Windstorm Insurance Association, for example, would be exempt.

What homeowners need to know

For homeowners, the most important takeaway is that the appraisal process creates an independent check when there’s a dispute over the value of damage. Instead of relying solely on the insurer’s estimate, the homeowner can trigger a process where both sides bring in their own appraisers, and if necessary, a third party makes the final call.

Still, there are unanswered questions that could shape how effective the process really is for consumers. Will homeowners understand how and when to demand an appraisal? And will the system of appointing umpires be truly impartial, or tilt toward industry insiders?

What’s next

The Insurance Council of Texas is currently reviewing the draft rules, with an eye toward making sure they line up with the law as passed earlier this year. 

Experts, however, caution that the details will matter. Questions remain about whether the timelines are realistic in practice and whether the requirement to hire appraisers could still be cost-prohibitive for some consumers.

Beyond Texas: Why homeowners everywhere should watch

The state’s approach to appraisals is likely to draw attention far beyond its borders, especially as the claims process comes under scrutiny for insurers across the country.

Florida offers a stark reminder of what can happen when those frustrations go unaddressed. There, as insurers collapsed or fled the market, more than a million policyholders were pushed onto Citizens, the state’s insurer of last resort. A controversial new system routed disputes into administrative hearings instead of traditional courts, where Citizens has gone on to win more than 90% of the time. Critics say the process has stripped homeowners of basic legal protections and left many with settlements worth only a fraction of their repair costs.

If Texas succeeds in creating an appraisal system that delivers faster, fairer results, it could stand as an alternative to the kind of imbalance now playing out in states with high-volume and high-cost insurance claims.