Texas Legislators Weigh Creation of State-Funded Car Insurance Option

Texans struggling with high auto insurance premiums might get a reprieve soon.

Senator Roland Gutierrez introduced a bill to the Texas Senate in February to create a state-funded car insurance option for all Texans.

Its goal is to provide affordable coverage and foster competition in Texas’ auto insurance market.

Rates rose by 23% in 2024 due to inflation and increased claims from extreme weather. A recent Insurify report predicts that Texas auto insurance rates will continue to rise by 6% in 2025, reaching an average annual rate of $2,886 for full-coverage insurance.

Affordable auto insurance for everyone

The Texas Automobile Insurance Public Option Act would be available for all Texans who can prove residency and have a valid Texas vehicle registration.

The proposed act differs from Texas’ car insurer of last resort, the Texas Automobile Insurance Plan Association (TAIPA). Drivers must receive a rejection from at least two insurance companies in the last 60 days to enroll in the TAIPA. The Texas Automobile Insurance Public Option Act wouldn’t have this requirement.

California, Hawaii, New Jersey, and Maryland also have state-funded car insurance programs. However, unlike the Texas Automobile Insurance Public Option Act, these programs are only open to low-income drivers and have multiple eligibility requirements.

The program would offer the state’s minimum liability requirements plus optional uninsured/underinsured motorist coverage, personal injury protection, and comprehensive and collision coverage.

The program would also include a sliding scale for low-income drivers with risk-based adjustments.

The bill didn’t clarify whether the program could reject drivers or whether it would add more coverage options or include discount opportunities.

Premium profits and the state would fund the Public Option Act. Enrollment would happen annually — much as health insurance has an open enrollment period. But drivers with qualifying life events — such as buying a vehicle or losing private coverage — would also be eligible to enroll at any time.

Combatting rising insurance rates

Gutierrez said he backed the bill to create an affordable and accessible insurance option for Texans.

“The skyrocketing costs of groceries, healthcare, home, and auto insurance have stretched Texans’ pocketbooks thin,” Gutierrez told NBC’s Dallas-Forth Worth affiliate. “It’s time that the state of Texas steps in and offers a public insurance option that will provide affordable, reliable coverage for everyone at a fraction of the cost.”

The bill also aims to foster competition in Texas’ auto insurance market. Full-coverage premiums rose by 15% from 2023 to 2024, Insurify data shows. And rates will continue to increase by 6% in 2025, Insurify analysts predict.

“The state of Texas can provide auto insurance at a lower rate because we aren’t getting squeezed by shareholders, paying a CEO with an inflated salary, or racking up the bill on some huge marketing campaign,” Gutierrez told NBC. “This is coverage that you can count on, that will force insurance giants to bring their prices down or justify the cost.”

What’s next: The bill will undergo committee review

Gutierrez introduced the bill in February, and it currently sits with the Texas Senate Business and Commerce Committee for review. If the Senate and the House pass the bill, it’ll require a signature from Governor Greg Abbott. If the bill becomes law, drivers could get coverage on or after Jan. 1, 2026.

Related articles