Texans have paid among the highest rates for home insurance for at least the last ten years. Jockeying with Texas for the state with the highest rates have been Florida and Louisiana, while Oklahoma and Washington D.C. have rounded out the top five.
Texas homeowners started off 2014 with a new round of rate hikes from most insurance companies. State Farm raised home insurance rates 9.8% after a 20% increase in 2013. Farmers raised rates an average of 14.9% statewide, and Allstate increased their rates 6.5% to kick 2014 off. Many consumer watch groups are wondering if there will be another round of rate hikes coming at the end of this year or early next year.
I would not be surprised to see Texas home insurance rates continue to increase. Texas weather is the biggest reason insurance companies give for increasing their rates. Our top three weather related claims consist of hurricane, tornados, and hail. Hurricane Ike, which struck Galveston in September of 2008, had estimated losses of $20 billion. Since then, Texas was hit by 22 tornados in 2012 with a cost of $1.3 billion in damages and a hail storm in Dallas later that year with $900 million in damages.
There’s one other contributing factor impacting our home insurance rates, and that’s the Texas Department of Insurance. TDI fulfills several roles including licensing insurance agents and claims adjusters, licensing insurance companies, monitoring the financial health of insurance companies, resolving complaints against insurance agents and companies, as well as assisting and educating Texas consumers. They are the agency that ultimately approves or disapproves what insurance companies charge for each insurance product.
There are over 200 insurance companies providing home insurance in Texas. In 2011 the Texas Department of Insurance rejected rate increase requests from only 4 companies. This number dropped to 2 in 2012, and 0 in 2013. None of the rate requests which were rejected were from the 3 largest home insurance companies.
Texas operates a file and use system. This enables an insurance company to file with TDI, they are going to charge a higher rate for home insurance, put the rate into effect, and then wait for TDI to either approve or reject the higher rate. Consumer groups believe this method is backwards contending the insurance companies should propose any rate increase with its accompanying justification to TDI first and then wait to implement the rate change once it’s been approved.
What are Texas consumers to do? I believe there are a two key actions any consumer can take; compare home insurance rates with other companies and complain. There are a number of excellent companies offering competitive rates and great service. Shop for home insurance as you would for any other service.
In addition, if you’re unhappy with the rates you’re paying, write a letter to TDI. If enough people write letters encouraging TDI to take action and bring rates down, they will be forced to listen to their constituents. TDI’s mailing address is PO Box 149104, Austin, TX 78714-9104, and put them to the attention of Julia Rathgeber, our state Insurance Commissioner.
What do you think should be done? Share your comments, suggestions, and questions with me on our Google + and Facebook pages. I’d love to hear from you!