Three Largest Home Insurers in Texas Plan to Raise Rates

Texas’ three largest home insurers are kicking off 2014 with steep increases in policyholder premiums, according to a report published Saturday.

The Dallas Morning News reports that Allstate, Farmers and State Farm plan to raise rates for most current and new customers by between an average of 6.5 percent to 14.9 percent. More than 2 million homeowners will be affected.

The companies have notified the Texas Department of Insurance that the increases will help offset projected losses. The insurance department will review the rate hikes and can reject any it deems excessive in what would be the first major decision on rates made by new Insurance Commissioner Julia Rathgeber.

But Public Insurance Counsel Deeia Beck, the state consumer advocate for the industry, has already said the proposed hikes aren’t justified.

Farmers is raising rates an average of 14.9 percent, and State Farm is boosting rates 9.8 percent. Allstate’s increase is 6.5 percent. That will affect policyholders with Allstate’s two largest homeowner’s insurance subsidiaries.

The Office of Public Insurance Counsel has opposed all rate increases, but objected most strenuously to the State Farm and Farmers plans. Beck wrote that State Farm based increases on projections that “exaggerate future expected losses.”

State Farm is the state’s largest insurer. Spokeswoman Patti Kelly told the newspaper Friday that the company had no choice, given that it is spending $1.11 for every dollar collected in premiums to cover the cost of business expenses and claims.

Beck wrote of Farmers that the company’s filing includes unsupported premium and property loss trends and that it was seeking “greatly excessive” Texas profits.

Luis Sahagun, a Farmers spokesman, said the insurer needs to account for “increasing costs associated with covering the risks faced by customers” in Texas, including damage from tornadoes, hailstorms and other severe weather.

Insurance profit and loss figures for last year aren’t yet available. But 2012 was a very profitable year for many in the state. Overall, insurers paid out an average 54.4 percent of their premiums to cover property losses, a major improvement over previous years.

A “loss ratio” of 60 percent is considered a good target for industry profitability. State Farm showed a loss ratio of 47.5 percent. Allstate had a 50.8 percent loss ratio, and Farmers was 66.3 percent.

Alex Winslow of Texas Watch, a consumer group, said Texas had the third-highest rates of any state according to a survey by the National Association of Insurance Commissioners last month – trailing only Florida and Louisiana.