Never a Dull Moment

It seems there’s never a dull moment in the Texas homeowners market. Insuring homes has always been a gamble here, what with the state’s notorious propensity for attracting wild weather. But since the Ballard mold case hit Farmers Insurance Group with a $32 million judgment in 2001, agents and homeowners may have felt they’ve been on a theme park ride from heck. Insurers pulled out, rates went through the roof and underwriting constricted such that some property owners felt they were lucky to get insurance at any price. Then the Farmers award was significantly reduced on appeal and the Texas Department of Insurance began to allow increased flexibility in the forms insurers could use. The market seemed to breathe a tentative sigh of relief.

The legislature came to Austin last January and threatened all kinds of outrageous actions to avenge and protect their constituents, not the least of which was a proposed across-the-board rate rollback. However, they wrapped up the regular session in June with a compromise, Senate Bill 14, that most observers thought was pretty reasonable. It promised to modernize the state’s regulatory process by moving to a file and use system, gave the insurance commissioner more authority to approve or disallow rates, and required companies to file their rating methodologies for review by TDI.

Now, Insurance Commissioner José Montemayor, in a not unexpected move, has ordered most of the top 32 homeowners insurance providers to cut their rates, in at least one case by 31 percent. Needless to say, carriers and their representative associations are not happy about it. Dire warnings of another crisis in availability are being issued right and left. However, Montemayor cautioned in March, when he presented the results of his initial review of homeowners rates to the legislature, that rates for some companies were excessive. When SB 14 passed, TDI estimated that homeowners rates would drop by as much as 12 to 18 percent on average as a result of the reforms contained in the legislation. Not all of the 32 carriers reviewed were ordered to change their rates. Eight are not required to modify their rates at all, five are facing decreases of 20 percent or more and the rest were ordered to lower their rates by 18 percent or less.

Carriers have the opportunity to appeal the order and Farmers has already announced that it will. It remains to be seen whether other companies will follow suit. Until then, agents and homeowners continue to play the waiting game. But just as all families need down time at home after periods of hectic activity, the homeowners market needs some dull time—a boring, non-eventful period with rate consistency and security. Here’s hoping we get it.