An Improving Texas Homeowners Market

The Texas homeowners insurance market is apparently on the rebound, according to data reports filed by carriers with the Texas Department of Insurance.

TDI said the top Texas homeowners insurers reported a loss ratio of 58 percent for 2003.

Loss ratios reflect losses on claims as a percentage of total earned premium. Agent commissions, overhead and other administrative costs are not reflected. If considered, they could add 30 to 35 percentage points to the ratio.

Carriers had loss ratios of 108.6 percent in 2002 and 118 percent in 2001. TDI noted that the 2003 loss ratios did not include the full effect of ordered rate cuts. If the full reductions were factored in, the loss ratios would have been slightly higher but would still show significant improvement.

“This return to competitiveness is due to the reforms of Senate Bill 14, passed by the 78th Legislature in 2003,” Texas Insurance Commissioner Jose Montemayor said. “Those reforms, as implemented by the Texas Department of Insurance, are restoring competition that will benefit Texas homeowners.”

Mark Hanna, a spokesman with the Insurance Council of Texas, said while loss figures are a good sign, the homeowners market has more recovering to do.

“While Texas insurers are finally realizing an improvement in their losses, it’s been a rough road,” Hanna said in an e-mailed statement. “With the uncertainty over new legislation and Texas natural disasters, few companies have rushed into Texas to sell homeowners insurance. Two of our largest insurers either remain on the sidelines as far as selling homeowners insurance to new customers or have recently re-entered the market on a limited basis.”

Noting the record losses in 2001 and 2002 that were “largely attributable to the mold crisis,” Montemayor said, “What these numbers tell us is that stability has returned to the insurance market in Texas. I look forward to continued improvement.”
“Be thankful that homeowner rates don’t fluctuate on a daily basis,” Hanna said. “Home-owner rates generally reflect several years of experience, which helps even out our weather catastrophes and our good times.”

Despite the upbeat news from TDI, some groups say premiums are still too high. The Fort Worth Star-Telegram reported that TDI data show many homeowners’ rates were 40 percent higher in 2003 than in 2000. Still, 2003 rates fell about 4 percent from 2002 levels.
According to consumer groups, such as Texas Watch, the winners of recent legislative initiatives are insurers, not policyholders. Texas Watch maintains on its Web site (www.fixtexasinsurance.com) that homeowners are simply “paying a lot more for a lot less” coverage.