State Farm’s 9.1% rate hike in Texas rejected
Two administrative law judges in Texas on Oct. 5 rejected State Farm’s plan to increase homeowner insurance rates, calling the hike too excessive.
State Farm Lloyds Inc. had appealed to the State Office of Administrative Hearings after Insurance Commissioner Mike Geeslin turned down the proposed rate increases last year.
But Administrative Law Judges James W. Norman and William G. Newchurch found State Farm’s proposed 9.1 percent rate hike to be too much. They concluded only a 3.6 percent increase would be reasonable.
“This is an important step as State Farm Lloyds seeks to charge a rate that reflects its increased costs,” said State Farm spokesman Kevin Davis.
The administrative law judges’ recommendations will go to Geeslin, who will issue another decision.
State Farm initially requested a combined 20.8 percent rate increase for homeowners insurance coverage, but Texas insurance officials disapproved. After appealing to the administrative law judges, State Farm withdrew one of the proposed increases and asked only for the 9.1 hike.
The company said an increase is necessary because of the large variety of natural disasters Texas faces.
“This creates enormous potential swings, from year to year, in costs. It underscores the need for long term financial strength to pay losses in the bad years while rebuilding strength in the good ones,” State Farm said in a statement.
State Farm is the largest writer of homeowners insurance in Texas, with 29 percent of the market, said Texas Department of Insurance spokesman Jerry Hagins.
Policyholders were never charged the proposed increases, Hagins said.
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