Homeowner Rate Hikes Go Unchallenged by Texas Commissioner

Texas’ insurance commissioner has allowed the three largest home insurers to impose significant rate hikes on many policyholders despite the objections of a state consumer advocate.

Insurance Commissioner Julia Rathgeber can reject any new rates that are deemed excessive and order refunds. But her office has taken no action since learning of the increases late last year, and it’s unclear whether she will do so.

State Farm policyholders have seen a nearly 10 percent increase this year, which follows a 20 percent increase in 2013. Farmers raised its rates an average of 14.9 percent early this year while Allstate hiked rates by 6.5 percent.

Rathgeber’s office said that the rate increases are still under review, according to The Dallas Morning News. But the higher rates have been appearing on renewal notices since the start of the year.

The three companies have an overwhelming share of the homeowners insurance market in Texas with more than 2 million combined customers.

The companies say the rates are justified because of destructive weather patterns in Texas, including frequent hailstorms.

Patti Kelly, a State Farm spokeswoman, said the company had little choice but to seek an increase. She said State Farm is spending $1.11 for every dollar collected in premiums to take care of claims and business expenses.

“The costs of repairs we pay to help customers recover from unexpected (weather events) continue to rise, and have for some time. Additionally, the volume of claims and cost per claim are increasing,” she told the Morning News.

Luis Sahagun, a spokesman for Farmers, said the insurer needed to adjust its rates to account for the “increasing costs associated with covering the risks faced by customers” in Texas. That includes tornadoes and hailstorms.

“The costs associated with paying for losses resulting from fires and water damage have also kept growing,” he said.

But Public Insurance Counsel Deeia Beck has objected to the increases as “excessive.”

She said State Farm’s rates were excessive and based on projections that “exaggerate future expected losses.” Further, the company is citing unreasonably high expenses to justify its new rates, she said.

Farmers, meanwhile, is trying to reap a “greatly excessive” profit in Texas, she said. That includes substantial profit generated from management contracts between Farmers’ holding company and its subsidiaries.

Beck filed documents protesting the increases in January. She said in mid-September that she’d received no reaction from the Department of Insurance.

“The rate increases do not meet legal guidelines under the Texas Insurance Code,” she said. “I had thought that we would hear something (from the commissioner) by now.”