2019 Outlook: Rates, Deductibles Likely to Rise Again in Texas Homeowners Insurance Market

Texas independent insurance agents might want to warn their homeowner insurance customers that premium hikes and/or increases in deductibles could be on the horizon this year.

Homeowners insurers have been filing for rate increases in the state over the past couple of years and that’s going to continue, according to Jim Gavin, Information Services Specialist at the Independent Insurance Agents of Texas.

Speaking at IIAT’s 2019 Joe Vincent Management Seminar in January, Gavin said the homeowners market was stable in 2018 due to it being a relatively mild weather year, at least by Texas standards, but the same could not be said for 2017 and 2016.

Hailstorm damage was significant in Texas in 2016 and 2017 was marked by the devastation caused by Hurricane Harvey.

In 2018, however, the state was fortunate to have had only one major hailstorm that resulted in losses of more than $500 million. In addition, Texas, which averages 134 tornadoes each year, had only 52 reported tornadoes last year, according to the Insurance Council of Texas. Hurricanes also went elsewhere.

To counter their experiences in 2016 and 2017, carriers are continuing to file rate increases, Gavin said. They also have been raising deductibles, partly to help keep the rate increase percentages down.

“I’ve seen indications of rate where carriers need as much as 39 percent of rate in homeowners,” he said. They’re not filing for increases of that magnitude, however, instead they’re going for hikes of less than 10 percent. That’s because in Texas a carrier can increase a rate by 10 percent during any 12-month period without going through a formal approval process, he said. So, some carriers are seeking an overall rate hike of 9.9 percent, while others may be filing for higher rates in some parts of the state and decreasing them in other areas, so that the statewide impact of their rate filing comes in at 9.9 percent.

The growing economy in Texas is also a factor behind increased premiums to a certain extent. Rising property values and growing construction costs will factor into rates such that additional limits may be required at renewal for homeowner policies, Gavin said.

“I think the homeowners market will continue to grow [in 2019] … I would expect rate increases. I would advise my customers to be prepared for deductible increases or both,” Gavin said.

Another thing agents should be on the lookout for in the coming year is a variety of new forms that have been filed in the homeowners market in Texas, Gavin said. Among them are: additional filings for actual cash value (ACV) roof options; cosmetic damage exclusions and an ISO personal flood policy.

The good news for independent agents is that they took a bigger piece of the homeowners insurance market pie in 2017.

“In terms of market share, we as independent agents achieved the highest market share in homeowners that we’ve seen in a number of years,” Gavin said.

Independent agents wrote 26 percent of the market in 2017 and have seen a steady increase each year since 2014, when independent agents’ market share in homeowners stood at 22.4 percent. Some of that growth can be attributed to decisions made by direct writers to reduce their exposures and restrict the writing of new business in certain parts of the state, Gavin said.