Texas insurance officials on July 21 rejected proposed homeowner rate increases by State Farm, the state’s largest home insurer.
State Farm had filed for a pair of statewide rate increases on May 31: a 9.1 percent boost to cover costs related to reinsurance and a second 10.7 percent average hike to cover projected claims and losses.
The increases were calculated as a statewide boost, but most of the customers who would have been affected live in Texas’ coastal counties, company officials said.
Insurance Commissioner Mike Geeslin determined the rate hikes to be excessive.
“We find TDI’s decision disappointing and puzzling,” said State Farm spokeswoman Sophie Har-bert. “It doesn’t seem to take into account what’s happening in the marketplace. Companies have to be able to charge enough to offset their loss. That’s good business.”
Harbert said State Farm would consider whether to appeal the ruling and ask for a hearing on its request.
She said it was too early to tell if the decision would force the company to cut back on the number of policies it writes in Texas.
State Farm was ordered to reduce its rates in 2003 but has not done so while it fights the order in court. Company officials have defended their rates as fair and competitive.
Alex Winslow of the consumer advocacy group Texas Watch, was critical of State Farm’s original rate filing. He said customers should be “cautiously optimistic.”
“This is only good news if TDI follows through and forces State Farm to not only reduce its current rates, but pay back every penny its owes,” Winslow said.
But Jerry Johns, president of the Southwestern Insurance Information Service, suggested the decision could ultimately hurt consumers in a market with a shrinking number of providers.
“Insurers are fleeing the Texas market because they simply do not have the rates to pay claims,” Johns said, adding that since 1999, the number of companies writing homeowners policies in Texas has fallen from 380 to 120. “That is not good for consumers and should send a wake-up call to Commissioner Geeslin,” Johns said.
c:Copyright 2006 Associated Press. All rights reserved.
Topics Texas Pricing Trends
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