On Average, Texas Homeowners Rates Are Down, Agents Group Says

Reduction Is in Cost per $1,000 in Property Value

There’s a common perception that homeowners insurance rates in Texas go up and up, and never come down. That’s not necessarily true, however, according to the Independent Insurance Agents of Texas. They say that when studied on a cost per $1,000 of property value, homeowners premiums have fallen since 2002.

IIAT examined Texas Depart-ment of Insurance data on homeowners rates from 2002 through 2008 and came up with a state-wide average premium cost per $1,000 of property value for the study years, explained Jim Gavin, IIAT’s continuing education manager. Though the resulting figures aren’t “actuarially precise,” they can be used as a guide, he said.

While there were slight increases or decreases in the rate per $1,000 year to year from 2002 through 2008, the overall effect was a drop in the percentage of premium cost versus the value of property covered.

“The average rate for all the properties written in 2002 was $8.65 per $1,000,” Gavin said. “That continued to drop all the way through 2008, when the average rate for all homeowners in the state was about $6.35 per $1,000 of value. So if you had written $150,000 in homeowners value in 2002, using the average rate in the state that would have run $1,284. By 2008 that premium was $952.”

Texas homeowners may not be actually seeing a downward trend in their premium total, however, because during that same period of time home values have risen. In all years except 2008, property values increased on average statewide.

“The biggest driver of the cost of the homeowners pricing in the last five or six years has been the increased cost in the dwellings,” said Lee Loftis, IIAT’s director of government affairs. “We have flourished in Texas. Everybody knows that until this year we’ve seen a substantial increase in the replacement cost of dwellings, so therefore we’re going to have an increased cost in the pricing” of homeowners coverage.

Loftis said the group will use this information in 2011 when the legislature meets again.

During the 2009 legislative session it was often repeated that Texas has some of the highest premiums in the country. Mainstream media and lawmakers relied on data from the National Association of Insurance Commissioners to reach that conclusion. It’s a faulty one however, Gavin said, because as the NAIC itself acknowledges, the data for Texas is skewed.

“The reason for that is that in every other state the ISO HO-3 represents about 80 percent of the market for all homeowners,” Gavin said. “In Texas it only represents about 30 percent. … In another state you might be looking at a really representative number for a homeowners premium; it’s not necessarily representative for Texas.”

Paul Martin, IIAT’s director of education, said by the group’s calculations, homeowners rates on a cost per $1,000 of value basis have actually dropped more than 26 percent from 2002 through 2008.

Gavin, Martin and Loftis presented the results of their study during the IIAT’s Joe Vincent Management Seminar on Jan. 31.

Topics Trends Texas Agencies Pricing Trends Homeowners Property