Higher Homeowners Insurance Rates on the Horizon in Texas

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Two insurers that together hold the lion’s share of the homeowners insurance market in Texas are either in the process of raising rates or have filed for increases.

Insurance Commissioner Eleanor Kitzman on Dec. 1, 2011, authorized State Farm Insurance to switch many of its 1.2 million homeowner policies to a higher deductible. Kitzman also allowed an average 10 percent increase in homeowner rates. State Farm says higher discounts will reduce the actual increase to an average 1.4 percent.

The new minimum deductible is 1 percent of a home’s insured value, instead of a flat rate. Critics say a higher minimum deductible means less coverage.

New customers have paid the rates since Oct. 15, 2011. Existing policyholders saw the changes Dec 1.

State Farm has been embroiled in a long-running dispute with Texas regulators, including former Commissioner Mike Geeslin, over alleged overcharges for homeowners insurance.

The Texas Department of Insurance in November 2009 ordered State Farm Lloyd’s (SFL) to refund a total of $310 million to policyholders after finding that the insurer had overcharged customers beginning in 2003. State Farm had been told in 2003 to cut its rates by 12 percent but the company sued the department and appealed. The case has been in limbo since then.

In April 2011, a district judge in Austin ruled that State Farm must refund nearly $350 million to its policyholders. The $350 million includes interest payments. The company appealed and a three-judge panel of the 3rd Court of Appeals in Austin took the case under advisement in mid-December.

Allstate Insurance also has asked Texas regulators to allow the company to raise homeowner rates by nearly 10 percent for some customers.

The filing with TDI seeks a 5.7 percent average statewide increase for customers of AllState Texas Lloyds.

Policyholders with Allstate Fire and Casualty could face an increase of an average 9.8 percent. The Allstate subsidiaries cover about 585,000 Texas homeowners.

The higher rates, subject to regulatory review, would take effect Jan. 26 for current customers.