TDI Orders Homeowners Insurers to File Rates

The Texas Department of Insurance announced that record low loss ratios reported by Texas homeowners insurers in 2004 has prompted the department to order some of the state’s largest homeowners insurance groups to file and justify their rates. The filings are due no later than May 1, 2005.

Overall, the industry had an average loss ratio of 27.6 percent. Loss ratios are the amount of claims expressed as a percentage of the premium. Industry expenses (premium taxes, commissions, overhead) averaged 32.6 percent, resulting in combined losses and expenses of 60.2 percent. This ratio does not include the amounts that prudent insurers will set aside for future catastrophe losses. TDI noted that a single year’s experience does not necessarily constitute a basis for rate making but it is an indication of a market that should be in recovery.

While low losses can be attributed to a variety of factors, 2004 was a favorable year for insurers. Compared to 2003, which had the highest amount of wind and hail losses in the past 20 years, 2004 had few catastrophic storms in the coastal areas and the traditional hailstorm areas of North and Northeast Texas. The state was also spared the devastation caused by hurricanes, as experienced by Florida in 2004.

“While 2001-2003 were years of the perfect storm for insurance losses, 2004 was the year of perfect calm,” said Texas Insurance Commissioner José Montemayor. “Every year poses a new set of risks, and we know that hurricanes and hailstorms will happen again in Texas. Nonetheless, if insurers are benefiting from improved trends, we expect Texas policyholders to benefit, as well.”

“The historic reforms of Senate Bill 14 two years ago have given TDI the ability to order adjustments in rates when market forces do not respond to changing conditions,” Montemayor said. “Some insurers have lowered rates. Consumers now have more options and should shop around. However, if we find that adjustments are needed, we will not hesitate to order them.”

Homeowners groups who must file rates with TDI:

Zurich Insurance Group
Farmers Insurance Exchange
Fire Insurance Exchange
Foremost Lloyds of Texas

United Services Automobile Association Group
United Services Automobile Association
USAA Texas Lloyds

Travelers Property & Casualty Corporation Group
Travelers Lloyds of Texas Insurance Co.
Travelers Personal Security Insurance Co.

Vesta Insurance Group
Texas Select Lloyds Insurance Co.

Nationwide Corporation
Nationwide Lloyds

Chubb & Son Incorporated
Chubb Lloyds Insurance Co. of Texas

Texas Farm Bureau Mutual
Texas Farm Bureau Underwriters

Liberty Mutual Group
Liberty Lloyds of Texas Insurance Co.
Liberty Mutual Fire Insurance Co.
America First Lloyds Insurance Co.

Interinsurance Exchange of the Automobile Club Group
Interinsurance Exchange of the Automobile Club
Auto Club Indemnity Co.

ARX Holding Corporation Group
ASI Lloyds

TDI said State Farm and Allstate were not ordered to submit rates since they are already the subjects of administrative proceedings regarding their homeowners rates.

Topics Carriers Texas Homeowners