State Farm Files for Auto, Home Rate Changes in Texas

State Farm Insurance announced it has submitted several filings to the Texas Department of Insurance as it prepares to implement rate adjustments in the state. The company is reducing auto rates but increasing homeowners rates. It also plans to offer a bigger discount for homeowner’s customers who insure both their home and auto with State Farm.

The company is reducing auto insurance rates in Texas by an average of 2.6 percent, beginning July 17. According to State Farm, this represents an annual savings of $68 million for its Texas auto insurance customers.

“Our auto claims costs have gone down,” said Mike Wey, senior vice president of State Farm’s Texas zone. “We expect this trend to continue and are pleased to be able to reduce rates for the drivers of the three million cars we insure in Texas.”

This filing will be the fourth auto rate reduction in two years for State Farm’s Texas auto policyholders.

According to Jerry Johns, president of the Southwestern Insurance Information Service, Texas in 2005 “was among the top ten states with the largest auto insurance decrease at 5.8 percent.”

In addition to the auto rate filing, State Farm has submitted two filings for homeowners insurance rates.

One homeowners rate filing, for a statewide average increase of 9.1 percent, is due to rising reinsurance costs. The reinsurance filing includes the multi-line discount increase. The company currently offers a 5 percent discount on homeowners insurance to multi-line customers. The new filing increases the amount of that discount by an additional 7 percent—for a multiple-line discount amount of 12 percent. This represents an annual savings of $75 million dollars for the 81 percent of State Farm’s Texas homeowners customers who also have their autos insured with State Farm.

The company said the reinsurance filing will primarily impact the coastal counties so that premiums better match the risks presented.

“Insurance companies pay premiums on reinsurance, just as individuals pay premiums for the insurance policies they buy,” said Wey, “The cost of catastrophe reinsurance has gone up worldwide in anticipation of another active hurricane season.”

“Reinsurance for insurers writing homeowners has increased 100-300 percent, largely because of the vast numbers of people migrating to coastal areas and the expected severe weather throughout Texas. Reinsurance costs for insurers can account for a minimum of 30 percent of a person’s premium dollar,” Johns said.

The second homeowners rate filing is for a statewide average increase of 10.7 percent and is based on the projected costs of future anticipated claims and expenses.

Rate changes for individual customers will vary, depending on a variety of factors.

The homeowners rate changes will take effect on Aug. 1 for new policies. For current homeowners policies, the change will take place at renewal beginning Oct. 1.

State Farm said it decreased rates by a net 10.2 percent when it implemented its own HO-W policy form in Texas, and has not changed its base homeowners rates since January 2003. Meanwhile, the costs for construction materials and labor and the costs to replace homes have continued to increase.

Although in Texas insurers may set rates under a file and use policy, the Texas Department of Insurance plans to review State Farm’s filings, according to the Associated Press. The department ordered the company to reduce rates in 2003, along with many other homeowners insurers, but State Farm has fought the order in court since then and refused to lower its rates while contesting the order.

“They are still fighting us in court. Their policy holders have not seen any relief and then they come in and file a rate increase on top of that,” TDI spokesman Jim Hurley told the AP. “We are going to examine this filing very closely.”

Topics Texas Auto Reinsurance Homeowners