Auto policies have become costlier as well, up an average of 11 percent
for the 53 largest insurers in the metropolitan area. Until this year,
auto premiums had been more stable than homeowners insurance costs.
The rate figures vary significantly from company to company in both
lines of insurance. But the average increases are large in comparison
with inflation. From 2008 through the middle of this year, the
cumulative rate of inflation in the U.S. was 10.5 percent. Auto and
home insurance rates have increased almost as much in just the past
year.
Insurance industry representatives cited higher costs for replacing
roofs and repairing cars, driven in part by the continued high price of
oil, a precursor to many building and repair materials. They also
pointed out that consumers can cut their insurance costs by taking
advantage of various discounts, such as having a security system in
their home or vehicle.
There are signs that the rates are becoming contentious: The state’s
public insurance counsel, charged with protecting consumers, has
objected to price hikes by the state’s three largest home insurers,
State Farm, Farmers and Allstate. Officials with all three companies
have expressed confidence that their rates are justified by costs.
Consumer groups said the premium increases show that state regulators
lack the tools they need to keep prices at a reasonable level.
“These steep rate increases are just more evidence that the market is
broken,” said Alex Winslow of Texas Watch, a consumer group active in
insurance issues. “Every year, rates keep going up and up while
coverage options get cut. Texans rightfully expect a reasonable value
for their insurance. But Texas homeowners and drivers keep paying more
and getting less.”
Winslow said that regulators and lawmakers too often “make excuses for
out-of-control insurance companies.”
Industry spokesman Mark Hanna of the Insurance Council of Texas said
the Dallas area continues to be a magnet for damaging wind and
hailstorms, which he called a big factor in the “upward pressure” on
homeowner rates.
“Two years ago, D-FW experienced two of the costliest hailstorms on
record, totaling $1.6 billion,” Hanna said. “Other storms since then
have destroyed millions of dollars of property in Granbury, Cleburne
and, most recently, Denton.”
He noted that the cost of replacing roofs is increasing as the price of
asphalt shingles — tied to the price of oil — steadily rises.
On auto rates, several factors are involved. But Hanna pointed to
technological advancements in today’s cars that translate into a higher
cost of replacing such parts as sunroofs and backup cameras. In
addition, auto paint and additives — also linked to the price of oil —
have seen higher costs.
Public Insurance Counsel Deeia Beck, whose office represents consumers
in matters before the Texas Department of Insurance, said she was not
surprised by the upward trends in premiums — which, she added, are
unjustified in many cases.
Earlier this year, Beck’s office filed objections with the department
against hefty premium hikes imposed by the big three home insurers in
the state — Allstate, Farmers and State Farm. Farmers raised its rates
the most — an average of 14.9 percent — while State Farm rates
increased 9.8 percent and Allstate 6.5 percent.
Beck argued that the companies exaggerated future expected losses to
justify their “excessive” rate hikes.
State Insurance Commissioner Julia Rathgeber has yet to act on the
objections. It’s been rare recently for commissioners to reject such
hikes, even when they reach double digits.
Department officials say the rates of all three companies are still
under review six months after they were first implemented.
Policyholders will continue to see the increases on their renewals
through the remainder of the year.
Consumer advocates pointed out that the recent rate jumps come after a
year in which insurers saw handsome profits in Texas.
Overall, home insurers paid out an average 44.8 percent of their
premiums to cover property losses in 2013. That was a sizable
improvement from the previous year, when companies had to use 54.5
percent of premiums to pay for losses. A “loss ratio” of 60 percent or
lower is considered a good target for profitability, and almost all
large companies hit that benchmark in 2013.
The 2014 rate comparisons gathered by the insurance department showed
that all three insurers were near or above average in their homeowners
policies.
In one ZIP code in North Dallas, Allstate was slightly below the
$1,600-a-year average for a typical $150,000 brick home. Farmers was
slightly above the average, while State Farm was about $1,000 more than
the average premium. Those patterns held in other ZIP codes that were
examined in the Dallas-Fort Worth area — although Allstate rates were
significantly below average in some areas.
In auto insurance, the three insurers were more competitive, with
Allstate and Farmers having below average rates and State Farm pricing
its policies near the average. All three have separate subsidiaries
that sell more expensive polices to drivers that are considered higher
risk — including those with previous accidents or poor credit scores.
Follow Terrence Stutz on Twitter at @t_stutz.
AT A GLANCE: Getting the best deal on home insurance
Some tips for how to get the best deal on homeowners insurance:
Decide what you need: Examine coverages and coverage amounts.
Shop around: Rates vary widely among companies. Ask several for
different rates, but make sure you’re asking about the same coverage.
Deductible: Choose the highest deductible you can afford, because
you’ll lower your premium.
Discounts: Ask an agent which ones you might qualify for.
Beyond price: Look at other factors, including a company’s financial
rating, record of dealing with consumer complaints and the status of
licensing by the state.
Setting homeowner premiums
Age, location and condition of the house: The older or worse condition,
the higher the cost. Weather and crime history in your area also will
have an effect.
Construction materials: Insurance for brick homes is cheaper than for
frame homes.
Fire protection: The better the fire services in your area, the better
the rate.
Claims history: The more you’ve filed, the higher your premium.
Credit score: Companies are allowed to use it but can’t refuse your
business based solely on your credit history.