After ‘03 state overhaul, study finds rates stable, other states rising faster
Texas homeowners still pay far more for insurance than those in any other state, even after the overhaul passed by the Legislature four years ago that was supposed to lower rates.
A new study from the National Association of Insurance Commissioners showed that the average annual premium in Texas for the most common homeowner policy was $1,372 a year, considerably more than the nationwide average of $764.
Louisiana was the second-highest at $1,144, and Florida was third at $1,083. The premiums in all other states were less than $1,000.
But the study also showed that other states are closing the gap. Many of their rates have seen double-digit increases in recent years, while Texas rates have stabilized. The study is based on premiums collected in 2005.
Texas has historically been among the most expensive states for home insurance, in large part because of its pattern of severe weather conditions such as hurricanes, hailstorms and tornadoes. A rash of mold claims in the early part of the decade caused even higher rates.
That led state lawmakers to pass a major insurance reform law in 2003, with promises to consumers that they would get some relief in the cost of home insurance.
Consumer groups said Tuesday that the figures show homeowners are still waiting, while insurance industry groups said the market has improved considerably with many Texans paying lower premiums than they did a few years ago.
“We have a couple of years of post-reform experience in Texas, and they show we’re heading in the wrong direction on insurance rates,” said Alex Winslow of Texas Watch, a consumer group active in insurance issues.
“Our closest neighbor, Louisiana, doesn’t even come close to Texas premiums, particularly after a year in which Hurricane Katrina ravaged New Orleans. Florida is a riskier state for the insurance industry than Texas, but that is not reflected in this comparison.”
Mr. Winslow said the data confirm what most homeowners have been experiencing the last several years - rising insurance premiums and reduced coverage.
“This just provides more evidence that the insurance commissioner needs to approve all rates before they go into effect,” he said.
Jerry Johns, president of Southwestern Insurance Information Service, said that is exactly what Texas does not need - more restraints on insurers.
“This is not yet a competitive state for homeowners insurance,” Mr. Johns said. “We’re not seeing a lot more companies coming into Texas, and the companies that currently are here are not enthusiastic about expanding their business.
“Allowing companies more freedom to use a variety of products and to adjust their rates would help, but it seems to be the philosophy of state regulators that that will not work.”
Regarding the state’s status as the most expensive home insurance market, he said, “Texas is number one and will continue to be number one as long as we have the type of weather we have now, which is very severe.
“Companies have to have money to pay claims, which can run into billions of dollars annually.”
A spokesman for the Insurance Council of Texas asserted that when 2006 and 2007 figures are finalized, they will show that home insurance rates in Texas have gone down.
“Our rates have been dropping since 2004,” said Mark Hanna of the insurance council. “Texas Department of Insurance quarterly reports show that, and Texas insurance agents in the field will show you that.”
He argued that the national study does not show what has been happening the last two years: a less expensive market, with the exception of Harris County and counties along the Gulf Coast. Most insurers have been increasing rates in those areas.
Florida, Louisiana and Mississippi could have higher insurance rates than Texas, Mr. Hanna said, but that won’t be reflected until the next report from the national association.
The study did show that rates shot up 16.6 percent in Florida in 2005, after several hurricanes hit the state, but the average premium there was still nearly $300 less than Texas.
Texas had average increases of 0.7 percent in 2005 and 2.6 percent in 2004. Nationally, rates increased 4.8 percent in 2005 and 9.1 percent in 2004. So the gap between Texas and other states narrowed in those two years.
The average rate in Texas was $1,328 in 2003 - the year the insurance law was enacted. Two years later, the average was $1,372, despite promises by legislative leaders that insurance rates would drop once the overhaul was in place.
Krista Piferrer, a spokeswoman for Gov. Rick Perry - who signed the law - noted that the study does not take into account the premiums charged last year and this year.
“The governor believes that the reforms took great steps in making sure that homeowner rates are kept low and that homeowners have the ability to choose the type of coverage they desire,” she said.
Jerry Hagins of the Texas Department of Insurance said the state-by-state comparisons did not take into account the unique insurance policies used in Texas.
Texas includes catastrophe funds, which California and Florida exclude, he said, making it appear that Texas rates are higher.
Found here.
Sphere: Related Content
