Texas homeowners pay highest insurance premiums for second year in a row

The following article was published in the Dallas Morning News on January 9, 2012:

Texas homeowners pay highest insurance premium for second year

By Terrence Stutz

Texas homeowners paid the most expensive insurance premiums in the country for the second year in a row, although average premiums in the state have not been increasing as sharply as in other states, according to new figures from the National Association of Insurance Commissioners.

The average annual cost of the most commonly sold policy in Texas was $1,511, which is well above the national average of $880 and about $50 more than in the state with the second-highest rates, Florida. Eight states had average premiums above $1,000 a year, and some of those have seen dramatic increases in recent years.

While Texas rates were up 3.5 percent ($51) from the previous year, the national average was up 11 percent as insurance rate increases exceeded the rate of inflation in several states. The figures were based on premiums collected in 2009, the most recent year for which figures were available.

Consumer groups warned that Texas homeowners should not expect any relief soon, while industry representatives noted that premiums in the state are not rising as fast as in other states.

“For as long as anyone can remember, Texas has had among the highest insurance rates in the nation,” said Alex Winslow of Texas Watch, a consumer group active in insurance issues.

“The flip side is that coverage for most homeowners is getting slashed while their rates keep going up. With higher deductibles, expanded exclusions and a growing number of junk policies, Texas policyholders are being forced to pay more for less,” he said. “It’s like being forced to pay Cadillac prices and getting stuck with a clunker.”

Winslow said the situation would not improve until the Legislature beefs up laws regulating insurers and the commissioner of insurance “gets tough” with companies.

Mark Hanna of the Insurance Council of Texas said the premiums listed in the study reflect how catastrophic weather events can affect homeowner rates. He noted that several states with higher premiums were along the hurricane-prone Gulf Coast or in areas that experience a large number of destructive storms.

“The NAIC figures [based on 2009 premiums] came one year after Texas was hit by three hurricanes, which included Hurricane Ike, the costliest storm in Texas history,” Hanna said.

Jerry Johns of the Southwestern Insurance Information Service, an industry group, said the slower increases in insurance rates in Texas indicate that the market has become more competitive as more companies are selling policies.

But he cautioned that a recent type of weather-related catastrophe — wildfires caused by drought conditions — could become a significant factor in premiums.

For example, insured loses from wildfires in Central Texas last year — in the Bastrop area — amounted to nearly $250 million. Since November 2010, almost 4 million acres have burned and 2,700 homes have been destroyed because of wildfires, according to the Insurance Council of Texas.

Some industry officials have questioned the validity of the NAIC premium comparisons, contending that they do not reflect the variety of homeowners policies sold in Texas — many of which are less expensive than the type used in the comparison.

The so-called HO-3 is the most widely used policy in Texas, according to the NAIC study. Across the country, four out of five policies sold are the HO-3 variety.

Renters insurance in Texas averaged $222 a year, according to the NAIC study. That is slightly higher than in California ($218) and New York ($213). The national average was $184.