Texas Department of Insurance

Straight Talk

Update on State Farm Homeowners Insurance Rate Increase

On March 31, 2008, the Texas Department of Insurance (TDI) approved an average 2.8% increase in State Farm’s homeowners insurance rate.

The State Farm filing includes discounts for some customers (e.g., multiple lines customers with home and auto policies).

State Farm had originally filed for an average statewide increase of 20.8%, which was disapproved by TDI.   State Farm challenged the disapproval but reduced the filing to 9.1% before the hearing. In a subsequent challenge to the disapproval, administrative law judges concluded that the 9.1% rate was excessive and that a 3.6% statewide average increase was likely justified. State Farm filed for a 3.6% average increase, but after discussions with TDI, further reduced the filing to 2.8%

The current rate increase does not resolve the ongoing dispute over a 12% rate reduction ordered by TDI in 2003, nor does it preclude additional or future regulatory action by TDI.

Policyholders should be aware that rates may vary from the statewide average in some areas of the state. TDI encourages consumers to shop and compare when seeking to buy or renew insurance coverage.

It pays for consumers of insurance to be savvy and shop for the coverage that best suits their needs and pocketbook. But, when the insurance market fails to meet the needs of consumers, or someone isn't treated fairly, the Texas Department of Insurance (TDI) can help. In 2006, TDI helped consumers collect over $56 million in additional claims payments and refunds; took over 400 enforcement actions; and collected close to $31 million in fines, penalties and restitution.

Consumer Protection

TDI provides assistance to consumers directly through its Consumer Protection division, which operates a toll-free information line (1-800-252-3439), administers a complaint resolution system, and provides an extensive array of consumer publications available on request at no charge. Consumer Protection helps consumers recover millions of dollars in refunds and additional claim payments each year.

In Fiscal Year 2006, TDI:

• responded to approximately 995,000 consumer inquiries via phone, mail email, and the Internet;
• resolved 24,122 complaints; and
• returned over $56 million to consumers in the form of additional claims payments and refunds.

Legal and Compliance/Fraud

In addition, TDI works for consumers through its Legal and Compliance division and Fraud Unit by enforcing the state's insurance laws, sanctioning wrongdoers and ordering fines and restitution where applicable. 

TDI may fine or penalize agents and companies that delay payment of claims, misrepresent policies, fail to provide required discounts to policyholders, or engage in other unfair and unlawful practices. 

In FY 2006, TDI's Legal and Compliance Division:

• ordered 89 license revocations;
• formally denied 26 license applications;
• issued 248 orders assessing fines and/or restitution;
• assessed fines totaling $8,671,183; and
• ordered restitution to consumers which totaled $24,816,099. 

Some of the larger fines assessed in FY 2006 included:

• United HealthCare International Insurance Company was fined $4,000,000
• Employers Resource Management Company was fined $1,000,000

TDI's Insurance Fraud Unit investigates, prepares and refers cases for criminal prosecution in district court. In FY 2006, TDI's Fraud Unit:

• received 9,712 reports of insurance fraud;
• opened investigations on 448 cases;
• referred 182 cases to prosecutors that resulted in 114 indictments, 98 convictions and fines, penalties and restitution totaling $4,366,275.

Disaster Assistance

In addition, TDI assisted consumers in north central Texas following wildfires in the region and in El Paso County following flooding in the area.  TDI also developed Internet resource pages following both disasters.

How Texas Compares to the Rest of the Nation

Homeowners insurance in Texas is a $4.5 billion industry. Historically, homeowners insurance in Texas has been more expensive than in other states due to the size of the state and its exposure to severe weather conditions - specifically, hailstorms and coastal windstorms. In fact, wind and hail losses account for 84 percent of the difference in premiums paid by Texans and those paid by others around the U.S.

Don't Confuse Rates with the Premiums You Pay

A "rate" is the base price for insurance, just like the cost of gasoline is based on the price per gallon. There are other factors that affect premiums, or the final amount you pay, besides rates. For instance, changes in deductible, the amount of insurance needed to replace your home in the event of a loss (this usually goes up each year, due to increases in construction costs), and the types of coverage you buy will all affect the final premium you pay.

Consumers: It Pays to Shop

Rates and coverage can vary by company in Texas.  Consumers can often save hundreds of dollars by taking time to shop around for the coverage they need.  To compare price estimates for companies that sell most of the homeowners insurance policies in the state, view TDI’s Homeowners Insurance Price Comparisons at Helpinsure.com

To compare policy coverages, go to our Helpinsure.com or the Office of Public Insurance Counsel website:
www.opic.state.tx.us/homeowner.php

For more information contact: