Texas Insurance Commission will not oppose Farmers Insurance rate increases

AUSTINState Insurance Commissioner Eleanor Kitzman has decided not to oppose an average 15 percent rate hike that Farmers Insurance imposed on its homeowners customers this fall, the second time this year that the company has increased premiums in Texas.

The higher rates affect 520,000 Farmers customers who have either a Texas Family Home policy or a Next Generation Homeowners policy. The rates went into effect for new policies and renewals beginning in September.

“State law only allows us to disapprove rates when they are excessive, unfairly discriminatory or inadequate,” Jerry Hagins, a spokesman for the Texas Department of Insurance, said Friday.

Consumer advocates argued that the premium hike is excessive and that Kitzman’s decision continues a pattern of favoring insurers’ decisions to increase rates.

Alex Winslow of Texas Watch, a consumer group active in insurance issues, said approval of the higher rates demonstrates the commissioner’s “complete lack of interest” in protecting consumers.

“Her track record is clear. She hasn’t met a rate increase she didn’t like, and Texas policyholders are the ones paying the price,” he said, citing a string of premium hikes by major insurers that drew no objections from Kitzman.

Referring to the Farmers increase, Winslow said, “There is absolutely no justification for an increase of that size in such a short period of time.”

Farmers customers have already seen one premium boost this year, a nearly 10 percent hike that was imposed in March.

Luis Sahagun, a spokesman for the company, said when the rate plan was filed that higher premiums were necessary because of increasing costs in paying claims, primarily for weather-related damage such as hail and wind damage to roofs throughout the state.

Claims costs associated with weather-related risks in the state, such as tornadoes, strong winds and hail, as well as claims resulting from water losses and fires, have continued to increase significantly over the past several years,” he said.

Sahagun pointed to data from the National Weather Service that indicated there were 1,341 severe weather reports in Texas through the middle of this year. For all of 2011, there were 1,537 severe weather events.

Further, he noted, Texas led the nation with an average of 150 tornadoes per year from 1981 through 2010.

In June, the Dallas area was hit by severe hail storms that caused nearly $1.2 billion in damage. Texas also had a record-breaking year for wildfires in 2011, with nearly 4 million acres burned.

Under the state’s file-and-use system, auto and home insurers in Texas can raise rates once they have notified the insurance department, although the agency reviews all rate changes and can challenge any increase it considers excessive or unfairly discriminatory.

A county-by-county analysis of the higher rates by the insurance department shows that homeowners in Dallas will pay 15.9 percent more for a Next Generation policy and 13.8 percent more for a Texas Family Home policy.

Rate increases in Collin, Denton and Tarrant counties will range from 14.6 percent to 19.3 percent.

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source: Dallas Morning News


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