State Farm files request with state to raise homeowners’ insurance rates
July 17th, 2009
The Lufkin Daily News
In addition to rising property taxes, Angelina County homeowners are taking another hit this year — higher homeowners’ insurance premiums.
Insurance giant State Farm Lloyds filed with the Texas Department of Insurance on July 15 to increase its homeowners’ insurance rates in Texas by an average of 8.5 percent starting on Oct. 1 for existing customers upon renewal and Sept. 1 for new customers. Angelina County’s increase is below the state average at 5.7 percent. State Farm noted that 350,000 of its 1.2 million customers will see no change or a decrease in their rates as a result of the filing.
“We’ve seen major insurance carriers Allstate and Farmers raise their rates and now State Farm is completing the rate hike trifecta,” said N. Alex Winslow, executive director of Texas Watch, a consumer rights group based in Austin.
State Farm Lloyds called 2008 “the worst catastrophic loss year in Texas history” with hurricanes Dolly, Ike and numerous spring hail storms across the state. The result: claims totaling $1.4 billion. Through May of 2009, State Farm paid $572.8 million in weather-related claims, already ranking 2009 second only to 2008 as the most costly of the last five claim years even prior to the start of hurricane season, the company said in a press release.
“Having the financial ability to keep our promises and pay claims is our priority. This rate increase is a step toward rate adequacy,” said Senior Vice President Mike Wey.
Winslow said he believes that insurance carriers are going to be looking for any reason possible to increase rates and reduce coverage.
“We’ve already paid for Hurricane Ike in 2008 premiums,” he said. “Insurance premiums are designed to pay for risks going forward not to recuperate part of last year’s losses. To suggest that insurance companies need to raise rates to pay for Ike damage is disingenuous.”
He added that lawmakers should have passed legislation to help homeowners this session, but didn’t to make it a priority — something made evident when the legislature put voter identification laws before insurance reform on the agenda, Winslow said.
“I don’t know how important voter ID is to you, but we’re in the middle of an economic crisis the likes of which we haven’t seen (in a number of years). Insurance reform should have been a higher priority but they didn’t do that this session,” he said. “Because of their failure to act it appears insurance carriers have become emboldened.” State Rep. Jim McReynolds (D-Lufkin) said he would liked to have heard insurance reform legislation this session as it would have been “warmly welcomed by most Texans.”
“We’re spending up to 25 percent of our family income on insurance. Texas is one of the highest in the nation for insurance premiums and it hurts all of us,” McReynolds said. “It will be one of the things we take up next time, without a doubt. We’ll make some radical changes to get those premiums down in the next session.”
State Farm Lloyds is currently operating at a rate deficit of 13.5 percent, the company said in a press release. In 2008, the company reported an after-tax net loss of $549 million, compared to a $5.46 billion net income in 2007.
“These big companies need to make a profit to stay in business, but don’t feel sorry for them,” McReynolds said of State Farm’s $542 million net loss in 2008 compared to its $5.46 billion net income in 2007. “It’s not the local mom and pop insurance agencies that are causing this but instead these big corporate underwriters.”