Texas insurance rate hikes approved by regulators

by Matthew Glans on March 23, 2012

The Texas Department of Insurance recently approved several homeowners insurance rate increases that were submitted by Allstate Fire and Casualty and Allstate Texas Lloyds. These rate increases, according to Allstate corporate relations spokesperson Kristen Beaman, are necessary due to rising loss costs, which are rising faster than premiums.

From Insurance Journal:

Homeowner insurance rate hikes filed in Texas by Allstate Insurance in December 2011 have passed muster with Texas insurance regulators.

The company made a rate adjustment of 5.7 percent statewide for Allstate Texas Lloyds (ATL) policyholders effective for renewals processed beginning Dec. 12, 2011, according to Allstate corporate relations spokesperson Kristen Beaman.

Rates for new Allstate Fire and Casualty (AFCIC) policyholders in Texas increased by an average 9.8 percent on Dec. 12, 2011, and for existing customers effective Jan. 26, 2012.

Despite claims by some  consumer advocates that insurers are only interested in raising rates and maximizing profits, the reality is that the rates charged by most insurers are not driven by greed or a desire to extract excessive profits, but by legitimate costs and exposure to risk. Insurers need to be able to react to risk and charge premiums that allow them to remain solvent. This is true for all insurers.

Blaming insurers for high rates and not allowing them to adjust their rates for risk and profitability is a political maneuver that ignores the realities of the insurance industry. Allowing insurers to set rates actuarially, based on risk instead of political pressures, would help ensure the solvency of current insurers in the state and be another step towards attracting new companies to Texas.

By allowing these rate increases, Texas is allowing Allstate to properly prepare itself for future losses. Given the increased risk of major windstorm loss along the Texas coast, this is sound policy.

ATL has around 400,000 policyholders in Texas, which represent around 65 percent of Allstate’s homeowner customer base in Texas. Beaman said the rate hike will result in an average annual increase of $68 per customer.

For AFCIC customers, the annual impact per policy is $124. Allstate Fire and Casualty has 185,000 homeowners policies in place in Texas, representing 35 percent of Allstate homeowners customers.

AFCIC is also deepening its multi-line discount for customers who have both home and auto coverage with Allstate. This discount will now be 26 percent.The rate change for ATL is the first in 12 months. Allstate Texas Lloyds increased rates by 5.4 percent effective Jan. 20, 2011. The current rate increase for AFCIC is the first since December 2010, Beaman said. At that time, rates for homeowners covered by Allstate Texas Fire and Casualty went up by 9.7 percent.

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