Home insurance hikes prompt calls for investigation

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Home insurance hikes prompt calls for investigation

From staff and wire reports

Homeowners statewide are seeing huge increases in insurance premiums,

leading to calls for investigation.

The three companies that dominate the homeowners insurance market in Texas -

State Farm, Allstate and Farmers - have increased their rates by an average

of 30 percent to 50 percent in the past six months. Some Texans have seen

even bigger increases, depending on where they live.

The increases have become an issue in this year's gubernatorial campaign,

and Gov. Rick has asked the attorney general to investigate. The state

Office of Public Insurance Counsel has also called for an investigation.

" In many cases the premiums are escalating at what I believe to be excessive

levels, " said Rod Bordelon, who heads the counsel's office. He said

homeowners hit with excessive increases should file complaints with the

Texas Department of Insurance.

Officials for all three companies cited the same reason for the rate

increases: higher costs because of a recent deluge of expensive claims

dealing with water damage, mold and weather events such as tornadoes and

hailstorms.

State Farm spokesman Androff said the company has raised rates twice

in recent months, once in November and then a second time in February. The

two increases have raised rates by a combined average of 34.3 percent

statewide. In McLennan County, the average rate increase has been 34

percent, he said.

Androff said he knows it might be difficult for customers to understand why

the rate increases are necessary, but he explained that each year the

company has to estimate how much it will pay out in claims and then

determine its premiums based on those estimates. The fact that the number of

mold claims " sky-rocketed " during the past 18 months meant that the

company's estimates were off, he said.

In just the year 2000 in Texas, State Farm incurred $298 million in

underwriting losses, Androff said. Last year, the company lost $728 million.

Those losses combine to be more than $1 billion, an amount that endangers

the company's ability to serve its customers if premiums are not increased,

he said.

Farmers Spokesman Bob Huxel said his company has found itself in a similar

situation. It was forced to raise rates in mid-December because of the large

amounts of claims the company has received due to water damage, mold and

weather-related events.

Statewide, the rate increases averaged about 29 percent, Huxel said. In

McLennan County, customers saw their rates increase from 9 percent to 21.8

percent, he said.

Allstate has also raised rates in recent months for the same reasons. In

December, the company increased premiums by an average of 30 percent, said

spokesman Schmitt. That came on the heels of another increase in

October that upped premiums by an average of 20 percent. In McLennan County,

the December increase was 22 percent and the October increase was 23.5

percent, he said.

Although some consumers may feel as if they are getting a raw deal, Schmitt

said they should consider the fact that the policies most Texas homeowners

have historically had provide the most expansive coverage for water damage

in the nation. That has driven up the price of coverage for all Texas

homeowners, he said.

" It has turned an insurance policy into a home maintenance policy, " Schmitt

said.

In fact, the three insurance firms - which together sell about two-thirds of

all homeowner policies in Texas - are no longer selling the more expansive

policies, which are called HO-B policies and include water and mold damage.

However, the companies are planning on coming out with new versions of their

HO-A plans, which do not cover mold and water damage. Allstate is the first

company to do so by starting to offer a policy called HO-A Plus.

The new plan, which only covers sudden and accidental losses, costs at least

20 percent less than the policies with more expansive coverage, Schmitt

said. It is not as expansive as the old HO-B policy, but it is more

comprehensive than the standard HO-A policy, he said.

For now, homeowners can cut their premiums by $150 to $300 per year by

raising their deductible from $250 to $1,000, said Don Whitaker, an

independent insurance broker in San . Many insurers also give

discounts for installing monitored security systems and hail-resistant roof

tiles.

Tribune-Herald staff writer Van Auken and the Associated Press

contributed to this story. Van Auken can be reached at

cvanauken@... or at 757-5744.