Everything is Bigger in Texas - Including the Insurance Rates

Navigating through Texas can feel like running a gauntlet.

From the challenges posed by unpredictable weather — such as hailstorms, ice disruptions, lightning, powerful wind, floods, and wildfires — to the unpredictable driving conditions, residents face yet another lurking danger: the never-ending rise of insurance premiums.

Data from S&P Global Market Intelligence paints a sobering picture.

Their findings are not particularly encouraging, with headlines that highlight Texas's woes.

For instance, in the fourth quarter of 2022, Texas regulators approved 32 rate hikes for homeowners insurance.

These approvals are anticipated to surge the industry premiums by a whopping $425.5 million, marking Texas as the state with the most substantial predicted hike for that period.

Meanwhile, reports from the previous year highlighted an imminent storm brewing in the auto insurance sector.

The narrative hinted at looming rate increases that could potentially set new records in Texas's insurance history.

Where are we now?

Fast forward to 2023, the wave of rate increases hasn't ebbed.

Current data reveals 96 logged entries for homeowners insurance rate hike proposals, with the average hike pegged at 13.3%.

On the auto insurance front, a staggering 221 entries have been noted for rate hike requests, averaging an increase of 10.3%.

We are all feeling the pain.

However, to play devil’s advocate (as an insurance professional) insurance providers argue that the landscape has been equally challenging for them.

Their contention is rooted in the dynamics of the loss ratio — a metric that juxtaposes the insurance claims and operational costs against the premiums collected.

And historical trends provide context to this argument.

Between 2012 and 2020, the loss ratio for private auto policies in Texas hovered around 67%.

However, the advent of the pandemic and associated economic shifts saw repair and replacement costs for vehicles spike. This uptick propelled the loss ratio to 74% in 2021 and around 70% in 2022, signifying reduced profit margins for insurers.

Homeowners insurance also experienced turbulence.

From 2012 to 2020, the average loss ratio was 59%. But the tumultuous events of 2021, notably the ice storm and associated electrical blackouts, saw the loss ratio skyrocket to 104%.

This meant insurance payouts eclipsed premium collections.

 Although 2022 witnessed a decline in the loss ratio to about 49%, premium hikes remain a reality.

So, how do I try to lower my costs?

The good news is you aren’t entirely without options here.

There are several ways you can potentially lessen the financial burden of the increased costs of insurance. Here are a few strategies:

1. Shop your insurance through an agent that can approach every carrier on your behalf
2. Bundle your insurance policies together to achieve economies of scale / carrier discounts (cue literally every insurance commercial you've ever heard)
3. Raise your deductibles (assume more risk)
4. Don’t include the cost of your land in the calculation for rebuilding costs
5. Ask your agent how you can make your home more resistant to storms or other natural disasters (reinforcing your roof, storm shutters, stronger roofing materials, etc.)
6. Stay with the same insurer (special discounts)
7. Review your limits annually (have you sold any assets – computers, jewelry, art, etc.)
8. Improve your credit score (yes, in some states, this is taken into consideration when underwriting your insurance policies)

While I do not specialize in personal home and auto insurance, I am happy to help however I can.

Please reach out if you have any questions or need recommendations on who to go to – I have a guy!