Texas Windstorm Insurance Association policyholders' rates will go up beginning Feb. 1, 2008, as a result of rate increases approved by the Texas Department of Insurance

Information from the Texas Wind and Hail Insurance Resource Web Page

Texans living and working along the Gulf Coast should review their homeowners and commercial insurance policies prior to hurricane season to ensure they are adequately covered against losses caused by wind and hail. Some insurance companies provide wind and hail coverage, while others do not.

If your company has excluded wind and hail coverage from your policy, shop around. You may be able to find another company that offers wind and hail coverage in your area. If you can't find a company providing the coverage, ask your insurance agent about purchasing insurance from the Texas Windstorm Insurance Association (TWIA). TWIA is the state’s insurer of last resort for wind and hail coverage when homeowners and business owners are denied coverage in the 14 coastal counties and parts of Harris County on Galveston Bay.

Windstorm Coverage Options

• List of insurance companies writing residential property insurance along the Gulf Coast
• List of companies writing commercial property insurance along the Gulf Coast
• Texas Windstorm Insurance Association

TWIA Structure Eligibility Requirements

• Located in TWIA’s coverage territory. TWIA’s coverage territory includes Aransas, Brazoria, Calhoun, Cameron, Chambers, Galveston, Jefferson, Kenedy, Kleberg, Matagorda, Nueces, Refugio, San Patricio, and Willacy counties; and the following communities east of State Highway 146 in Harris County: Pasadena, Morgan's Point, Shoreacres, Seabrook and La Porte.
• Meet Texas Department of Insurance (TDI) building specifications. New structures, alterations, additions, or repairs to existing structures, including re-roofs or roof repairs must be inspected by a TDI inspector or an engineer who has been appointed by the Commissioner of Insurance. There is no fee for any inspection conducted by TDI. All inspections must be made during the construction phase. For questions or to find out if your home was previously inspected, contact your agent or TDI's Windstorm Inspection Division at 1-800-248-6032.

Shopping for Insurance

• Use an insurance agent to help you shop. Some agents represent only a single company or company group. Independent agents may represent several companies. Including independent agents in your search can help you get quotes from multiple companies with a single call. To find an agent near you, use your local yellow pages or visit www.helpinsure.com , a free service of the state and TDI that helps people shop for homeowners insurance.
• Make sure your insurance agent and company are licensed. To verify whether an agent or company is licensed, call our Consumer Help Line or use the Agent and Insurer Search features on our website.
• Use TDI’s Homeowners Insurance Price Comparisons. The price comparisons list most companies writing homeowners insurance in your area and provide contact information and premium estimates. Call our Consumer Help Line for a free copy of the price comparison for your area or view the price comparisons on our website, www.tdi.state.tx.us/consumer/txshoph.html .
• Understand homeowners policy types and coverages. Insurance companies may sell several types of homeowners policies in Texas, each with a different level of coverage. Make sure you compare policies with similar coverages. Visit the Texas Office of Public Insurance Counsel (OPIC) website, www.opic.state.tx.us , to compare coverages for policies sold in Texas.
• Decide whether you need other coverages. Homeowners policies do not cover damage caused by rising waters. You can buy a separate policy to cover most types of flooding from the National Flood Insurance Program. Call NFIP at 1-800-427-4661 or visit its website, www.floodsmart.gov .
• Consider factors other than price. A company’s complaint history and financial rating can indicate the level of service you will receive. Call our Consumer Help Line or use the Insurer Search feature on our website.
• Ask about payment options. Some insurance companies offer payment plans that allow you to pay your premium in installments. For example, you may be able to make monthly payments, rather than paying your entire annual premium at once.
• Ask about discounts. Some companies offer discounts. The discounts offered and their amounts vary by company.
• Answer questions truthfully. Giving incorrect information when you apply for insurance could lead to an incorrect rate quote or a denial or cancellation of coverage. An insurance company may cancel your policy within the first 60 days if it gives you 30 days’ notice.
• Choose the highest deductible you can afford. Higher deductibles will lower your premium, but you’ll have to pay more out of pocket if you have a claim.
• Know how your credit score affects you. Insurance companies may consider your credit score when deciding whether to sell you a policy and the price to charge you. They cannot deny you coverage or refuse to renew your policy solely because of your credit score, however.

Having Trouble Finding Insurance?

The Texas FAIR Plan is available to homeowners who have been declined by at least two insurance companies and have not received a valid offer of comparable insurance. To find agents authorized to sell coverage through the FAIR Plan, visit www.texasfairplan.org and click on the Find an Authorized Agent link.

Consumer Publications

• Windstorm Insurance Inspections
• Homeowners Insurance
• Company/Policy Comparison Worksheet. Use this worksheet to help you compile and compare information about companies and the policies they sell.
• Shopping for Homeowners Insurance Checklist. Use this checklist to help you gather information and shop for insurance after buying a new home.

Farmers Insurance proposes steep rate hike on Texas Coast

Farmers Insurance wants to raise homeowners rates 20 to 30% along the Texas coast -- while reducing rates in many other areas.

The filing with the Texas Department of Insurance indicates a net result of a statewide increase of 2.2% -- with hefty premium hikes in coastal counties and southeast Texas.

Many other parts of the state would see modest reductions.

Farmers spokeswoman Michelle Levy says nearly half of the company's 686,000 policyholders in Texas would see lower premiums under the plan.
The rates, which will be reviewed by insurance regulators, are scheduled to take effect February 16th for new and existing customers.

This filing comes five months after the company withdrew a proposed 6.6% increase in homeowner rates -- when regulators indicated they'd reject the plan.

The industry saw massive property losses from 2005 Hurricanes Katrina and Rita.

Insurers Favor High-Value Homes

Insurers are offering owners of multi-million-dollar coastal homes insurance packages that — while costly — provide extensive coverage not usually available to owners of lesser properties.

The main reason that insurers like high-value homes is their top-quality construction, which makes them more likely to withstand hurricanes and earthquakes.

"Along the coast, newer homes tend to be of higher value, but they're also better constructed," says Robert Hartwig, president of the Insurance Information Institute. "The fact of the matter is [high-value homes] are built like bunkers."

Nevertheless, this sort of insurance isn’t cheap. Chubb Group, which is one of the major writers in this space, charges about $10,000 per year for a $2 million home — with costs in vulnerable and expensive areas like Miami Beach running as much as $25,000 per year. Deductibles are 2 percent to 5 percent.

Installing such safety measures as lightning rods, surge protectors, back-up communications for alarm systems, seismic gas valve shut-offs, and low-temperature sensors in colder climates can cut costs up to 15 percent.

Source: Investor’s Business Daily, Brad Kelly

TEXAS INSURANCE PREMIUMS NATION'S HIGHEST

A new study from the National Association of Insurance Commissioners shows that Texas homeowners pay far more for insurance than those in any other state.

The average annual premium in Texas for the most common homeowner policy was $1,372, considerably more than the nationwide average of $764.

Louisiana ranked second at $1,144, while Florida was third at $1,083. The premiums in all other states were less than $1,000.

However, the study, which was based on 2005 premiums, also showed that other states are closing the gap. Many of their rates have seen double-digit increases in recent years, while Texas rates have stabilized.

Texas historically has been among the most expensive states for home insurance, in large part because of its pattern of severe weather conditions such as hurricanes, hailstorms and tornadoes. A rash of mold claims in the early part of the decade caused even higher rates.

Insurers overcharge and underpay

Even in years of significant hurricane activity, U.S. insurers are reaping record profits by overcharging for policies, underpaying claims, dumping thousands of coastal customers and shifting costs onto taxpayers, according to a report released Thursday by a national consumer group.

The Consumer Federation of America’s report concludes that overcharges by insurers in the past four years amounted to an average of $870 per household.

It also accuses the property/casualty insurance industry of engaging in anti-consumer practices that led to “bloated surplus and reserve levels.”

“Consumers ultimately pay the price for the unjustified profits, padded reserves and excess capitalization that exist right now in the industry,” said J. Robert Hunter, an actuary, former state insurance commissioner and former federal insurance administrator who authored the study.

Industry Responds

Industry representatives said the study was “fatally flawed” and “grossly distorts” their financial picture.

They defended profits, which they say are rare and should reassure consumers that money is available to meet obligations.

“The self-described consumer groups have been riding this tired old horse on the odd occasion the insurance industry earns a profit,” said Jerry Johns, a spokesman for trade group Southwestern Insurance Information Service.

“For years, insurers have consistently lost money on most lines of property and casualty business.”

The federation said it pored over the balance sheets for property/casualty insurers, a group lately bemoaning increasing weather-related exposure in a warming world, to find they’re in better shape than at any time in history.

Record Profits

The report also estimates that last year’s after-tax returns were about $65 billion, just less than the record set in 2006.

Profits for the record years of 2004, 2005, 2006 and 2007 are estimated to be $253.1 billion, according to the report.

“Unfortunately, a major reason why insurers have reported record high profits and low losses in recent years is that they have been methodically overcharging consumers, cutting back on coverage, underpaying claims and getting taxpayers to pick up some of the tab for risks the insurer should cover,” Hunter said.

In reaching some of its conclusions, the federation studied pure loss ratio, which is the amount of each premium dollar insurers pay back to policyholders in benefits. It found the loss ratio was only 54.6 cents last year.

The Texas Department of Insurance said in March that in 2005, the year of Hurricane Rita, the loss ratio averaged a healthy 57 percent among insurers doing business in the state.

Insurance consumers have been losing ground for two decades, according to the federation’s report.

“Over the past 20 years, the amount paid back as benefits has dramatically declined from over 70 cents per premium dollar, indicating a huge loss in the value of insurance to consumers,” according to the federation’s report.

Numbers Challenged

Robert Hartwig, an economist and president of trade group Insurance Information Institute, released a statement Thursday challenging the report and the notion that insurers were paying less to consumers.

“Insurers are protecting more cars, homes and businesses than any time in U.S. history and have been an essential component of the country’s economic growth engine for decades,” Hartwig said.

“The insurance industry has paid out billions of dollars in insured losses over the past few years and insurance proceeds constituted the single largest source of critically needed funds contributing to the stabilization and recovery of the Gulf Coast’s economy after Hurricane Katrina. So to say claims payouts continue to drop is absurd.”

The federation report also homed in on the industry’s retained earnings, known as surplus, which, by its estimates, were $687 billion for the entire industry by the end of 2007.

“An adequate surplus guarantees a safe insurance industry, but this amount is excessive by any legitimate measure,” according to the report. The federation said the insurance industry was overcapitalized.

Hartwig said the federation’s study criticized private auto and home insurers but included data from government-run insurers that sell, among other things, workers’ compensation, artificially inflating surplus figures.

“More serious is the fact that the CFA compounds this error by double counting tens of billions of dollars in surplus on the books of individual insurers,” Hartwig said.

The federation overstated the industry’s claims-paying capacity by about $160 billion in 2007, Hartwig said. Actual surplus last year was $530 billion, he said.

Hidden Profits

When industry profits are high, insurers tend to pad their reserves, removing income from profit statements and lowering their tax burden, according to the report. Reserves aren’t taxed and income is.

“This practice also allows insurers to point to inflated ‘losses,’ which rise because of reserve redundancies, as justification for not lowering rates,” the report concluded.

The report comes as Texans, specifically those living in coastal counties, are watching their homeowner rates rise and while regulators and insurers become more acrimonious in their fight about what consumers should pay for insurance.

Last month, Farmers Insurance Exchange and Fire Insurance Exchange notified the Texas Department of Insurance about their intentions to raise rates, on average statewide, 2.5 percent and 1.7 percent respectively.

But Farmers’ 10,717 Galveston County policyholders could see their premium rates increase between 14 percent and 16 percent, said company spokeswoman Michelle Levy.

Also last month, State Farm Insurance Co. filed plans that could mean homeowner premium rate increases of as much as 22 percent for some of its 13,600 Galveston County policyholders.

In October, a judge ruled that Allstate homeowner policyholders — there are 10,000 in the county — would continue paying a 5.9 percent increase in premium rates while regulators and the company slugged it out in court.

“The rates people pay in Texas are based on losses in Texas and have nothing to do with what is going on in other parts of the country,” Johns said.

“It is simply inappropriate and highly misleading for a group to draw conclusions, which plant a false sense of distrust in the minds of millions of people.”

Insurers cited rising cost of construction, labor and reinsurance — coverage insurers buy to protect themselves from catastrophes.

In recent years, insurers have dropped thousands of county windstorm policies, pushing them to a dangerously burdened state-created insurer of last resort.