Soaring home insurance rates worry lawmakers

As Texans confront skyrocketing home insurance premiums, some top state lawmakers are considering major interventions when they meet again in January, including overhauling the very system that regulates insurance providers.

"Between property taxes and insurance, it is the number one issue in our office. It is not even close," state Sen. Lois Kolkhorst, a Republican from Brenham, said during a Senate committee hearing on Tuesday. "It is one of the most important things we tackle in the next session."

Cassie Brown, the state's insurance commissioner, told the committee that home insurance rates increased last year by more than 21% statewide, double the average rate increase in 2022 and the biggest annual jump in at least a decade.

Insurance companies are contending with more severe and more frequent disasters, Brown said - there were more severe storms in Texas last year than any other state. But inflation and higher costs for construction and labor, as well as higher home values, are also to blame. The median home price in Texas jumped 40% since 2019. "All this new value needs coverage, which results in bigger bills for consumers," Brown said.

Lawmakers signaled that they may be open to reconsidering a 2003 statute that established Texas' file-and-use system, which puts minimal guardrails on insurance companies raising rates. Other states including California, which has struggled with a recent exodus of providers, require insurers to request prior approval.

Brown said that the Texas Department of Insurance reviews 100% of rate filings, but that they "rarely" disapprove them.

"If we tighten up the criteria that you have to look at in order to approve their rates - I would expect that if it's harder to get a rate increase approval, that would help Texans with their premiums on their insurance," said Donna Campbell, a New Braunfels Republican. "I'm thinking that stopping file-and-use immediately would be a good idea."

Industry representatives said the file-and-use system has helped create a robust and competitive market in Texas. "Companies who come to Texas don't feel like they're going to be trapped in a loss situation ... as they are in many other states," said Beaman Floyd, the director of the Texas Coalition for Affordable Insurance Solutions, which represents major insurers in the state.

Floyd said that despite a national insurance crisis, "Texas has been able to keep functioning, keep operating and have a diversity of companies in the marketplace that can see opportunities."

"We don't have the same kind of availability crisis that a lot of other states are seeing because we still do have an attractive, competitive market," he said.

Still, over the last year, many homeowners in Houston and across the state say their insurance carriers have declined to renew their coverage.

According to TDI, only four companies have exited the Texas home and auto insurance market this year, affecting 11,000 policyholders.

But facing escalating losses, many companies have tightened their underwriting guidelines, which dictate where and under what circumstances companies offer new or continuing coverage. "Stories you may hear about Texans not being able to keep or find homeowners insurance are more likely caused by these underwriting changes than companies leaving the market," Brown told lawmakers.

In 2023, 138,000 homeowner's policies were not renewed, impacting 1.66% of the state's property insurance market, she said. In 2022, 0.88% of total homeowners policies were not renewed, according to data from the National Association of Insurance Commissioners.

"I worry that Texans ratepayers are not getting a fair shake in the current situation," said Charles Schwertner, a Georgetown Republican and the chairman of the Senate Committee on Business and Industry.

Texans are "not very happy about insurance, for sure," Schwertner said. "I don't think it was quite as collectively known on this dais before we started talking about it."