Texas home insurance gobbles up household budgets

Yes, the cost of homeowners' insurance eats up more and more of Texans' housing budgets every year. Average rates rose almost 11% in 2022, 21% in 2023 and nearly 19% last year.

Ouch.

At least Texans can still secure insurance relatively easily. More than 150 companies write homeowners policies here, and the largest company commands only 20% of the market. Despite the state's increasingly capricious, destructive weather, insurers stay in Texas because the law allows them to charge and immediately use rates they feel they need to cover operations and probable losses. The state doesn't interfere in the market by artificially capping rates.

That said, the cost of insurance, along with factors such as higher mortgage interest rates and a shortage of starter houses, is becoming yet another barrier to homeownership. In response, state Sen. Charles Schwertner, R-Georgetown, introduced a bill to shift how the Texas Department of Insurance handles rate increases.

Senate Bill 1643 would create what's known as a flex-band system. Insurers could file and immediately use rate changes of 10% or less. The Texas Insurance Commissioner would have to approve rate increases or decreases larger than 10% before companies could charge them. The bill would apply to commercial and residential property insurance and commercial and personal auto insurance.

The bill is a compromise between the file-and-use system and one that requires prior-approval of all rate changes. It is not a cure for rising insurance rates. Consumer advocates say the bill wouldn't prevent insurance companies from filing multiple 9% rate changes during a year. Insurance lobbyists argue the bill would slow companies' ability to quickly respond to changing market conditions and could be a prelude to arbitrary rate caps.

This newspaper recommends shelving the bill in favor of additional study during the interim. The state needs a broad approach to address the varying roles of regulators, insurers and consumers.

For example, The Houston Chronicle reported in December that the Texas Department of Insurance reviewed 22,000 rate filings since 2017 and did not reject a single rate increase. Department of Insurance staff members say they require more information in 77% of rate filings, and sometimes convince companies to alter their rate request. Lawmakers need to examine the rate review process and whether statutory revisions could streamline the process of recovering funds for policyholders who were overcharged.

Legislators also should experiment with ways to encourage property owners to "harden" their homes against natural disasters. House Bill 1576 would establish a grant program to help single-family homeowners take steps to mitigate hurricane and windstorm damage. This could be a useful program, but grants should be available for any weather peril, and the program should target lower-income households or cap the value of the eligible homes.

Last, insurers need to publicize and potentially increase discounts for property owners who voluntarily invest in tested strategies to make their homes more resilient to their region's hazards, whether that's wildfires, hailstorms or tornadoes.

And customers: Shop around. Competition is still the best way to find more affordable insurance.