LevonP
11-08-2008, 11:55 AM
AUSTIN – Farmers Insurance plans to impose double-digit rate hikes for hundreds of thousands of its customers in North Texas and across the state, blaming the increase on rising costs for labor and building materials.
The higher rates, which would be reflected on insurance bills beginning Feb. 16, affect policyholders for two of the company's largest subsidiaries. Farmers is the No. 3 home insurer in Texas.
Consumer groups sharply criticized the rate filing on Friday, saying it comes at the worst time for many homeowners already feeling the effects of the slumping U.S. economy. They called on State Insurance Commissioner Mike Geeslin to reject the proposal.
A spokesman for the Texas Department of Insurance said the filing will be closely scrutinized over the next several weeks. Those findings will be used by the commissioner in deciding whether to block the higher rates or let them go through.
"Farmers is taking this rate action to keep up with the higher costs of labor and materials," said company spokeswoman Michelle Levy.
Asked whether the filing was related to massive losses from Hurricanes Dolly and Ike this year, Ms. Levy said the rate proposals were in the works well before the hurricanes struck the Texas coast near Brownsville and Galveston, respectively.
Other insurance companies are expected to file for rate increases over the next few months. USAA Texas, the state's fourth-largest insurer, filed for a 7.9 percent increase last month.
Rising costs
Some experts have cited rising costs for building materials in the last few months, particularly in southeast Texas where property damage from Hurricane Ike was extensive. Insured losses from Hurricane Ike have been estimated at more than $10 billion by the Insurance Council of Texas.
The rate increases planned by Farmers are across the board and affect customers of Farmers Insurance Exchange – up nearly 10 percent – and Fire Insurance Exchange – up 12.6 percent.
Rates for Farmers' other home-insurance subsidiary in Texas – Texas Farmers Insurance – recently went up 7.9 percent, and that increase is being seen in annual premium notices sent out since May.
Farmers provides coverage for about 714,000 Texas homeowners.
Alex Winslow of Texas Watch, a consumer group active in insurance issues, called the Farmers proposal "just the latest in a long line of rate filings that are burdening Texas homeowners" with "excessive" insurance premiums.
"This filing and others like it reflect an ongoing pattern of unwarranted rate hikes by insurance companies in our state," Mr. Winslow said.
"The Legislature needs to take swift action when they convene in January to enact common-sense, comprehensive insurance reform that guarantees the rates passed on to homeowners are fair and reasonable," added Mr. Winslow, who called on Mr. Geeslin to reject the proposal.
'A hard time'
Tim Morstad of AARP in Texas said the higher rates "will hit households hard at a time we are hearing from our members that the economic downturn is pushing many homeowners to the brink."
He added, "This reinforces the need to strengthen the Texas Department of Insurance so that the commissioner has all the tools and leverage he needs to scrub these proposals and reject unwarranted increases."
Farmers officials said there is good news for condo owners, who will see their rates drop 10.2 percent. Most are covered by Fire Insurance Exchange. Renters – generally covered by the same subsidiary – will see no change in their rates, according to the company.
Under the state's file-and-use law for insurance premiums, Farmers is allowed to raise rates once it has notified the insurance department, but the company is subject to a rate rollback – and refunds – if the insurance commissioner determines the increases are not justified. An insurer also has to pay interest on any refunds that are due.
In December, Farmers filed for a statewide 2.2 percent increase in home insurance for many customers. But that plan included hefty rate hikes of 20 percent to 30 percent along the Texas coast, while most policyholders in Dallas and Tarrant counties saw their premiums drop an average 5 percent.
Those new rates went into effect in February.
In addition to rising building costs, insurance-industry representatives also have cited the higher cost of reinsurance – purchased by companies to help pay claims after a catastrophic event such as a hurricane.
State lawmakers are expected to consider several changes in insurance regulation during their regular session next year when they take up the recommendations of the Texas Sunset Advisory Commission, which has studied the state insurance department and its regulation of the industry.
Several legislators on the commission have voiced frustration over homeowners-insurance rates in Texas, which have been the highest in the nation for several years.
The higher rates, which would be reflected on insurance bills beginning Feb. 16, affect policyholders for two of the company's largest subsidiaries. Farmers is the No. 3 home insurer in Texas.
Consumer groups sharply criticized the rate filing on Friday, saying it comes at the worst time for many homeowners already feeling the effects of the slumping U.S. economy. They called on State Insurance Commissioner Mike Geeslin to reject the proposal.
A spokesman for the Texas Department of Insurance said the filing will be closely scrutinized over the next several weeks. Those findings will be used by the commissioner in deciding whether to block the higher rates or let them go through.
"Farmers is taking this rate action to keep up with the higher costs of labor and materials," said company spokeswoman Michelle Levy.
Asked whether the filing was related to massive losses from Hurricanes Dolly and Ike this year, Ms. Levy said the rate proposals were in the works well before the hurricanes struck the Texas coast near Brownsville and Galveston, respectively.
Other insurance companies are expected to file for rate increases over the next few months. USAA Texas, the state's fourth-largest insurer, filed for a 7.9 percent increase last month.
Rising costs
Some experts have cited rising costs for building materials in the last few months, particularly in southeast Texas where property damage from Hurricane Ike was extensive. Insured losses from Hurricane Ike have been estimated at more than $10 billion by the Insurance Council of Texas.
The rate increases planned by Farmers are across the board and affect customers of Farmers Insurance Exchange – up nearly 10 percent – and Fire Insurance Exchange – up 12.6 percent.
Rates for Farmers' other home-insurance subsidiary in Texas – Texas Farmers Insurance – recently went up 7.9 percent, and that increase is being seen in annual premium notices sent out since May.
Farmers provides coverage for about 714,000 Texas homeowners.
Alex Winslow of Texas Watch, a consumer group active in insurance issues, called the Farmers proposal "just the latest in a long line of rate filings that are burdening Texas homeowners" with "excessive" insurance premiums.
"This filing and others like it reflect an ongoing pattern of unwarranted rate hikes by insurance companies in our state," Mr. Winslow said.
"The Legislature needs to take swift action when they convene in January to enact common-sense, comprehensive insurance reform that guarantees the rates passed on to homeowners are fair and reasonable," added Mr. Winslow, who called on Mr. Geeslin to reject the proposal.
'A hard time'
Tim Morstad of AARP in Texas said the higher rates "will hit households hard at a time we are hearing from our members that the economic downturn is pushing many homeowners to the brink."
He added, "This reinforces the need to strengthen the Texas Department of Insurance so that the commissioner has all the tools and leverage he needs to scrub these proposals and reject unwarranted increases."
Farmers officials said there is good news for condo owners, who will see their rates drop 10.2 percent. Most are covered by Fire Insurance Exchange. Renters – generally covered by the same subsidiary – will see no change in their rates, according to the company.
Under the state's file-and-use law for insurance premiums, Farmers is allowed to raise rates once it has notified the insurance department, but the company is subject to a rate rollback – and refunds – if the insurance commissioner determines the increases are not justified. An insurer also has to pay interest on any refunds that are due.
In December, Farmers filed for a statewide 2.2 percent increase in home insurance for many customers. But that plan included hefty rate hikes of 20 percent to 30 percent along the Texas coast, while most policyholders in Dallas and Tarrant counties saw their premiums drop an average 5 percent.
Those new rates went into effect in February.
In addition to rising building costs, insurance-industry representatives also have cited the higher cost of reinsurance – purchased by companies to help pay claims after a catastrophic event such as a hurricane.
State lawmakers are expected to consider several changes in insurance regulation during their regular session next year when they take up the recommendations of the Texas Sunset Advisory Commission, which has studied the state insurance department and its regulation of the industry.
Several legislators on the commission have voiced frustration over homeowners-insurance rates in Texas, which have been the highest in the nation for several years.