State Farm to raise homeowners insurance rates as much as 14 percent in Dallas area

AUSTIN – State Farm Insurance filed notice with the state Wednesday that it will raise its homeowner policies as much as 14.4 percent in the Dallas area, becoming the third and largest insurer to hike rates in the past month.

State Farm officials blamed the boost on a slew of spring storms unleashing hail damage in North Texas, as well as the rising price of building materials. Statewide, the rate increase averages about 8.5 percent, with the new rates hitting existing customers when they renew policies after Oct. 1. New customers will pay the higher rates starting Sept. 1.

The spike in premium costs also follows the devastation wreaked by Hurricanes Dolly and Ike last year.

Mark Hanna of the Insurance Council of Texas, an industry group, said Ike in particular was devastating, causing $10 billion in insurance losses.

"It was the costliest storm in state history," Hanna said. Rates had been stable for about six years, he said, but "then Ike kicked us over the edge."

Consumer groups said the jumps follow years of fat profits for insurance companies in Texas.

"The reality is that the rates homeowners have been paying have already been deemed to be too high and the coverage has been significantly less. So in truth, homeowners are paying more for their insurance and getting less," said Alex Winslow, executive director of Texas Watch.

He said he wasn't surprised by State Farm's decision after seeing Farmers Insurance recently announce an average statewide hike in its rates of 10 percent to 12.6 percent, followed by Allstate's 6.2 percent increase last week. They are the state's three largest insurers; State Farm alone has 1.2 million homeowners and rental insurance companies.

"I was waiting to see State Farm fill out the trifecta," Winslow said.

He said he believes insurance companies were "emboldened" after the Legislature adjourned this year without tackling insurance regulations.

Insurers can file their rate increases with the Texas Department of Insurance and immediately apply them to policies. The department then studies the rates to ensure they can be justified by actuarial data. If not, the agency can order refunds and rate rollbacks.

But State Farm has been legally challenging a rebate ordered six years ago, saying its rates always have been fair and competitive and they do not owe consumers a rebate. The case, which is awaiting a ruling from Insurance Commissioner Mike Geeslin, could cost the company as much as $1 billion. And it's one of the reasons lawmakers debated changing the system to require prior state approval of insurance rates.

The spate of premium increases is spilling into the political arena, especially in the Republican governor's race.