Then Higbee learned in May that State Farm was raising his premiums 30 to 35 percent. A week ago, he moved his business coverage to Farmers and last week moved his home and auto policies to Nationwide Insurance.

“I pay the bills on time. I’m not beating anybody out of money. I don’t know what the problem is,” said Higbee, who estimates that he saved $600 a year on his home policy and $135 on auto by switching.

Higbee apparently isn’t alone. After State Farm, the state’s largest homeowner insurer with 29 percent of the market, raised homeowner rates last fall and again in the spring, some policyholders are just now opening their renewal notices to find two increases in one.

State Farm, in its filings with the state, raised rates an average of 8.8 percent in the fall and 4.5 percent in the spring, with the second increase taking effect May 1 for new business and June 1 for renewals. Under state law, insurers are allowed to implement increases while Texas regulators review them; the state has not issued its position on State Farm’s rate filings.

State Farm’s increases in North Texas and Tarrant County, already known for higher storm-related losses, are significantly steeper than its premium increases in some other parts of the state.

In one typical scenario in Fort Worth, the Texas Department of Insurance estimates that State Farm homeowners insurance policyholders who enjoy discounts for having multiple policies with the company could see their annual premium rise 31 percent after the two rate increases.

That assumes a 10-year-old frame home with no claims, $150,000 in building coverage with replacement cost on contents, a $1,500 deductible and an average credit score. The new premium for that property could be $1,610, up from $1,128, the insurance department estimated.

With no multiline discounts, Tarrant County homeowners could see premiums rise 39 percent, the insurance department estimates under various scenarios. Consumers can use the online calculator on the department’s website to enter data on their property, such as ZIP code, coverage value, credit score, claims history, age of home and type of construction, to get their own estimate.

Kevin Davis, a Texas spokesman for State Farm, said 9 in 10 of the insurer’s policyholders qualify for a multipolicy discount of 20 percent, which the company raised from 15 percent as part of its spring rate filing.

“At the end of the day, it is for these reasons that we encourage our policyholders to contact their State Farm agents so they can find out what their rate changes mean for them,” Davis said.

Some policyholders are beginning to shop around.

Stan Jones, the Nationwide agent in southwest Fort Worth who wrote Higbee his new home and auto policies, said his call volume from State Farm policyholders has tripled in the last month.

“People are just getting their renewals,” Jones said. “State Farm customers are traditionally loyal customers. It takes something to get them to switch.”

Dan Strack, owner of Strack Insurance Services, an independent agent in Arlington, says he took in 47 online leads on his website in May, of which six were from State Farm policyholders. In June, he has taken in seven leads, and five from State Farm customers.

Strack said he saw little effect after State Farm’s first increase last fall. But with renewals coming up and the two increases on top of each other, “it’s starting to soak in.”

Yet, Strack, who writes homeowner policies for several insurers, including Universal, Homeowners of America, The Hartford, Travelers, ASI and Safeco, says some State Farm policyholders will likely stick with their policies rather than go with a lesser-known brand, even if it means paying more. State Farm’s ability to write multiple coverages also helps, as some insurers don’t write both home and auto coverage, he said.

“Nine out of 10 times, I can beat the rate they’re getting,” Strack said. But “people are reluctant to change from State Farm and go with a company they don’t know.”

At Allstate, Texas’ No. 2 homeowner insurer with 10.8 percent of the market, spokesman Joe McCormick said, “We have not seen any uptick in State Farm business coming to us. Not in a macro sense. Some of the agencies might have seen some of it.”

No. 1 in losses

Underlying the rate increases are major questions about the desirability of the Texas homeowners market to insurers.

Hurricanes that blow in from the Gulf of Mexico, along with hail and windstorms that sweep across North Texas, contributed to $2.45 billion in catastrophe losses for Texas home insurers in 2009, according to industry estimates. That made Texas the No. 1 state for losses, with more than 20 percent of the nation’s $10.5 billion in total catastrophe losses.

Under Texas’ “file and use” system, insurers can implement rate increases pending regulators’ review. That’s supposed to be more favorable to the industry, but in practice it amounts to “file and haggle” and discourages insurers from doing business in the state, said Jerry Johns, president of the Southwest Insurance Information Service, a trade group.

“Companies have to have insurance rates sufficient to pay claims,” Johns said. “If they don’t have the funds, that is the customer’s worst nightmare.”

Patrick Brockett, the Gus S. Wortham Chair in Risk Management and Insurance at the University of Texas at Austin’s McCombs School of Business, agreed that Texas’ regulatory system has held homeowner rates “artificially low,” given the weather-related risks that insurers bear.

“The cost of catastrophic risk coverage on the coast has just been increasing,” he said. “More people are living there. The value of the structures is higher.”

And in North Texas, he said, “Hailstorm and wind damage is very significant. When the rates have been held artificially low, then increases may look abnormal, but may not be.”

Davis, the State Farm spokesman, said the firm went five years without a rate increase.

“The cost of everything that insurance pays for continued to rise,” he said. “In order to continue to keep our promises, we have to make adjustments.”

Alex Winslow, executive director of the Texas Watch advocacy group, argued that the Legislature should change state law to let the insurance commissioner review rate increases before they go into effect, bar insurers from using factors such as credit scores in assessing risk, and simplify policies.

Credit scores, now widely used by insurers, “do not accurately reflect a person’s risk,” Winslow said.

“And consumers have no way to effectively shop the Texas insurance market because it is too complex and confusing to allow true consumer choice,” said Winslow, who accused State Farm of being a “bully” with the insurance commissioner, Legislature and policyholders.

Brockett said he expects to see more insurers file for rate increases. But he doesn’t expect to see significant shifts in market share among Texas homeowner insurers, unless one of the majors pulls out of the state. It’s also plausible they could decide not to write new policies but continue to renew existing policies, he said.

“These are big companies, and they’re going to have large market share,” he said.

At Allstate, which implemented a 6 percent average homeowner rate increase last year, McCormick pointed out that his own neighborhood in Colleyville saw a substantial number of new roofs after a storm last year. Five years earlier, storms triggered another wave of reroofing, he said.

Does Allstate want more or less market share than it has now?

“That’s a good question,” McCormick said. “Across the state, we certainly want homeowners’ business, but it’s got to be at the right rate. We can’t be consistently losing money on a product.”

Policyholders who see rate increases have options, insurers and experts said.

Besides exploring discounts for owning multiple policies, Davis of State Farm said policyholders should meet with their agents to discuss changes in coverage such as raising deductibles.

The state insurance department has put up tools on its site, www.tdi.state.tx.us. Besides the calculator, consumers can also check for competing policies in their ZIP code at www.helpinsure.com. Other information includes insurers’ credit ratings and complaint data.

“We can’t tell anyone to change companies or stay with them, but we want them to be informed consumers,” said Ben Gonzalez, a spokesman for the insurance department.

For example, State Farm’s 4.5 percent and 8.8 percent spring and fall filings are accurate statewide averages, Gonzalez said.

“But you’re probably not going to see the low end of that in the metro areas or coast,” he said. “You’re going to see that in the less-risky areas.”

Johns likewise recommended shopping around.

“Consumers have choices when it comes to homeowner or auto insurance,” he said. “I think people are going to be shocked at the variety of pricing in the marketplace in Texas.”

And the state can’t do much about it.

We do have a Texas State Insurance Commission, and a commissioner heading it up. And his job is to protect consumers from excessive rates and questionable practices. But the fact is, he doesn’t…

And the reason he doesn’t is because his office is essentially toothless.

“We have a system that allows insurers to do whatever they want with regard to rates and coverage without really very much oversight,” says Alex Winslow of Texas Watch, a consumer organization in Austin.

State Farm controls about a third of the home insurance market in Texas, and for the second time in 9 months, they’ve decided to raise rates.

They can raise their rates at any time without having to really justify it to anybody….not to their customers, not to the state legislature, not to the insurance commissioner,” Winslow told us.

In the Tyler/Longview area it will mean a roughly 18% increase in your bill.

Surely, you say, they have to get that approved.

Well, you’d be wrong.

“We really have a toothless situation right now where nobody is really looking out for the consumer,” says State Senator Kevin Eltife.

Current law allows them to announce the rate, and start charging you. If the commissioner doesn’t like it, he has to say so after the fact, and then how do you enforce it?

“The legislature really needs to step up to the plate and say enough is enough. We need a system where the insurance companies need to get their rates approved before they post them on their consumers,” Winslow concluded.

Eltife agreed, “I think the consumer group you’ve spoken to makes absolute sense. They ought to have to get approval for their rates before they start charging the consumer. Because another thing they’re doing. They put the rate in place, start getting the money. And then they ie this stuff up in court for years while they’re collecting money from the consumer. It’s not right. People are struggling. Now more than ever we need to try to protect the consumer.”

State Farm, Texas’ largest home insurer with about 30 percent of the market, issued a 4.5 percent rate hike effective June 1 for existing customers. The increase comes after an 8.5 percent rate change the company issued in the fall.

“They are both centered around our costs,” said Kevin Davis, a State Farm corporate spokesman out of Austin. “We’re constantly reviewing our rates and rate needs, and costs continue to rise in providing homeowner’s insurance.”

For a Smith County resident living in a basic frame home built after 2000, annual premiums are predicted to jump about $200, or 19 percent, according to an estimate calculator on the Texas Department of Insurance website.

State Farm representatives conversely said changes in annual premiums could vary greatly from customer to customer, depending upon a bevy of factors that include a home’s location, its building materials and the policyholder’s amount of coverage.

The insurer’s two rate increases are under review by the state’s Department of Insurance, which has expressed its disapproval of the hikes.

In a letter to State Farm in March, Mike Geeslin, Texas’ commissioner of insurance, asked the company to voluntarily withdraw its most recent rate increase. Geeslin suggested that the company’s pair of closely issued rate hikes “may indicate a lack of rate making discipline and lead to market instability.”

“Given that State Farm Lloyds is the market leader … other companies may follow suit” in raising rates, Geeslin wrote, adding “It appears that the timing of this is not in the best interests of Texas consumers. Customers deserve a stable and competitive market.”

The commissioner’s office previously recommended State Farm withdraw a rate increase in 2003 that the state agency deemed excessive. It marked the company’s last hike prior to 2009.

In the wake of the 2003 rate increase, the insurance commissioner last year ordered State Farm to pay $310 million to Texas policyholders in premium reimbursement, a demand that has seen the Department of Insurance and State Farm face off in court on multiple occasions.

The item remains in a Travis County court following an appeal from State Farm, officials said.

If the Department of Insurance deems the two most recent rate adjustments to be excessive, the commissioner again could order State Farm to reimburse Texas policyholders, said John Greely, a communications official with the state agency.

The agency has no timetable for its review of the two rate adjustments, Greely said.

Davis, meanwhile, said State Farm leadership continues to work closely with state officials in resolving the rate disagreements. The increases are not excessive, he said, and will not have a widespread impact on all customers.

Policyholders on the coast will experience a different rate adjustment than those in East Texas due to weather- and disaster-related risk, he said.

“From 2003 to now, our rates have always been fair and justified,” Davis said. “At the end of the day, our agents have been reaching out to our policyholders and letting them know what to expect.

“We’re also stressing the fact that policyholders need to contact their agents to find out what those averages (4.5 percent and 8.5 percent increases) really mean to their individual policies,” he added. “If they’re curious or concerned about any of this information, they can call their agents and can find out about any discounts they are eligible for.”

The 4.5 percent increase in Texas home insurance rates that takes effect this month follows an 8.5 percent increase in October. State Farm cited the rising cost of doing business for the increases.

The back-to-back rate increases have alarmed the state’s insurance commissioner, who has expressed concerns that other insurers may follow State Farm’s lead and also raise rates.

The impact of State Farm’s rate changes vary widely around the state. San Antonio residents could see their homeowners rates jump more than 11 percent, based on data from the Texas Department of Insurance.

The state agency performed its own calculations to assess how the rate changes will impact State Farm customers around the state. It’s the first time the agency has posted such an analysis on its website.

“Focusing on percentages is misleading,” responded Patti Kelly, a State Farm spokeswoman. “The price customers pay for homeowners insurance is very much influenced by a variety of factors.” They include a house’s location, the type of construction, coverage, deductibles and discounts for having other lines of insurance with State Farm.

The agency found that on a $150,000 frame house built 10 years ago in the 78233 ZIP code of San Antonio, the two rate increases would raise premiums $151, or 11.8 percent, to $1,426. The example assumes a $1,500 deductible and replacement cost on the home’s contents.

A State Farm policyholder who has both home and auto coverage would see their premiums rise $57, or about 5.3 percent, to $1,141, as a result of the two rate increases.

The Texas Department of Insurance looked at similarly valued homes in 65 different locations around the state. It found the two rate increases differ greatly in size depending on location.

One Fort Worth ZIP code registered a 31 percent increase from the two rate changes. But premiums actually declined 2.5 percent in one Houston ZIP code. Meanwhile, premiums rocketed 25.7 percent in one Dallas ZIP code, while premiums were up 4.4 percent in an Austin ZIP code. The examples include discounts for homeowners who also have auto coverage with State Farm. Nine out of 10 State Farm customers have multiple lines of insurance with the company, Kelly said. Kelly objected to the state only including one ZIP code for San Antonio in its analysis. She emphasized the figure for San Antonio represents a “sample” only for that one ZIP code.

Best said the P/C insurers’ results were driven by improved underwriting results, the continued recovery of the financial markets and disciplined capital management.

Boosting 2009 underwriting results were a quiet hurricane season, significant reserve releases, and a sizable reduction in underwriting losses in the mortgage and financial guarantee segments, the rating agency said.

“The overall industry’s conservative operating strategy and effective capital management leave it sufficiently capitalized to navigate the underwriting cycle and volatility in the financial markets, but challenges remain,” Best said in the report, which was released last week.

Among other results, net premiums written declined for the third consecutive year, the first time that has occurred in the years Best has been conducting the survey. P/C insurers wrote $419.3 billion in net premiums in 2009, a 5.9% decline from 2008, Best said.

The industry’s combined ratio improved to 101.2% in 2009 vs. 104% the prior year. Policyholder surplus increased to $519.3 billion at year-end, an 8.8% increase from the previous year.

Copies of the report, “U.S. P/C Industry Results Rebound as Cat Losses Ease, Investments Rise,” can be obtained by going to www.bestweek.com and clicking on Best’s Special Reports. The report costs $65 for non-subscribers.

Not surprisingly, some homeowners are upset. John Cobarruvias lives miles from the coast in a two-story brick home in Clear Lake. He said even though he’s had only one claim (for a new roof) in 20 years, the cost of his insurance is going through the roof.

Cobarruvias, who is politically active in support of homeowners’ rights, said six years ago his house cost just $800 a year to insure.

“And now I’m paying $2,800 a year,” said Cobarruvias. In just the past year, Cobarruvias said his premiums have jumped 24 percent.

While he has insurance through USAA, he is not alone. State Farm, the biggest insurer in Texas, is also raising some premiums in Harris County by as much as 20 percent.

But the insurance industry says don’t blame them — blame Houston’s weather.

“There’s a good reason why your rates are where they are,” said Mark Hanna, a spokesperson with the Insurance Council of Texas, a group that promotes the interests of the insurance industry.

Hanna will head to Houston next month to present a slideshow to the media.

The message: The most costly storms in recent Texas history have hit Houston—Ike and Allison—so insurance companies have to charge more.

“Houston’s a great city, but when it comes to weather, you have more than your share,” said Hanna, who also contends that catastrophes cost more these days.

“The price of roofs has doubled in the past 10 years. Labor’s gone up,” said Hanna.

But some customers and critics said the insurance industry’s argument doesn’t add up.

The pro-consumer group Texas Watch is one of them.

“It isn’t news we have bad weather here,” Texas Watch’s Executive Director Alex Winslow said. “The real question is whether our rates in line with the coverage we get. The answer is clearly they are not. Coverage for most homeowners has been slashed.”

The Texas Department of Insurance (TDI), which does not have the power to approve or reject rate hikes before companies issue them, has asked State Farm to voluntarily withdraw its rate hike. Otherwise, the state said other companies would be encouraged to “follow suit” with their own increases.

TDI is also in a dispute with State Farm over past increases. Last week, State Farm took TDI to court to prevent the state agency from publicizing information about rate hikes.

It’s not like insurance companies are going broke in Texas. While in some years they’ve lost money — like in 2008 with Hurricane Ike, when they paid out $1.5 billion more in claims than they collected — in many years they collected far more than they paid out. Using figures provided by the state, in the past 18 years, insurance companies in Texas, on average, collected a $1.1 billion more than they paid out.

The companies have to pay expenses out of that, but with that kind of money, critics don’t feel the companies are entitled to charge even more.

“This is a perfect example of a free market — they’re free to do what they want to,” said Cobarruvias.

What can you do if you get hit with a hike? Call your agent. For example, one local homeowner got a State Farm bill for $2,9000 to insure a $325,000 house in central Houston. That was a 20-percent hike from the previous year. A State Farm agent said by increasing the deductible (to a sizeable $10,000) and eliminating coverage for damage caused by leaky pipes, the bill would be cut by nearly $1,000.

What’s more, the industry says while some of the biggest companies are raising rates, smaller players aren’t.

“Don’t feel like you’re locked into any insurance company. There are savings out there if you just get on the phone and make the effort,” said Hanna.

You can shop around by going to the Texas Department of Insurance website, where you can do basic comparisons to find the lowest premiums.

But even then, you’ll probably still end up paying more than homeowners in almost any other state. Only Floridians pay more to insure their homes, according to National Association of Insurance Commissioners.

The state’s largest property insurer shows no sign of compromising on its marathon legal battle over the state’s ruling that it overcharged homeowners hundreds of millions of dollars.

The insurer – which had an improved bottom line in 2009, according to figures released Monday by the state – has yet to pay a penny to policyholders.

After filing twice in eight months to increase rates, company officials gave a cold shoulder last month to state Insurance Commissioner Mike Geeslin, who suggested State Farm needed to give its customers a break.

And on Thursday, State Farm will take Geeslin and the Texas Department of Insurance to court in an effort to keep the agency from publicizing documents related to the rate spikes, which represent a statewide increase of 13 percent.

Meeting obligations

Company representatives insist that State Farm is just protecting its financial interests and those of its 1.2 million Texas customers with homeowner policies. State Farm also insures about 3 million drivers in Texas.

“Quite frankly, we do this on a regular basis because we have to react whenever necessary to remain in a financial position that allows us to meet our obligations” to policyholders, said Kevin Davis, a spokesman for State Farm in Texas.

Consumer advocates and some lawmakers, who will consider new insurance regulations next year, contend that State Farm has no incentive to abandon its tough-minded tactics as long as the law allows insurers to implement rate increases without the state’s consent.

“I don’t think any insurance company should be allowed to get to the point where they are too big and powerful to be regulated,” said Alex Winslow of Texas Watch, a consumer group active in insurance issues. He accused State Farm of “taking advantage of the marketplace.”

Public Insurance Counsel Deeia Beck, whose state agency represents consumers, said that while State Farm has “a legal right to do what they’re doing, I don’t think it has been a good path to choose” – particularly for its customers.

She noted that the company has used similar tactics in Louisiana and in Florida, where State Farm declared last year that it was going to pull out of the state. It reversed course only after state regulators agreed to let the company raise homeowner rates nearly 15 percent and drop about 125,000 policies.

Dispute over ‘03 order

State Farm’s longest-running dispute with Texas is litigation over a 2003 state order for the company to slash its rates 12 percent and issue refunds for excessive charges.

The state’s public insurance counsel said last year that the company owed nearly $1 billion in overcharges and penalty interest. Geeslin offered to settle the case for $310 million in refunds, but State Farm held firm that it owed nothing. The case is back in court again.

“State Farm’s rates are, and always have been, competitive and reflect the risks of the Texas market,” Davis said.

Among the risks, the company argues, are unpredictable weather. Davis also noted that the company has paid billions in claims in recent years and ranks high in customer-service ratings compiled by the state.

Davis rejected the assertion that State Farm constantly battles with the Insurance Department, noting that the company and department staffers frequently cooperate on a variety of regulatory issues.

But some lawmakers are growing impatient, particularly after the company announced the back-to-back rate hikes.

“Most families in North Texas haven’t seen their incomes go up by double digits this year, yet these big insurance companies think it’s OK to increase their premiums by double-digit increases,” said Rep. Chris Turner, D-Burleson. “With Texans already paying the second-highest homeowners insurance rates in the nation, this is unacceptable.”

Several other House members have made similar comments about State Farm in recent weeks.

Sen. Glenn Hegar, who as chairman of the Sunset Advisory Commission will lead a review of insurance regulations soon, voiced unhappiness with State Farm’s decision to try to block publication of certain documents related to the company’s two rate hikes. The agency has already posted most of the rate filings on its Web site – the first time it has done so for any insurer.

“Texans have an absolute right to full transparency and disclosure when an insurance company is attempting to increase rates on its customers,” said Hegar, R-Katy. “I will not allow [insurers] to hide behind the curtain of confidentiality when their actions impact ratepayers and Texas consumers.”

State Farm contends that the documents contain proprietary information that could harm its business interests if competitors see it. The company says no other state allows the release of such information.

Talk of prior approval

One industry insider with close ties to many legislators said he was “amazed at how belligerent State Farm has been in dealing with the Insurance Department.” He also voiced concern that the disagreements could lead to legislation next year that would put a tighter grip on insurance company premiums.

Most talked-about among lawmakers is a switch to a system that would require home and auto insurers to get prior approval from the state before implementing a rate increase. Under the current file-and-use law, companies are allowed to immediately impose higher rates once they have notified the insurance department.

Timing questioned

The commissioner can object and order refunds – plus penalty interest – if the new rates are deemed excessive.

When State Farm notified Geeslin of its most recent increase, the commissioner said the timing was “not in the best interests of Texas consumers” and asked company officials to voluntarily withdraw the rate plan. State Farm refused and said it will implement the changes next month.

“State Farm is the poster child for what is wrong with the system, and the commissioner has given them too much latitude,” said Winslow of Texas Watch.

Davis countered that a prior-approval requirement would be a mistake because the current system fosters competition among companies – and better prices.

“Competition is the most effective regulator of rates,” he said, also pointing out that the commissioner has the ability to regulate rates under the current system.

Background: Texas vs. the insurance giant

State Farm’s battles with the state:

May 2003: The Legislature approves an insurance overhaul to combat record increases in homeowner rates caused by massive claims for mold and water damage.

September 2003: Ordered by the Texas Department of Insurance to reduce its “excessive” rates 12 percent, State Farm files suit to block the order, arguing that its rates are fair.

December 2004: Lt. Gov. David Dewhurst, citing a record $600 million in profits by State Farm over a 15-month period, calls on the company to quit stalling and cut its rates.

July 2006: Insurance Commissioner Mike Geeslin rejects a bid by State Farm to increase rates 23 percent in Dallas County and 11 percent statewide. Geeslin also requires prior approval for future hikes.

May 2008: A state appeals court overturns Geeslin’s prior-approval order and sends the case back to Geeslin for hearings to determine whether the company has overcharged its customers.

April 2009: The commissioner begins hearings in the State Farm case. The Texas Department of Insurance and the Office of Public Insurance Counsel contend the company owes hundreds of millions of dollars in refunds while State Farm says it owes nothing.

November 2009: Geeslin orders State Farm to refund $310 million to its Texas customers for overcharges dating to 2003. The amount is far less than the $1 billion that the state’s public insurance counsel says is owed.

November 2009: State Farm rejects Geeslin’s order and says it will take the long-running case back to state court. A spokesman for the company compares the order to the financial stress that State Farm faced with its massive Hurricane Ike losses in 2008.

SOURCE: Dallas Morning News research

“Not in a million years,” he said as he walked into a lawyer’s office to file a lawsuit.

Hurricane Ike tore through his home in the 8800 block of Hedgestone Ct. in La Porte more than a year and half ago.

“When we first opened the door, the smell was terrible from the mold,” Davis said. “We went up to the second floor and that’s when we really saw the damage.”

Since then, he said he’s gone through five insurance adjusters. They’ve paid him enough to fix his roof, but the inside of the home is still gutted.

“We were pretty devastated,” Davis said. “We paid our premiums on time and now I don’t have any trust in them.”
He’s not alone.

The Mostyn Law Firm in Houston is handling about 3,500 Ike-related cases right now. They have quickly multiplied over the past few weeks as homeowners’ patience runs out.

“You have homeowners trying to work with their insurance companies,” said Rene Sigman, an attorney with the firm. “Then it’ll rain like today and they start to see more damages and they’re getting fed up trying to work with their insurance companies. They’re starting to come in and say, ‘I’ve had it.’”

Insurers estimated Ike’s price tag would reach $8.5 billion in Harris County alone.

But the toll might seem even larger for Dave Davis. He and his pregnant wife are still living with relatives. They have no permanent home 549 days after the storm.

“(The insurance company) basically cut us in half,” he said.

Davis filed the lawsuit paperwork Tuesday. He may never get to court, though. Attorneys around Houston tell 11 News well over half their clients are settling before trial.

State Farm, which has almost 30 percent of the homeowner insurance market in Texas, plans to launch the rates in May for new customers and starting June 1 for others as policies come up for renewal.

“As costs related to providing home insurance coverage continue to rise, prices must be adjusted to reflect that trend,” Kevin Davis, a State Farm spokesman, said today.

The insurer’s costs are rising across the board, from claim losses to business expenses, he said.

Separately, Travelers Insurance has told state regulators it plans to hike home insurance rates a statewide average 6.9 percent starting April 17.

A spokesman for that insurer could not immediately offer comment.

In documents filed with the Texas Department of Insurance, State Farm said it opted for a lower rate increase than the 26 percent hike its projections indicate it needs.

State Farm is also increasing the discounts it offers consumers who buy both home and auto policies from the company to 20 percent, up from 15 percent.

State Farm last raised Texas home insurance rates in October with an 8.8 percent rate hike.

The timing of the new filing has state insurance regulators concerned.

In a letter sent last week, Insurance Commissioner Mike Geeslin asked State Farm to withdraw the rate hike voluntarily.

“Multiple rate increases within such a short period of time may indicate a lack of rate-making discipline and lead to market instability,” Geeslin wrote, adding that he worries other insurers may follow State Farm’s lead.

State Farm and the Insurance Department also continue to butt heads in court over a 2004 order from the state to cut rates. After years of batting the case around in court, Geeslin ordered the insurer in November to refund $310 million plus interest to policyholder and the company has appealed.

The Office of Public Insurance Counsel, which represents consumers at state rate hearings, says the latest increase is “excessive” and “unreasonable.”

As it has in the past, the consumer agency took issue with the projected profits the rates would provide and the insurer’s purchase of reinsurance, or coverage used to help pay for claims after catastrophes.

Washington State Insurance Commissioner Mike Kreidler appreciates the political independence of being personally elected. It forces the insurance department to be more in tune with the needs and wants of insurance consumer, said the third-term Democrat. But Kreidler, a former congressman, said it’s not without a disadvantage, too: “When you walk into a legislative session, you don’t have anyone in the governor’s office looking out for you.”

Among members of the National Association of Insurance Commissioners, 11 states have elected insurance commissioners. In the U.S. Virgin Islands, the lieutenant governor serves as the top regulator. In all other states and jurisdictions, the post is appointed.

Georgia lawmakers are considering a constitutional amendment to make the now-elected post one appointed by the governor (BestWire, Feb. 8, 2010). In California, where commissioners have been elected since 1991, both candidates for the Republican nomination for governor — including the incumbent insurance commissioner — have said there is merit in exploring whether to do the same (BestWire, Jan. 29, 2010).

“Having independence from a governor, or having independence from whomever would make an appointment, is vital,” said North Carolina Insurance Commissioner Wayne Goodwin. The first-term Democrat said having an elected commissioner “is an extra level of consumer protection.”

Consumers “expect more from an elected commissioner,” Mississippi Insurance Commissioner Mike Chaney said.

In Goodwin’s 2008 race, both he and his opponent participated in a public financing regime that limited them to individual contributions of $200 or less. But in most states, running for office means raising a lot of money for campaigns. States vary in restrictions on commissioners raising money from the people and entities they regulate. In Louisiana, there are no specific limits on insurance industry contributions; the same laws apply to insurance commissioner candidates as apply to all elected offices, Insurance Commissioner Jim Donelon said, including a $5,000 maximum from corporations. Chaney, a Republican, said in his 2007 race, he raised all his money from agents.

In Washington State, insurance companies and insurer-run political action committees do not contribute to commissioner candidates, Kreidler said. Similar restrictions apply in Georgia, and are extended to the gubernatorial campaign of four-term Republican commissioner John Oxendine. Last year, Oxendine returned $120,000 in campaign contributions from 10 political action committees after an ethics complaint linked the origin of funds to insurance companies he regulates. State Rep. Austin Scott, an Oxendine rival for the GOP nomination, proposed legislation to bar insurance executives from donating to campaigns for insurance commissioner or to the campaigns of any incumbent commissioner (BestWire, Feb. 16, 2010). Oxendine called the bill “a political stunt by a desperate candidate.”

Some commissioners and industry watchers agreed that industry political influence can at least have the appearance of tilting the regulatory process, whether an office holder is appointed or elected — an effect that can be more pronounced when campaign donations are involved.

“I don’t want to be dependent on the industry,” Kreidler said. “When you’re a regulator, it would certainly be a perceived conflict of interest if you’re accepting money from the people you’re regulating.”

Donelon admits that he was against having an elected commissioner before he was for it. As a legislator, “I voted both ways on that bill,” the first-term Republican said. Insurance commissioner races can be contentious, but they force candidates to strike a balance in being both pro-consumer and pro-business, Donelon said. “We move to the center to demonstrate that we are pro-consumer Republicans,” he said.

Birny Birnbaum, executive director of the Center for Economic Justice, supports having elected commissioners — as long as regulated entities are barred from contributing. “The solution for this in the broader issue is to have public financing of campaigns,” he said.

John Lobert, senior vice president for state government relations for the Property Casualty Insurers Association of America, said, “I do not believe that the position is well-suited as an elected one. It just seems to me that direct politics should not play a part in the regulation of business and consumer affairs.” He added, however, “I don’t think there is a pat answer.”

A 2008 NAIC analysis of 10-year average property/casualty industry profitability showed roughly comparable results in operating profits and return on net worth in states with elected commissioners. The results show better results in those states when Hurricane Katrina’s effect on Louisiana and Mississippi are considered.

A key consideration is the level of discretionary authority the insurance commissioner has, said J.P. Wieske, director of state affairs for the Council for Affordable Health Insurance. Elected commissioners tend to have more discretionary authority, which allows them to make more subjective decisions on rates and forms, for example, he said, “which is where the problems can come in.”

In Texas, legislation to make the insurance commissioner an elected position failed in 2008 (BestWire, July 28, 2008). N. Alex Winslow, executive director of Texas Watch, noted that state voters elect overseers for agriculture and the oil industry. “Those are major industries, but they don’t touch the lives of every single Texan. The insurance commissioner does. He makes decisions every day about how much insurance companies charge, what they cover, and how they handle claims,” he said.