Thousands of Harris County homeowners are getting hit with big hikes in their insurance premiums. The insurance industry contends the higher prices are justified, because it says the Houston area has proven itself to be costly after some of the biggest weather catastrophes in Texas history.
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.
