Jul 5, 2022 - News

Insurance rates rising fast in Texas

Illustration of a hand hammering a board decorated with a one hundred dollar bill over a home window
Illustration: Annelise Capossela/Axios

The price you pay for auto and home insurance is quickly rising as Texas underwriters raise rates to keep up with inflation, escalating mechanics' wages and soaring construction costs, per documents obtained by Axios.

The big picture: Average auto insurance premiums dropped during the pandemic as Texans drove far less and companies slashed rates to retain and win customers.

  • But at least three major insurance companies are now warning Texas insurance agents to brace for higher premiums.

What they're saying: "A rate increase is needed to address deteriorating profitability of the personal auto program," states a Germania Insurance bulletin to agents marked "confidential" that lays out the factors for a statewide 9% auto rate increase, on average, effective this month.

Details: The bulletin from Brenham-based Germania zeroes in on claim frequency and severity.

  • "The occurrence of claims has increased as driving patterns continue to normalize after the pandemic. Texans are driving more and having accidents."
  • "Auto repair shop costs continue to increase for vehicle parts and labor, new and used vehicle prices remain high, and delays in receiving parts has lengthened the claims process."

Insurance company Travelers is singing a similar tune and has advised agents that weather, labor shortages, supply chain issues, and an increase in the number of fatal crashes — likely due to distracted driving — is driving up car premiums.

Meanwhile: Safeco Insurance observed that "some policyholders will naturally balk at the higher premiums," per another industry bulletin obtained by Axios.

  • "To set expectations and help mitigate shopping at renewal" the company has been testing the use of a "How inflation affects your premium" pop-up link in the online customer accounts as a heads-up about rising rates and the factors driving them.

Zoom out: The Insurance Information Institute reported that homeowner premium rates are up 12.2% on average nationwide from 2017 to 2021.

  • And on the auto side, catalytic converter thefts claims increased 1,215% between 2019 and 2021 — with Texas reporting the second highest amount of catalytic converter theft insurance claims in the nation.

Be smart: "We always encourage consumers to shop around, take advantage of any discounts offered by an insurer, and to take a close look at their insurance needs and deductible levels,"Albert Betts, executive director of the Insurance Council of Texas, a trade group, told Axios.

  • "What consumers are seeing now is a reaction to increasing losses and increasing costs of the components of a claim, repair and replacement of damage to a home or auto," Betts said.
  • By the numbers: U.S. auto insurers spent about $1 on claims and expenses last year for every $1 they collected in premiums, per the Insurance Council of Texas.

What to know: The Texas Department of Insurance has a helpful shopping tool, as do companies like The Zebra.

What we're watching: If and when inflation slows, supply chain issues are resolved, and everyone learns to drive without texting (which is against the law in Texas), will insurance rates fall?

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