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State Farm to raise Dallas area homeowners insurance rates up to 14%

homeowners

By J.J. Smith. State Farm Insurance, the state’s largest insurer of homes, has filed for a rate increase of up to 14.4 percent for Dallas area homeowners, making it the third of the state’s largest insurers to recently raise rates.

Farmers Insurance recently announced an average statewide increase in its rates of 10 percent to 12.6 percent, followed by Allstate’s 6.2 percent boost last week.

State Farm wants to impose the increase on new customers September 1st, and for current policy holders, October 1st.

The size of the increases will vary around Texas and the Dallas area, depending on where claims have been heaviest. In Dallas County, the increases will range from 5.7 percent to 14.4 percent. The rate hike request would average 8.5 percent across Texas.

Texas Insurance Commissioner Mike Geeslin has 30 days to approve or reject that request.

Officials of State Farm, which insures 1.2 million homeowners statewide, blamed the increase on the devastation wreaked by Hurricanes Ike and Dolly last year, hail damage from a barrage of spring storms, plus rising construction costs. 

In 2008, State Farm paid out $1.4 billion in claims, much of it stemming from hurricanes Ike and Dolly. Through May of 2009, before the start of hurricane season, State Farm already has paid $573 million in weather-related claims, according to senior vice president Mike Wey. About 30 percent of customers statewide could see their rates remain the same, Wey said.

Mark Hanna of the Insurance Council of Texas said Ike alone caused $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.”

Insurance Department spokesperson Jerry Hagins said insurers can apply their rate increases to policies immediately after filing them with the Texas Department of Insurance. Experts in the department can then order rate rollbacks or refunds if it finds the hikes are not justified.

State Farm also challenged a rebate ordered six years ago, claiming that its rate hikes were fair. The case, which is still under examination, could cost the company as much as $1 billion.

Hagins said three years ago, State Farm sought a 21 percent rate hike. But after the state’s review, last year’s approved rate increase fell to 3 percent.

“That’s an example of how the rate filing process usually goes and how we like it to go,” said Hagens.

Alex Winslow, executive director of the Texas Watch consumer group, said the increased rates follow years of excessive 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.”

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

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