State Farm Insurance Co. has hiked its homeowners insurance policy price for the second time in less than eight months, effectively increasing the annual rate for Galvestonians by 39.4 percent since this time last year.
Texas’ largest homeowners insurance company has added 11.8 percent to the price of a Galveston policy in its latest increase, after hitting island customers with a hike of 24.7 percent in October. The full effect of adding both increases is a raise of 39.4 percent in the price of a policy due to expire between now and October this year.
In cash terms, it takes the price of a policy that cost Galveston residents $2,292 before October last year to $3,196, according to the Texas Department of Insurance’s website.
The local increase is the highest in the state, although the rates for Brownsville, Brownwood, Fort Worth, Orange and Port Lavaca are not far behind.
In Houston, residents of ZIP code 77023 are also looking at an overall hike of 37 percent, while those in 77040 were given a 6.3 percent discount in October, only to suffer a 10.6 percent raise now.
The latest hike became effective June 1 for existing customers, with new customers paying the rate since May 1.
State Farm filed its new rate, citing a state average of 4.5 percent, at the state’s insurance commission March 2.
Three days later, Commissioner Mike Geeslin wrote to the company’s chief executive, Phillip Hawkins, expressing his displeasure that the filing followed so closely after October’s state average increase of 8.8 percent and calling for the latest rate’s voluntary withdrawal.
But, according to consumer advocate Texas Watch’s executive director, Alex Winslow, it is not in the company’s interest to do so because, under a Texas law introduced in 2003, insurance companies can “file and use” new rates without waiting for approval from the state’s insurance commission.
“Technically, the commission can deny the increase and tell the company to make refunds and pay penalties, but that has never happened,” he said.
“Typically, the state negotiates a solution that costs the company just pennies on the dollar and leaves the customer with all but a few percent of the imposed increase.
“It also takes years rather than months to resolve such disputes — in fact, we’re still awaiting the outcome of one started in 2003, the year the new law was introduced.”
Kevin Davis, of State Farm, said Texas Watch’s numbers are not representative examples of the rates for different areas.
“They’re just the extreme,” he said.
“In fact, the net effect of our October rate change was a decrease or no change for more than 300,000 of our 1.2 million customers.”
He said another factor is that most customers pay less than the stated rates because of discounts.
“There are several coverage options, and nine out of every 10 of our customers have multiline discounts,” he said.
He also defended the increase as only the third for homeowners since 2003.
“From 2003 to 2008, there were no changes to our policy base rates and, since then, we have applied increases of 2.8 percent in 2008, 8.5 percent in 2009 and 4.5 percent now.”
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