Why are insurance premiums increasing, even if I have not made any claims?
There are many reasons why premiums in Texas are increasing. Fundamentally, insurance companies need to bring in enough revenue to cover the cost of their anticipated claims and operating expenses. As claims activity increases, operating costs increase. General factors influencing premium increases include:
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- Increases in the number and severity of storms and weather events
- Increases in the number of cars on the road and accidents
- Increases in the costs to repair new cars due to their advanced technology
- Increases in the costs of labor, materials, and other goods and services
- Increases in reinsurance costs
- Increases in litigation activity
- Increases in liability claim settlement expenses
- Increases in home values and building replacement values
Additional factors that may be unique to individual policyholders can also influence premiums, such as…
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- Past claims activity
- Past speeding tickets or moving violations
- A new or different vehicle or driver
- A change of address (moving)
- A change in the age of someone on a policy
- A change in the age of an insured home or vehicle
- A change in marital status
- A change in credit score
- A lapse in insurance
- A loss of previous insurance discounts
Can insurance companies charge whatever rates they want?
No. Insurance companies must follow Texas law when deciding how much to charge their policyholders. Insurance companies are regulated by the Texas Department of Insurance (TDI), which oversees the rates insurers may charge policyholders under the law.
There are also laws that prevent insurance companies from charging excessive rates in Texas. The Texas Insurance Code Sec. § 2251.051 defines rates as excessive if “the rate is likely to produce a long-term profit that is unreasonably high in relation to the insurance coverage provided.” Insurance companies must submit their proposed rate changes to regulators for review and must mathematically demonstrate that their proposed rates are appropriate for their expected losses and expenses across the policies they intend to write.
What does the Office of Public Insurance Counsel (OPIC) do to protect Texas consumers against excessive rates?
Among many things, OPIC reviews proposed changes to insurance rating plans. A “rating plan” is the algorithm, or set of formulas and factors, that a company uses to determine the premium it charges for each policy. When rating plans appear to result in excessive rates as defined under state law, OPIC works with the company and TDI to reduce proposed rates. If necessary, OPIC files a formal objection to a proposed rating plan with TDI.
What can I do to help keep my insurance premiums down?
While consumers cannot control inflation, the frequency and severity of weather events, or some other factors that influence their insurance premiums, they can control things that may positively impact the personal component of their premiums, such as…
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- Invest in upgraded materials for a home such as an impact resistant roof, hurricane shutters, storm doors, etc.
- Invest in loss mitigation systems such as a security system, leak detection devices, or fire prevention devises
- Maintain an insured property by performing necessary repairs, trimming trees, etc.
- Ask an insurance company about how a new car choice will affect insurance rates
- Take a driver’s safety course
- Increase the deductible amount of a policy
- Ask about available discounts
Consumers can also shop around. Rating plans and the list of characteristics considered in rating varies among companies. The premium a consumer pays for a policy with one company may be greater or less than what they would pay with another. Some people find it useful to have an independent insurance agent assist them with their search as they shop.
Does OPIC have resources that can help me shop for insurance?
Yes. We have created shopping guides that help consumers more effectively shop for insurance:
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- How to shop around for home insurance: https://www.opic.texas.gov/residential-property-insurance/shopping-guide/
- How to shop around for auto insurance: https://www.opic.texas.gov/auto-insurance/shopping-guide/
In addition, consumers should ask about any discounts an insurance company may offer, such as for having multiple policies with the company or completing a driver safety course.