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The Texas homeowners insurance market has turned the corner and is regaining momentum to be more competitive, according to year-end reports that carriers file with the Texas Department of Insurance (TDI).
TDI said the top homeowners insurance companies reported a loss ratio of 58 percent for the year 2003. Loss ratios reflect losses on claims as a percentage of total earned premium. The loss ratio does not reflect agent commissions, overhead and other administrative costs, which could add 30 to 35 percentage points to this number.
The new number compares with a loss ratio of 108.6 percent in 2002 and 118 percent in 2001. TDI noted that the 2003 loss ratios did not include the full effect of the TDI-ordered rate reductions to home insurers. If the full reductions were factored it, the loss ratios would have been slightly higher but would still show significant improvement over recent years.
“This return to competitiveness is due to the reforms of Senate Bill 14, passed by the 78th Legislature in 2003,” Texas Insurance Commissioner Jose Montemayor said. “Those reforms, as implemented by the Texas Department of Insurance, are restoring competition that will benefit Texas homeowners.”
While these loss ratios are not predictors of rates, they do demonstrate that the homeowners market has finally gotten past the upheavals of recent years. The 58 percent figure is within a percentage point of the figure that the Texas Department of Insurance has used in setting the benchmark rates in the past.
Mark Hanna, a spokesman with the Insurance Council of Texas, noted that while loss figures are a good sign, the homeowners market still has more recovering to do.
“While Texas insurers are finally realizing an improvement in their losses, it’s been a rough road,” Hanna said in an e-mailed statement. “With the uncertainty over new legislation and Texas natural disasters, few companies have rushed into Texas to sell homeowners insurance. Two of our largest insurers either remain on the sidelines as far as selling homeowners insurance to new customers or have recently re-entered the market on a limited basis.”
“2001 and 2002 were catastrophic years for insurers, with record losses in Texas largely attributable to the mold crisis,” Montemayor said. “What these numbers tell us is that stability has returned to the insurance market in Texas. I look forward to continued improvement.”
“Be thankful that homeowner rates don’t fluctuate on a daily basis,” Hanna added. “Homeowner rates generally reflect several years of experience, which helps even out our weather catastrophes and our good times.”