Introduction
Texans are opening their mail to find insurance price increases of 50% or more in the past year. This sudden surge in insurance prices has left many Texans feeling perplexed and concerned about their financial well-being. Families struggling financially now must pay more for insurance, making them doubt if they can afford it. As they anxiously scan through their bills, they wonder how they will manage to keep up with these excessive costs.
Inflation
The reasons behind this alarming increase in insurance prices are complex. In 2022 we saw inflation of 10% causing lumber and other essential home-building supplies to skyrocket. Many months of double-digit inflation set the stage for home and auto insurance prices to rise.
Claims
Texans witnessed record hail claims in 2022. Texas had a record 458 major hail events. According to a March 2023 analysis by State Farm, the company paid out over $3.5 billion in hail claims in 2022. By the end of 2022, most Texas home insurance policies had gone up 40% or more.
Texans started 2023 with a surge in natural disasters. More devastating hailstorms rocked the state during the spring of 2023. A tornado devastated the city of Perryton on June 15, 2023, killing 3 people and injuring 100 more. On June 22, 2023, the town of Matador experienced tennis ball size hail and a tornado that killed 4 people.
These catastrophic events resulted in substantial property damage and an influx of insurance claims. Insurance companies pass on the costs of claims to policyholders by increasing premiums due to the high expenses they face. Due to the 2022 inflation and numerous disasters in early 2023, home insurance experienced large rate increases.
Texas Rising Insurance Prices
Texans are now experiencing the highest annual home insurance rates in recent history. Furthermore, the ongoing economic uncertainties and market fluctuations have also played a role in escalating insurance premiums.
Increasing insurance prices have a wide impact, affecting individuals, families, small businesses, and the economy. Texans must decide. They can either sacrifice important expenses to afford insurance or go without coverage. Going without coverage puts them at risk for unexpected situations.
Eddie Carter, of Carter’s Insurance Agency, has watched clients remove important coverage from their policies to save money. One recent client requested to remove all personal property (contents) coverage from their policy. Eddie Carter states “We are seeing consumers make tough choices on insurance”.
Moreover, the impact of these disasters has affected the ability to buy home insurance. We have witnessed companies stop taking new clients, especially in rural areas. Rural Texans depend on coverage from Texas-based farm mutual insurance companies. The high inflation in 2022 and many disasters in early 2023 made many insurance companies stop accepting new customers.
Rural Texans Suffer
Rural Texans have watched the two largest farm mutuals suspend new policies. National insurance companies oftentimes will not insure unprotected rural homes. This has left many rural families with few options and high homeowners insurance rates. Carriers not currently insuring homes, make this issues worse for homeowners.
Furthermore, home insurance companies are now requiring higher and higher deductibles. Texans are watching insurance companies require a 2% deductible for windstorms, hurricanes, and hail. The 2023 median home price in Texas is $303,000 according to Zillow. A 2% deductible is $6060 which leaves many Texans with a claim wondering how they will pay for the damage.
Meanwhile, California has watched home insurance companies pull out of the state because of the wildfire danger. Florida has watched home insurance companies pull out of the state because of Hurricanes. Will Texas be next to lose insurance companies because of disasters?
Home insurance price hikes are only one aspect hitting Texans. Auto insurance has also gone up dramatically in the last 12 months. Business Insurance is also not immune.
Where do we go from here?
Like most things, insurance is cyclical. Remember the 2000’s dot com bubble burst? Texas experienced a bit of a recession and lower property values and high insurance costs. Right on the heels of the dot.com bubble bursting was the mold crisis.
June 2021 Farmers Insurance vs Melinda Ballard lawsuit resulted in a 32 million judgement that effectively shut the Texas home insurance market down. By November 2001 Farmers was non-renewing homeowners-B insurance policies and offering only limited policies.
Conclusion:
Insurance availability oftentimes dries up in a “hard market”. We are in a hard market in Texas. If we have a peaceful hurricane season, by early 2024 we should see things begin to ease up a little. With fewer catastrophes in the second half of 2023, things should look brighter going into 2024.
An Independent Insurance Agent can help you with your insurance needs. Carter’s Insurance is still offering clients options to insure their homes. Independent Insurance agents offer carrier and product options.
Thank You for Visiting Our Blog.
Written By Eddie Carter, Managing Partner
Carter’s Insurance Agency
Published August 07, 2023
