As the Legislative Session in Austin continues, the topic of homeowners, and home insurance, are a focal point. Multiple lawmakers have tossed out reforms for home insurance, including Republican State Senator Charles Schwertner of Georgetown.
Two bills filed by Senator Schwertner would essentially be a crackdown on rate hikes. One of the bills would force insurers to get approval from regulators for increases over 10 percent. Another would then create a three-member commission to oversee the Texas Department of Insurance, which a few lawmakers accuse of not prioritizing customers.
The insurance industry is pushing back, though, and for some logical reason. Insurance rate hikes are not something that happens all the time and usually come about due to a variety of factors.
Richard Johnson of the Insurance Council of Texas says things like the weather, and home demand, cause fluctuations.
"It has been the economy, and inflation, but it has also been because of insured losses," he says. "Insurance companies have incurred tremendous losses the last couple of years."
Texas is no stranger to devastating weather, and that has caused a lot of loss for insurers. Whether it be Hurricane Beryl, the Houston Derecho, the recent wildfires, or tornados. The cost of the economy combined with home demand and natural disasters usually spells a rate hike.
In theory, the bill would save people from sudden rate hikes. For example, in 2023, the Texas Department of Insurance (TDI) recorded an average 21-percent jump across the state, which was twice the average the previous two years. The commission created from the bill would also add oversight for TDI, which has not denied a rate hike since 2017.
All of it is in hope to open up the market and provide more oversight. But, in reality, the plan hampers Texas' ability to be a true free market.
"We want Texas to continue to be a competitive market...when companies are not able to business in a market, that becomes concerning," Johnson says. "Because they start to leave, competition goes down, then the rates go up anyway."
The thing is too, this idea has already been tried. California did the same thing years ago, and is now paying for it, especially after wildfires that ravaged Los Angeles.
"The value of property skyrocketed and got to a point where insurance companies could not do business there, less companies were in the state, so there was less competitiveness, and rates then went even higher," says Johnson.
As for how to protect yourself from rate hikes? Johnson says always be shopping for the insurer that fits you best. He adds we need to be careful with capping abilities of insurance companies to recover losses.
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