Tuesday, July 30, 1996

State lowers benchmark for homeowners insurance

By Associated Press

AUSTIN (AP) - The statewide average benchmark rate for homeowners insurance was lowered on Monday 1.1 percent for homeowners and 24.9 percent for renters insurance.

Insurance Commissioner Elton Bomer's order, the second lowering of the rate mark in two years, means 15 of the 23 geographic rating territories will see reductions.

Insurance companies subject to the benchmark rating system account for about 30 percent of the homeowners insurance market in Texas. The other 70 percent of the $2.3 billion business goes to companies whose rates, by law, aren't regulated.

Rate-regulated companies set their own rates but must stay within a range of 30 percent above and 30 percent below the benchmark rates set by Bomer unless they receive special permission.

These companies must file their new rates with the Texas Department of Insurance by Oct. 30 and may start using them as soon as they are filed.

The benchmark for standard homeowners' insurance rates in Abilene will drop 14.6 percent.
The average Abilene homeowner, currently paying $643 monthly, will see rates drop to $549.

Those rates are for Homeowners' Form B, $80,000 coverage on a brick veneer house, the kind of insurance purchased by 96 percent of Texas homeowners.

Benchmark rates, set by Bomer, set a standard that companies may go 30 percent above or below. The current rate changes do not necessarily mean companies will change their rates soon, or at all.
Last year, the benchmark rates were lowered an average of 3 percent for homeowners and 25 percent for renters.

"It's important to remember, however, that rates vary widely across the state and from company to company, which means it is important for homeowners to shop for the best deal they can get," Bomer said.

His comments were echoed by the industry.

"Many insurers take advantage of the ability to adjust their rates well below the benchmark for property insurance," said Jerry Johns of the Southwestern Insurance Information Institute.

Claims used to calculate the new rates were for the period ending Sept. 30, 1994. That did not include the $1.1 billion hail storm that hit the Dallas-Fort Worth area in May 1995. Losses from that storm will begin appearing in rate calculations that begin later this year.

The benchmark rates fell in most of the state's largest cities, including Houston, San Antonio, Austin and El Paso. They rose in Dallas-Fort Worth.

Bomer's order divided the central rating zone into north and south regions to reflect what he said are major differences in weather-related insurance losses.

The effects of the division mean higher rates for Dallas, Fort Worth and Waco and other cities in the region, and lower rates for San Antonio, Austin, El Paso, Laredo and other southern cities.

"We know from experience that damaging hail strikes North Texas far more often than South Texas. It's not right for homeowners in San Antonio to pay for hail storms in Dallas, just as it wouldn't be fair for homeowners in Dallas or Fort Worth to pay for hurricanes along the coast," Bomer said.

Rates for the Texas Catastrophe Property Insurance Association residential policies will remain at present levels. That pool provides wind and hail coverage in the 14 coastal counties and part of Harris County for buildings that private companies won't insurance voluntarily because of the threat of hurricanes.

Monday's rate order also established discounts on homeowners insurance premiums for consumers who choose large deductibles. Insurance companies must start giving the discounts this fall.
Deductibles are the part of a claim that the policyholder must pay.

There are separate deductibles for wind, hurricane and wind-driven losses and for fire and all other property losses. Until now, the maximum deductible was 1 percent of a home's insured value. The new, larger deductibles range up to 5 percent, with premium discounts growing as the deductible grows.

Harte-Hanks Austin Bureau staff writer Michael Brick contributed to this report.