State Farm plans home insurance rate hike

By PURVA PATEL Copyright 2009 Houston Chronicle

July 15, 2009, 12:49PM

State Farm, Texas' largest home insurer, plans to hike rates statewide an average of 8.5 percent.

Homeowners close to the coast will bear the brunt. Those in southern Harris County and in Galveston County will see increases in the 20 percent range, according to State Farm.

The new rates go into effect starting Oct. 1 for existing customers as policies renew, and on Sept. 1 for new customers.

State Farm, which has 1.2 million Texas policyholders, says it needs the rate hike to because of increase in the number of and the severity of claims.

Hurricanes Ike and Dolly last year cost the company $1.4 billion in claims, the company said. It's unclear if that is net of reinsurance, or coverage the company buys to pay for claims in the even of a catastrophe.

Last year's losses wiped out the company's underwriting profits from 2004 to 2007, the company said.

Insurers use historical claims losses to project the rates they need to pay future claims.

The rate increase follows recent hikes announced by the state's two other biggest insurers, Allstate and Farmers.

Earlier this month, Allstate Texas Lloyds said it would increase rates starting in August by an average 5.5 percent statewide and much more in coastal regions including Houston.

In June, Farmers Insurance said it was raising rates for 285,000 customers by an average 9.5 percent.

State Farm's notice of a rate increase comes as it awaits a ruling on from state Insurance Commissioner Mike Geeslin on a 6-year-old rate case in which regulators ordered the company to reduce its rates 12 percent.