"Homeowners insurance rates should be lower"

The following is an excerpt from a March 21, 2004 editorial from the Beaumont Enterprise

The Texas Department of Insurance released its first major study last week of homeowners rates since last year's reforms took effect. The report confirmed what many homeowners have suspected - their rates may be a bit more affordable, but Texas still has a way to go before it's competitive with other states.

The state study reported that homeowners insurance companies in Texas had a loss ratio of 58 percent in 2003, meaning that they paid out 58 percent of their premiums on loss claims. That number represents a major improvement over similar numbers in previous years, when carriers had loss ratios of 109 percent in 2001 and 118 percent in 2002. Those figures meant that in those years, insurance companies paid out more in losses than they received from premiums. No business can operate like that, and those numbers vindicated the need for last year's reforms.

Insurers are undoubtedly pleased to be making a profit again in Texas, and ironically, so should their customers. Profitability means that the competition of the marketplace can begin to function again and presumably drive rates lower.

That needs to happen. Texas homeowners insurance rates are still way above national averages. Most homeowners pay more than $1,000 per year for standard policies while residents in other states might pay just a few hundred dollars per year for similar coverage.

The Legislature and the Department of Insurance must continue to monitor homeowners rates in Texas. If the rates don't start decreasing soon, both of those organizations should be prepared to take the action necessary to make that happen. Last year's reforms started that process, but they may need a boost to finish the job.

© The Beaumont Enterprise 2004