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Letter to the Editor
Friday January 5
Texas Auto Insurers Raise Rates
AM Best has reported that the two largest writers of automobile insurance in Texas are increasing rates at the end of January. State Farm will raise its private-passenger auto insurance rates an average of 1.7 percent, and Allstate Insurance Group's policyholders will see an average 2.3 percent hike in their auto insurance bills. Both companies pin the increases on increased auto repair and medical costs and harsh weather in the state that exposes cars to damage.
According to an Allstate spokesperson, State Farm is basing its average increase on client data that comes from recent claims experience and what the company predicts could be a long-term trend. This is the first time State Farm has raised rates in Texas since 1996.
The rate increase is an average of subject variables such as place of residence, the type of car and miles driven. Some policyholders in the state will actually see decreases in rates, such as those in El Paso, who will receive an average 7 percent cut in auto insurance rates.
Several other large auto insurers also will raise their rates, according to the Texas Department of Insurance.
Auto insurers in Texas base their rates on a benchmark system. The Department of Insurance sets an annual rate that insurers can charge 30 percent above or 30 percent below. County mutuals, which insure nonstandard risks, aren't subject to the benchmark system. Last August, Texas Insurance Commissioner Jose Montemayor ordered private-passenger auto insurance benchmark rates reduced an average of 1.3 percent.
The Insurance Department will review the auto rate increases and determine whether they are necessary. Over the past two years, the department has ordered several insurers to roll back rate increases after its actuaries determined they weren't justified.
When the Texas Legislature convenes next week, it will decide on a bill calling for insurance companies to offer drivers the option of mileage-based auto policies. The bill seeks to allow the possibility of lower insurance costs for motorists who drive less by charging them by the mile as an alternative to the standard calendar-based plan, reported on by AM Best earlier this week.
State Farm was the Number One private-passenger auto insurer in Texas in 1999, with a 23.7 percent market share, and Allstate was Number Two with 15.6 percent, according to A.M. Best Co. data.
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