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State Farm claims representative James Benoy talked with Thomas Keener of Arlington about damage from a water pipe break during a freeze in February 2011.
By TERRENCE STUTZ
TERRENCE STUTZ The Dallas Morning News
AUSTIN — State Farm Insurance is charging by far the highest premiums among the 32 insurance companies selling homeowners policies in the Dallas area, even as Texas’ largest property insurer continues to battle state allegations that its rates are excessive.
The prices are not even close. New rate figures submitted to the Texas Department of Insurance this summer show that State Farm’s premiums are well above average in most areas of North Texas. The company’s rates are up about 35 percent from one year ago.
For example, in ZIP code 75244 in North Dallas, the annual State Farm rate is $2,347 on a typical brick home insured for $150,000. That’s nearly $890 more than the average for the 32 largest insurers selling policies in the area, according to an analysis by The Dallas Morning News.
In ZIP code 76001 in Arlington, State Farm is charging $962 more than the average $1,511 rate for the same 32 companies. In Plano, the listed State Farm rate is more than double the average $1,163 rate reflected in the rate guides compiled annually by the insurance department.
Averages were significantly higher in most parts of the Dallas area this year than last year, a News analysis found, usually ranging from an increase of 7.5 percent to 10 percent. But that’s much less than State Farm’s rate hikes. The analysis considers a common set of factors, such as a house’s age, composition and value and the customer’s deductible.
State Farm officials disputed the validity of the rate comparisons. They said the department’s information doesn’t reflect all the discounts the company offers, as well as other important factors.
The comparison “is not an apples-to-apples comparison of every insurer’s policy and coverages,” said Patti Kelly, a spokeswoman for State Farm. She said the tool doesn’t account for discounts customers receive for having both home and auto policies, for instance.
“These discounts help our customers effectively lower their premiums,” she said.
Multipolicy discounts vary widely but could not account for the large gap between State Farm and its competitors. Other insurers also offer such discounts.
The state consumer advocate for insurance said she is not surprised by the findings. Her office, the Office of Public Insurance Counsel, is challenging State Farm’s latest 20 percent increase in homeowner rates in a case pending before a two-judge panel in Austin.
It’s one of two legal cases pitting State Farm against state agencies. The other is a 10-year-old case that centers on allegations by the insurance department that State Farm charged excessive rates for several years.
The latter case is before a state appeals court. That panel is considering State Farm’s appeal of a lower court’s decision ordering the company to refund nearly $350 million to its customers. The overcharges date back to 2003.
In Texas, insurers can file rates and begin using them immediately. The insurance commissioner can order reductions after reviewing the filings.
All insurers are required to file sample rates for both auto and homeowners insurance once a year.
Kelly noted that even though State Farm Lloyds is the largest property insurer in the state, it consistently receives few complaints. State Farm Lloyds is the insurer’s homeowners subsidiary.
“This further illustrates that our customers can depend on us to take care of them when the unexpected happens,” she said.
A leading consumer advocate on insurance issues said the rate guides and the drawn-out legal battles tell a different story.
It’s “another chapter in their history of unwarranted, excessive charges for homeowners insurance,” said Alex Winslow of Texas Watch. “For 10 years, [State Farm has] dragged the TDI through court while overcharging their customers. Now they are fighting to raise their current rates and will probably keep this dispute tied up in court for several years.”
Despite the high rates, State Farm consistently maintains its position as Texas’ largest insurer. Winslow said the Texas insurance market “is extremely hard to shop.” He said consumers don’t have the tools they need to shop the market, which would generate competition and improve service.
“State Farm is the high-profile company, but it is a systemic problem in Texas, where the insurance industry has dictated terms and can get away with unwarranted rate increases time and time again,” he added.
For instance, Winslow advocates for a standard policy across companies so consumers can know they’re comparing common options. Insurers say they prefer to give consumers a wider range of options.
Public Insurance Counsel Deeia Beck is seeking to rescind State Farm’s latest rate increase. She said the company raised rates in 2012 even though it showed good profits and a drop in claims.
Her office encourages consumers to regularly check their insurance premiums to see if they’re paying too much.
“People have a tendency to let things slide when it comes to insurance. Our studies have shown that people can be overcharged by quite a bit if they don’t keep an eye on it. If you don’t shop around, it can cost you,” she said.
The average rates for 32 companies in eight selected ZIP codes in the Dallas area showed significant increases this year from a year ago. Most ranged from 7.5 percent to 10 percent, although the increase in Plano was nearly 13 percent.
In auto insurance, increases were moderate, from 3 percent to 5.5 percent. Figures in the rate guides were for liability coverage, typically about half the cost of an auto insurance policy.
Mark Hanna of the Insurance Council of Texas, an industry group, said the rate increases were expected given the weather patterns in the state over the past year.
“There’s been no shortage of catastrophic weather events in the D-FW area, with two storms last year totaling $1.6 billion,” he said. “The homeowner rates reflect that.”
While prices may be up, Hanna noted that “the options and freedom of choice to pick and choose any insurance company remain with the consumer.”
“Good service, reliability, coverage and a range of other factors should be considered when picking an insurance company,” he added.
Kelly said those considerations are big selling points for State Farm — and aren’t reflected in the price comparisons.
“State Farm Lloyds’ coverages are among the most comprehensive offered in the Texas insurance market,” she said. Agents can help customers manage rates by selecting the right deductible and coverage amounts.
State Farm was the only one of the 32 insurers listed that had an A.M. Best rating lower than A. The company’s B++ rating is considered good, but every other insurer had a rating that was deemed superior or excellent.
A.M. Best ratings measure an insurance company’s financial strength and its ability to pay claims.
State Farm insures more than 1.2 million homeowners in North Texas and across the state, nearly 29 percent of the market.
Follow Terrence Stutz on Twitter at @t_stutz.
YOUR MONEY: How to get the best rate
Some tips for how to get the best deal on homeowners insurance:
Decide what you need: Examine coverages and coverage amounts.
Shop around: Rates vary widely among companies. Ask several for different rates, but make sure you’re asking about the same coverage.
Deductible: Choose the highest deductible you can afford, because you’ll lower your premium.
Discounts: Ask an agent which ones you might qualify for.
Beyond price: Look at other factors, including a company’s financial rating, record of dealing with consumer complaints and the status of licensing by the state.
Age, location and condition of the house: The older or worse condition, the higher the cost. Weather and crime history in your area also will have an effect.
Construction materials: Insurance for brick homes is cheaper than for frame homes.
Fire protection: The better the fire services in your area, the better the rate.
Claims history: The more you’ve filed, the higher your premium.
Credit score: Companies are allowed to use it but can’t refuse your business based solely on your credit history.