TEXAS ORDERS HOMEOWNER INSURERS TO LOWER RATES.

The Texas Department of Insurance has ordered most of the insurance company groups writing homeowner coverage in the state to lower their rates by as much as 31 percent, saying the move would save policyholders more than $510 million.

The TDI order was issued under authority of SB 14 enacted in June and covered 32 groups writing 95 percent of the coverage in the state, although not all 32 were ordered to cut rates. The companies were given 10 days to decide whether to appeal, with the deadline coming this week.

State Farm took the biggest dollar hit, a 12 percent cut amounting to an estimated $155 million reduction based on 2002 premiums of nearly $1.3 billion.

A 17.5 percent decrease ordered to Farmers Insurance Exchange came on top of a 6.8 percent reduction taken by the company as the result of a $177 million settlement last December, and American Standard's 10 percent cut was on top of a 10 percent cut it already took after SB 14 was enacted.

Farmers quickly said it would appeal the order, claiming it lost $792 million on homeowner insurance in 2002 and would continue to lose money on that line of business.

TDI said it used standard actuarial methodologies including loss trends, policy type offered in relation to premium charged, profit/loss margins and expenses.

SB 14 gave TDI the authority to review rates and order reductions where appropriate, with a deadline of Aug. 10 for the top 32 groups. The deadline for reviewing the rest of the market is Sept. 9.

Insurers warned that the order will make the situation worse.

"The forced rate reductions will only create more availability issues for the Texas consumer," said Joe Woods, southwest regional assistant vice president for the Alliance of American Insurers. He said fewer insurers will want to write property coverage in the state.

"Mandated rate reductions won't bring stability to the market," said Donald Hanson, southwestern regional manager for the National Association of Independent Insurers.

"Enhancing competition among insurers is and always has been the answer to the issues facing the Texas insurance marketplace."