One of the questions facing state legislators as they enter the final weeks of this year’s legislative session is whether their actions will provide real help with the rising cost of home insurance, or if lawmakers will make matters worse for Texas consumers.
Some legislation under consideration at the Texas Capitol would give state regulators more control over rate increases. If legislators give the state more power to artificially impose price controls regardless of the actual insured losses in Texas, it will predictably result in less availability of insurance. This has happened in California over the last three decades in a failed regulatory effort that has created an insurance crisis there.”
However, if legislators find ways to rein in lawsuit abuse and help homeowners make their homes more storm-resistant, competition is likely to increase. When that happens, consumers tend to win.
Some may think that rates are rising so that insurance companies can rake in larger and larger profits. In the last 10 years, Texas had an overall underwriting loss of -4.3, meaning for every $100 in premium collected, insurers paid $104.30 in claims and expenses. This includes losses in four of the last five years, for the data available (2019-2023).
Plus, data also shows that rate increases are moderating. The problem is easing. This is why it is important that legislators not turn to ideas that are likely to compound the problem.
Insurance rates are based on risk, and recent increases in rates reflect higher risks in recent years. First, inflation has driven up repair costs for all of us. Also, Texans are seeing more severe weather; Texas had 20 billion-dollar disasters in 2024, the most of any state, and is the national leader in big storms over the past few decades. At the same time, more homes are being built in areas that are vulnerable to major storms or fires.
Another source of high risk in Texas is lawsuit abuse. Texas is fourth in the nation in verdicts of $10 million or more. These lawsuits are often funded by unknown individuals or groups who hope that multi-million-dollar verdicts will give them a lucrative return on their investment.
These factors are the true drivers of higher insurance costs. State legislators cannot control inflation and they cannot stop extreme weather. However, they can curtail legal abuse and require more transparency in lawsuits, and they can also provide incentives for better protecting homes from severe weather. Doing so would actually address the root causes of higher rates.
Additional regulations — such as requirements that the state approve any rate increase of 10 percent or more before it takes effect, instead of having time to do so — will not address the causes of rate increases but instead add to the challenges of competing in the Texas insurance market, because insurers need to adjust rates quickly when risk changes.
It is also important for our legislators to remember how Texas became the best state in the country for business growth and job creation. It was not by over-regulating private industry, but by letting market forces and keeping regulations reasonable.
Some may assume that making insurers jump through more hoops will give consumers relief. However, that type of solution does not address the core causes of higher insurance rates. Legislators should focus instead on lasting, market-driven solutions.
David Sampson of Gainesville, Texas, is the President and CEO of the American Property Casualty Insurance Association.