Texans have expressed understandable anger at spikes in their insurance rates over the past five years. However, the news today is more encouraging: Rates are stabilizing.
New data from the Texas Department of Insurance shows that in 2025, prices for personal auto insurance in Texas rose by less than one percent. Homeowners insurance rates increased by 4.3 percent, which was a slowdown from sharper rate increases in the previous few years.
The new data suggests that the dramatic premium increases from 2022 through 2024 were driven by unusual external pressures. During that period, insurers were dealing with 40-year-high inflation across the economy, soaring construction and repair costs, continued population growth in areas vulnerable to severe weather and a surge in costly litigation. Inflation reached 9 percent in 2022 — the highest level in forty years. The cost of construction materials, labor, auto parts, and medical services surged. Building material costs rose 43.9 percent from 2020 to 2025. Labor costs went up 34.4 percent. The cost of auto repair parts increased 44.3 percent and labor costs went up 28.4 percent. At the same time, the population grew in areas vulnerable to severe weather and there was a surge in costly litigation.
Rates are moderating because some of those pressures are easing. In fact, signs indicate the market was already stabilizing before 2025. In 2024, auto insurance rate increases were back in line with the average over the past decade, at 4.8 percent. Data from S&P Global showed that the top 10 homeowners insurers in Texas raised rates by mid-single digits that year — a significant drop from 2023, when increases for many companies were in the mid-20 percent range.
Still, cost stabilization is not cost decline, and underlying challenges remain. Extreme weather is one of those challenges. Texas experienced a record number of billion-dollar storms in 2024, with 20 major disasters affecting the state, up from 16 the year before. Losses on that scale inevitably push costs upward.
Legal system abuse is another major factor. Texas has seen a rising number of so-called nuclear verdicts, which are jury awards of $10 million or more. There have been 130 nuclear verdicts in Texas in the past decade — the fourth-highest total in the nation. To some investors, these lawsuits are like lottery tickets; they finance the suits with hopes of hitting big, and that drives up costs. The Perryman Group estimates that tort lawsuits increase costs for Texas families by roughly $5,000 per year across the economy.
Lawmakers have begun to examine potential reforms. One proposal considered last year would have limited the practice of inflating jury awards with unreasonable medical charges, which could help reduce costs over time. Similar reforms in Florida have yielded rate decreases in the past year by many companies for both auto and home. In addition, 17 new insurers have entered the state to do business. States like Georgia and Louisiana have followed Florida’s example and begun to see similar results.
We know that extreme weather will continue to hit Texas, which suffered a record number of Billion Dollar Storms in 2024, the last year for which data is currently available. Preparation for these storms is critical. Grants that help homeowners strengthen roofs, windows and other structural features to meet the Insurance Institute for Business and Home Safety’s standards could reduce storm damage and insurance losses alike. Policies that encourage smarter building decisions in high-risk areas would also help control costs. Texas already has more than 8 million homes at significant risk from storms, and tens of thousands of new homes have been built in high-flood-risk areas in recent years.
The good news is that the market is moving in the right direction. Rates are stabilizing and insurers are adjusting to more normal economic conditions. Roadblocks to further reductions remain, but legislators will have the chance to act on those next year.
Texans deserve an insurance market that is competitive, stable and ready to help families recover when disaster strikes. The data show that progress is possible. With the right policy choices, that progress will continue.