2023 Texas P&C Market Update

As you've likely noticed or felt, the landscape of personal insurance has recently undergone a shift. Ongoing adverse macroeconomic conditions have significantly tightened the retail market. While this change has been gradually unfolding since the end of 2022 from our vantage point, customers, agents, and advisors have all begun to feel its effects more acutely this year.

This holds true on a national and industry-wide scale, but its impact has been particularly pronounced in the home and auto markets here in Texas. Our aim is to provide clarity on some of the underlying causes, especially those that are less frequently discussed. We will also explain how these causes have impacted recent carrier behavior, provide tips for consumers, and outline what can be anticipated by advisors moving forward.

This also marks the start of an ongoing newsletter that will seek to keep you updated on the Texas P&C marketplace to better inform your conversations with clients around insurance.

Causes:

Texas weather patterns and inflation garner a lot of the attention, and rightfully so. Texas does have unique exposure to many different types of catastrophic weather and lagging effects of rising inflation throughout ‘21 to it’s peak in June of 2022 do factor in. However, increased severity of auto losses, social inflation (not factored in CPI), and rising costs or reinsurance are also major and less talked about contributing factors. The spike in reinsurance premiums at the beginning of 2023 and subsequent mid year renewal rate increases (+ 20-50%) have led to the recent acceleration of these effects being felt by consumers.

_{This index combines the rate charged for coverage with the level of risk and loss exposure, providing an indicator of how insurance companies are pricing their property-catastrophe policies considering the potential impact of large-scale disasters or catastrophic events.}

Recent Carrier Responses:

• Exiting markets or states, or entering receivership.

• Temporarily pausing issuing new policies.

• Enforcing stricter underwriting guidelines, with more thorough questioning and extended application processing times.

• Non-renewing policies previously underwritten at insufficient rates.

• Prioritizing bundled business, occasionally declining standalone home or auto coverage (stand a lone business still makes sense in some cases)

• Offering fewer billing options, requiring larger initial payments or full payment.

• Mandating higher deductibles, mainly seen in Texas for landlord insurance.

• Limited capacity/ fewer available options for coastal insurance

Common Misconceptions 

Many think that claims-free history, good credit, or a relatively low-risk location will keep you from having rate increases. This is not true. While positive personal rating factors are helpful and do factor into pricing the macro factors listed above are weighted much more heavily. The rate adjustments we are seeing now aren't personal; they simply mirror the changing market.

What Advisors Can Expect?

• Fewer carrier changes recommended (both for new and existing customers)

• Quotes will expire and increase if not taken with 30 days.

• Renewal rates will be increasing regardless of of carrier.

• 30-40%+ YOY increases should be expected and in some cases will be much greater. This is true regardless of carrier.

• P&C reviews are still very important (both for new and existing customers). The reviews may or may not warrant a carrier change, but when recommended, carrier changes will yield large savings.

• Even if we don’t recommend a carrier change, we will provide talking points on recommended changes or options for your client to consider to make with existing provider.

• Personalized adjustments can be made at renewal even if staying with same carrier (deductible changes, auto telematics programs, etc.).

• We will be asking new questions when providing quotes (more stringent underwriting)

• Roof inspections or home inspections may be required in order to place new policies.

What Are We Advising Consumers?

• Opt for Higher Deductibles to save on your policy (At least have a conversation with your carrier or agent to see if this is worth savings).

• Opt into Telematics Programs (Earn discounts and be rated more individually on your own driving rather than only by the risk pool writ large).

• Review Discounts with your agent (make sure necessary discounts are applied and being rated appropriately)

• Consider tenure - switching companies too often will hurt in the long run.

• Try your best to maintain uninterrupted Coverage - Prevent policy lapses; it's challenging to reinstate.

• Look to bundle Auto and Home first, but be open to separating if that makes sense (dependent on your location and individual home and auto characteristics)

• Reserve Coverage for Catastrophes, handle small claims personally if possible (coincides with increased deductibles)

• Don’t just seek to lower price only. Of course, make sure you are getting a competitive rate and not over paying, but also make sure you are maintaining proper coverage.

• Don’t solely compare compare year over year price changes. Compare your current pricing with other available options in the current market.

I wanted to keep this brief, because, well it’s about insurance, but have also included some additional stats and reference points below.

While these changes are predominantly negative, there's a silver lining in the hope that these aggressive shifts and the near term price increases will ultimately preserve the capacity needed for a more healthy, stable marketplace in the future.

-MD

Other Noteworthy References/ Statistics:

Top Five States By Number Of Major Hail Events, 2022