Nationwide's announcement that it plans to lower homeowners rates in Texas may portend a cycle of rate decreases by carriers for policyholders in the state as reforms initiated two years ago take hold, an insurance group said.
"This could be a signal across the bow that a trend is beginning," said Mark Hanna, spokesman for the Insurance Council of Texas in Austin, Texas.
Yesterday, the Columbus, Ohio-based insurer said that effective Jan. 7, 2006, the company would reduce homeowners rates in its Texas Nationwide Lloyds subsidiary by an average 10.75 percent on renewing customers.
The company also announced it is creating Nationwide Property-Casualty Insurance Company for new customers.
According to National Underwriter Data Service, Nationwide is ranked as the seventh largest writer of homeowners insurance in the state, with less than 4 percent of the more than $4.5 billion market.
"While we have concerns about future Texas weather events, we've discussed our goals and concerns with the Texas Department of Insurance and feel our new rates will be adequate, yet competitive," said Chris Baggaley, regional vice president of Nationwide's Texas operations.
He added that the decrease reflects a desire to grow in the state and its long-standing commitment to the market there.
Joe Case, a spokesman for Nationwide, said after a review of data, the company felt it could make the decrease and still receive adequate capital to do business in Texas.
He said the company had little exposure in the Hurricane Rita impacted areas of Texas but would not make future determinations based on "a knee-jerk reaction to the weather."
"We are looking forward," he said, "and will continue to work with regulators to set rates that are appropriate."
The company's products are sold through exclusive agents, said Mr. Case. Its independent agent subsidiary, Allied, primarily writes commercial insurance in Texas, he added.
According to the Insurance Council of Texas, the decrease stems from reforms enacted in 2003, which keep regulation of rates with the Texas Department of Insurance but allow carriers freedom of form. The change permitted insurers to write mold exclusions into policies, or add coverage as an endorsement with higher premium.
Mold claims in Texas soared after a state jury in 2001 made a $32 million award to a homeowner who claimed a variety of injury and damages after a mold infestation in her house. The award was lowered in 2002 to $4 million, and the case was finally settled in 2004 for an undisclosed sum.
Mr. Hanna at the council said the state is ripe for competition as the result of the reforms, which would translate into rate decreases.
However, he cautioned that the rate reductions could be highly regional. The decreases may not necessarily translate to the coastal areas where recent discussions have focused on increased exposure from hurricanes.
Jerry Hagins, a spokesman for the Texas Department of Insurance, said the department ordered rate reductions two years ago after the reforms took effect. The significance of Nationwide's action is that it is voluntary, he said.
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