Texas Winter Weather Woes: Lower Temps, Higher Insurance Rates

The mid-January arctic blast that hit Texas sent temperatures plummeting 20 to 30 degrees below normal with areas of the Lone Star State below freezing for 80+ hours.

It was a stark reminder of the increasingly brutal winters in Texas, which are not only resulting in lower temperatures, but higher insurance and utility rates with homeowners expected to pay more for their policies again in 2024.

“Utility and insurance rates will likely make another upward jump in 2024 thanks to the historic winter storm that pulverized Texas nearly three years ago and the state’s volatile climate patterns,” reported the Dallas Morning News.

Texans, according to the publication, saw their homeowners' insurance rates rise 16.4 percent last year and a wallet-squeezing 50.9 percent rise since 2022.

“Historic Storms” Becoming Common in Texas

That 2021 historic storm may have felt like an anomaly at the time with Austin issuing its first ever wind chill warning, but the city also had two more wind chill warnings including during the January 2024 frigid weather.

“As Central Texas continues to deal with sub-freezing highs and lows in the teens…it could get worse. The added wind expected Monday night into Tuesday morning will make it feel like the single digits above or below freezing. This prompted the National Weather Service to issue a rare Wind Chill Warning– which is Austin’s third time in history,” reported KXAN.

The mid-January storm saw low temperatures across the state from Amarillo to Beaumont with wind chills of 2 degrees in College Station and 12 degrees at the beach in Galveston. There was more than two inches of snow in Coppell and freezing rain in Hill Country.

A second arctic blast in January on the heels of the first again challenged pets, plants, and pipes in Texas.

“Below-freezing temperatures can wreak havoc on a home or apartment's heating system, plumbing, or exterior features,” reported CBS News.

While this January’s weather was nothing like 2021 -- where the February storm almost knocked out the state’s entire power grid and caused hundreds of deaths and billions of dollars of damage – Texans are continuing to pay the price for this severe winter weather.

Texas Regulators Signed Off on 36 Double-Digit Insurance Increases in Q3

It was not good news for homeowners heading into this winter as S&P Global reported that “Texas regulators signed off on 36 double-digit rate increases in the third quarter, three of which were the most impactful hikes in the entire US during the period.”

S&P Global Market Intelligence analysis found approved rate increases of:

• Travelers Personal Insurance Co. (TX) 16.8 percent for a calculated premium change of $130.73 million.
  
  
• Texas Farmers Insurance Co. 15.1 percent for a calculated premium change of $123.30 million.
  
  
• Allstate Vehicle and Property Insurance Co 5.8 percent for a calculated premium change of $104.26 million.
  
  

The Dallas Morning News says that only Arizona has seen bigger home insurance rate increases.

Nerdwallet reported on Jan. 3, 2024, that the average cost of home insurance in Texas is $3,875 per year – more than double the national average of $1,820 per year.

While insurance companies have not pulled out of the state as some have in California and Florida after repeated natural disasters, the Dallas Morning News says that some insurance companies have stopped writing new policies in some high-risk areas of Texas.

The Factors Driving Higher Home Insurance Rates in Texas

The Dallas Morning News article cited three main factors driving the skyrocketing home insurance rates in Texas:

• High Cost of Reinsurance: Homeowners aren’t the only ones seeking insurance – so are your insurance companies as they attempt to limit their risks by purchasing reinsurance. Because of rising claims from repeated severe weather over the past several years, reinsurance entered in 2023 a “hard market”, a period of significant price rises. This hard market has continued into 2024 with Reuters reporting on Jan. 2 that U.S. property reinsurance rates rose by up to 50 percent on Jan. 1. Reinsurance prices are set at the beginning of each year and do not change over the next 12 months.
  
  
• Severe Weather Resulting in Big Losses for Insurance Companies: Despite spreading their risks, insurance companies have suffered a lot of major losses in recent years. In 2023, according to Reinsurance News, a hailstorm hit North Texas in March resulting in $1.6 billion in industry loss, and then in May, severe flooding caused another $1+ billion in losses. In total, there were 16 disasters in Texas in 2023 that cost $1 billion or more, a new state high for billion-dollar disasters in a single year. Hurricane Harvey in 2017, resulted in insurance claims paid nearing $20 billion, and the February 2021 deep freeze cost insurance companies more than $10 billion in claims.
  
  
• Increase in Cost of Construction Materials: It’s not just insurance companies that are contending with higher reinsurance and more claims to pay because of severe weather but the historically high inflation rates over the past several years have resulted in rising costs for construction materials. Higher construction materials matter because that means it will cost insurance companies more to repair or rebuild homes that have been damaged by fire, wind, hail, or other disasters. Insurance companies adjust their premiums based on how much they calculate it will cost to rebuild or repair a structure. The danger is that policyholders can be left underinsured if their insured value does not meet the cost needed to repair or replace their homes.
  
  

“Double-digit premium hikes. Higher deductibles. New coverage limits. Drones to check the state of roofs and yards,” the Wall Street Journal reported. “Home insurers are insuring less and charging more as they try to claw their way back to profitability after losing money in five of the past six years, analysts and insurance agents say.”

The bottom line? Money says “When your homeowners' insurance policy comes up for renewal in 2024, be prepared for an unpleasant shock: You’re likely to face a premium increase of 10 percent to 15 percent, and the price jump could be much higher if you live in an area where there's a risk of wildfires or severe storms.”

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