A move by a large insurance company to drop a security discount for homeowners has not been implemented in Texas, but one insurance spokesman thinks the insurance companyâ€™s attempt to do so is significant.
In its filing with the Texas Department of Insurance (TDI), Austin, Texas, to raise its rates an average of 20.8 percent, State Farm Insurance, Bloomington, Ill., also planned to discontinue its security discount. But because the rate filing was not approved, the security discount is still in effect.
Jerry Hagins, information specialist for the TDI, said he is unaware of any other company proposing to discontinue its security discount. â€œThatâ€™s the only development Iâ€™ve heard about where thereâ€™s any movement for or against the discount,â€ Hagins asserted.
A State Farm customer himself, Hagins said he received the discount on his last insurance premium.
â€œThatâ€™s the first Iâ€™ve heard of anybody dropping that,â€ said Mark Hanna, spokesman for the Insurance Council of Texas, about the security discount. But he thinks it is a significant development.
â€œWhen you have someone as large as State Farm â€” because youâ€™re talking nationwide about one-third of the market â€” doing that, youâ€™re certainly going to have the interest of others looking at State Farm and questioning why they did it,â€ he suggested. â€œIf they felt like there was a good reason, thereâ€™s always the possibility of others following suit.â€
Up until approximately four years ago, insurance companies had to use a state form in Texas. â€œIt was the homeowners policy that 95 percent of all insurers used,â€ Hanna explained.
Now that insurance companies can use their own national forms subject to approval by the TDI, â€œYouâ€™ve opened up a whole new world now, and everybody has their own different set of discounts,â€ Hanna noted. â€œItâ€™s not just one blanket policy these days.â€
Security discounts are a sales incentive used by security dealers and systems integrators when selling security systems to residential and commercial customers.
â€œWeâ€™re seeing a lot of variation in policies,â€ conceded Hagins of the TDI. â€œThey all have the right to add [the security discount] or take it off, but as far as I know, most of them offer that, because it just makes a lot of sense.â€
Insurance companies can file for a rate increase with the TDI at any time. Dropping the security discount would have to be approved by the TDI, even though the discount no longer is required.
The Texas legislature dropped the mandatory insurance form to encourage companies to offer insurance in Texas. Hannaâ€™s association represents 500 insurance companies in Texas, a number that he said has decreased a little since the law was changed. â€œItâ€™s hard to bring a lot of insurers into the Texas market because every imaginable weather catastrophe occurs in Texas. Name it, we have it all here in Texas,â€ Hanna asserted. â€œEarthquakes, freezing temperatures that crack water pipes, tornados, hailstorms, flash floods, hurricanes â€” weâ€™re a little short on blizzards.
â€œItâ€™s a pretty tough market to make a living in,â€ he stressed. â€œThey wanted to just open it up so there would be nothing that would scare an insurer from doing business in the state of Texas. Itâ€™s big opportunities and big risks when youâ€™re dealing with Texas.â€