Inside the costly new reality of insuring a home in Texas

When Maryann McGregor retired in 2020, she and her husband considered downsizing and selling their four-bedroom home in Clear Lake to their adult son. The couple had lived there for nearly four decades, and the house was paid off.

Then their home insurance bills started to skyrocket. Two carriers stopped providing coverage, and Allstate, which had been charging them $3,300 in 2020, is no longer writing new policies in their zip code. Now they’re paying $8,000 for a policy from a little-known start-up. Their wind and hail deductible has jumped to $28,400 — twice what they paid to replace the roof last year.

McGregor worries about burdening her son with the new costs.

“It would be a huge impact on him to have that big insurance bill on top of the tax bills,” she said. “The insurance is more than the taxes now.”

Homeowners like McGregor are struggling in every corner of Texas to keep their homes insured, paying more for less coverage as climate change wreaks havoc on providers.

Home insurance in the state is now among the most expensive in the country, trailing only Florida and Louisiana, according to a Houston Chronicle analysis of U.S. Census survey data. Insurance carriers from Allstate and State Farm to smaller start-ups have responded to the rising frequency and intensity of storms not by pulling out of local markets en masse, as has happened in more regulated states like California, but by jacking up premiums and dropping homeowners in risky areas.

The Texas Department of Insurance recorded a 21% jump in statewide rates last year, the biggest annual spike in at least a decade. In the last five years, rates in Texas have risen faster than anywhere else in the country, based on data tracked by S&P Global.

The Houston metropolitan area has the highest average premiums in the state, according to the Chronicle’s analysis, with communities closest to the coast paying nearly three times the national average for home insurance.

But it’s not just a coastal crisis. Homeowners in Amarillo and Lubbock have seen their premiums surge from one year to the next as wind storms and wildfires rip across the panhandle and West Texas. Rates have soared in Central and North Texas too as softball-sized hail has shredded roofs and tornadoes have destroyed neighborhoods.

In the Dallas-Fort Worth area, home insurance last year ranked among the top 20 priciest in the country, topping every metropolitan area in California and many across the East Coast and Florida.

“We don’t have a healthy home insurance market anywhere in the state,” state Sen. Tan Parker of Flower Mound told lawmakers recently, noting that he was dropped by his provider earlier this year, and is now paying more than three times as much for coverage.

In response, real estate agents say potential homebuyers are backing out of contracts because they can’t afford to add insurance premiums. Sellers are dropping list prices, citing the cost of insurance as the reason.

And homeowners who have paid off their mortgages or inherited their homes are increasingly choosing to opt out of coverage altogether: One in six Texas homeowners, or about 1.1 million households, didn't pay for insurance last year, according to the Chronicle's analysis of Census data.

“I've never experienced anything like this,” said Luis Leal, the owner of My Insurance Group, an independent agency in San Antonio that manages policies for 6,500 homeowners. “I got into the insurance space right at the turn of the 2008 mortgage crisis. And even that didn't cause as much turmoil as the last 4 or 5 years.”

Zero denials

There are many reasons for the surging premiums. Inflation has led to rising construction and labor costs, making it more expensive to replace or repair a damaged home. The cost of reinsurance, which insurance companies buy to protect their own losses, has also increased as global losses skyrocket.

But by far, climate change has been the biggest driver. This year alone, the state has seen 18 billion-dollar weather events, according to the National Oceanic and Atmospheric Administration — the most on record in 40 years. Those included drenching thunderstorms, tornadoes, massive hail and straight-line winds — all of which are made stronger by a warming atmosphere.

“It’s easy to get frustrated with insurance. But what most people are usually actually upset with is math,” said Lars Powell, the director of the Center for Risk and Insurance Research at the University of Alabama. “The insurance company isn't a charity. It's got to recoup its losses with premiums.”

Unlike in California and nine other states where insurers need approval to hike rates, in Texas, companies can begin using them as soon as they notify the state, a system called file-and-use. Insurance lobbyists say the Texas system, in place since 2003, enables a more competitive market, which is ultimately good for consumers.

Consumer advocates question whether companies are being adequately scrutinized. Because mortgage lenders require homeowners to carry insurance, it’s not a product people can freely choose — or forgo.

“This is essentially a utility product,” said Douglas Heller, the director of insurance at the Consumer Federation of America. “Generally speaking, you wouldn't let the utility companies that charge us for our electricity and our water decide to switch their rates without any review.”

The Texas Department of Insurance has the power to outright deny a rate increase. But it hasn’t done so for the more than 22,000 rate filings submitted from property and casualty insurers since 2017. A small fraction have either been withdrawn by the company or rejected for technical reasons.

TDI can also force a provider to seek approval before adopting a new rate but hasn’t done so since 2007.

The department says it objects to 75% of rate filings or asks for more information. Rate filings are denied only if the department deems them inadequate, excessive, discriminatory, or based on unsound actuarial principles, Ben Gonzalez, a TDI spokesperson, said in an email.

Heller and other advocates said insurance companies have done little to prepare for climate change, despite knowing for years it would disrupt their business model. Rather than working to encourage more resilient construction and investing in infrastructure to mitigate floods and fires, they said, companies shifted risk onto consumers through higher deductibles and policies that exclude certain perils, like hail and wind, and that offer less coverage for rebuilding.

After a hail storm in 2013, Vicki Wilmarth and her husband replaced their wood roof with more durable metal shingles. Their insurance cost has crept up anyway.

This September, the Amarillo couple’s provider sent a renewal notice with an annual rate of $6,800, a 90% jump. Wilmarth asked her broker to shop around. She found one plan that offered comprehensive coverage — at “only” a 65% increase.

Wilmarth and her husband are on track to pay off their mortgage in the next year or two, but the milestone may not result in much savings. “You think that when you pay off your mortgage, you're going to have a fairly substantial decrease in your costs,” she said. “But with property taxes and now insurance in Texas, it's not going to make a substantial difference.”

Beaman Floyd, the director of the Texas Coalition for Affordable Insurance Solutions, which represents major Texas insurers including State Farm and Allstate, said providers don’t “set climate policy or build houses.”

“We are very much in favor of … risk mitigation [and] good structural resiliency like building codes,” he said. “But our particular job is making sure that we have the money to pay claims in the changing environment.”

Floyd added that some companies offer discounts when homeowners harden their homes. But customers have to know to ask for them — and to shop around if they aren’t offered.

‘The coast won’

As private insurers drop risky homeowners along the coast, many have turned to a state-mandated safety net plan that is straining to keep up with losses. If the plan, called the Texas Windstorm Insurance Association, or TWIA, can't keep up with claims going forward, homeowners in less risky areas could ultimately be forced to help pick up the tab.

TWIA covers 14 coastal counties and a corner of Harris County.

In August, TWIA’s board voted to approve a 10% rate increase to replenish its reserves, which were drained by Hurricane Beryl. But after hundreds of people protested, including retirees who said they were being priced out of their homes, TDI Commissioner Cassie Brown rejected it.

Todd Hunter, a Republican from Corpus Christi, posted a video on X, celebrating the decision. “The coast won,” he said.

Helen Hanks, a Seabrook homeowner who took on a TWIA policy after her private insurer dropped her last year, was mystified by the decision to reject the higher rate. “I’m assuming that they need the money,” she said. “If we keep saying no, presumably they're not going to be able to pay out claims one day.”

In Harris County, TWIA’s coverage stops west of Highway 146, which stretches north-south along Trinity Bay, and homeowners who don’t qualify are paying triple what Hanks does for windstorm coverage on the private market.

If TWIA needs to raise more cash to cover claims, it has the authority to levy assessments on private insurers operating across the state — meaning homeowners from Amarillo to Austin would have to help subsidize coastal windstorm insurance.

Elsewhere in the state, homeowners who have been denied coverage can join the Texas FAIR  Plan, which has seen a similar rise in exposure over the past few years, mostly in Harris County.

Tackling risk

Republican state leaders rarely acknowledge climate change and have largely avoided discussions about reducing or adapting to its impact. Some have more recently focused on short-term fixes like more strictly regulating insurance companies.

State Rep. John Smithee, an Amarillo Republican who helped create the file-and-use system two decades ago, told lawmakers in August he was no longer “totally sold” on the concept. (His insurance premiums increased 40% last year.)

“It is time to look at it and evaluate how that’s worked and whether it’s worked as we hoped it would,” Smithee said during a hearing. Smithee’s staff said he was unavailable for an interview.

Consumer advocates say Texas should move to an approval process like the one California uses, which would allow the state to have more control over rate increases.

But that could end up restricting the availability of insurance, which has happened in California where major insurers such as State Farm and Allstate no longer offer new homeowners’ policies. Even under file-and-use, Progressive has started to limit new coverage plans in Texas.

Industry lobbyists say the current system allows companies flexibility to change prices as the state’s population continues to boom, particularly in high-risk areas.

But regulation alone won’t solve the growing market pressures from climate change, said Carolyn Kousky, the associate vice president for economics and policy at the Environmental Defense Fund.

“There's no way to make insurance cheap without lowering the risk.”

Several other states have tried to tackle risk indirectly, funding programs that help homeowners harden their homes to better withstand extreme weather and drive down losses for insurance companies.

In 2016, the Alabama legislature started offering grants to homeowners to upgrade their roofs using a construction standard called Fortified, developed by a research institute funded by the insurance industry. It also required that insurers provide steep discounts — up to 55% — on wind coverage for those homes.

As contractors and builders in Alabama learned about Fortified — and as homeowners caught on to the discounted premiums — many started retrofitting their homes even without the grant funding. Their homes fared significantly better during 2020’s Hurricane Sally than non-fortified homes, said Powell from the University of Alabama.

“Alabama has a similar risk profile to its neighbors in the Gulf Coast,” said Michael Newman, the general counsel at the Insurance Institute for Business and Home Safety, or IBHS, which developed the standards. “And yet it has a significantly healthier insurance market.”

In Texas, insurance officials have asked the state Legislature to fund similar home-hardening programs. Rep. J.M. Lozano, R-Kingsville, authored legislation last session that would have allowed TWIA to spend $500,000 annually on a fortified homes program. The bill passed the House but died in the Senate. (Lozano declined an interview request.)

Since private insurance providers across the country aren’t required to cover flood or wind damage, experts said they have less incentive to encourage homeowner upgrades on their own.

Other insurance experts have called for more federal coverage options and centralized regulation at the national level.

“The state-based system simply is incapable of dealing with the national issue of climate change,” said Birny Birnbaum, the executive director of the Center for Economic Justice and the former associate commissioner at the Texas Department of Insurance.

‘Where people can and can’t live’

In Clear Lake, a retired NASA engineer named John Cobarruvias watched as his private premiums crept up year after year — from $3,200 in 2020 to $5,700 this year. He was so fed up that he organized a community meeting in June and hoped a hundred people would come.

“I said, ‘let’s stop complaining. Let’s do something,’” he said.

Two hundred of his neighbors showed up, including staff members from the offices of Republican state Reps. Briscoe Cain and Dennis Paul, and GOP state Sen. Mayes Middleton. McGregor was there, as was Hanks — both curious to learn why insurance had suddenly become so expensive.

“This is not a political issue, but our politicians are the only people who are going to be able to fix it,” Cobarruvias told the crowd.
But addressing the roots of the insurance crisis will require tackling not only how insurance is regulated but also where people live. As Texas cities have boomed in population, the number of homes exposed to extreme weather has also increased.

Policymakers will have to grapple with these development patterns.

In Harris County, for example, officials are pushing residents to move out of the riskiest areas. The local flood control district has purchased thousands of homes in the flood plain since the 1980s, including more than a thousand since Hurricane Harvey hit in 2017, and helped move families to higher ground. But even as the county relocates people out of some flood-prone areas, it has allowed new development in other ones — areas that will be expensive to insure.

“Because we're not answering the public policy questions of how do we adapt to a world in which the climate is changing, we've essentially outsourced land use policy to insurance companies,” said Heller of the Consumer Federation of America. “They’re moving away from certain communities. … When did we decide that the insurance industry is the one that chooses where people can and can't live?”

At the meeting, Cobarruvias encouraged homeowners to write to their state representatives. So McGregor, 65, went home and typed out an email to Paul and Middleton. “Our premiums are simply too high, and deductibles are out the roof. This is not sustainable,” she wrote.

Her son recently moved his family to Dallas for a job. If he didn’t want to return to Houston, McGregor wondered if maybe they should just sell their farmhouse-style home on the open market.

“Maybe we should just move and get out of here before it gets awful,” she said. Before “it gets worse and then we can't sell it because nobody's going to buy it with the insurance rates so high.”