Texans probably noticed their homeowners insurance has increased. Here’s why.

With the state dealing with a winter freeze and multiple floods within the past five years, insurance companies have paid out for a lot of damage. The industry is sticking homeowners with the bill.

Homeowners in Texas may have noticed that year-to-year, insurance premiums are increasing.

A new report from LendingTree found that in Texas home insurance rates have increased by 54.5% over the past five years. It means Texas has the fifth-highest rate of increases of any state in the U.S.

With the state dealing with a winter freeze and multiple floods within those five years, insurance companies have paid out for a lot of damage, and the industry wants to recoup those costs somehow.

Guess how they’re doing it?

On Monday’s Houston Matters, Producer Joshua Zinn spoke with Rob Bhatt, an insurance analyst for LendingTree, about the report and what it could mean for the future.

“We focused on five years for this study because in the last five years we’ve seen some pretty dramatic changes,” Bhatt said. “The world is a different place than it was five years ago for obvious reasons, you know, most notably the pandemic. Associated with that are things like inflation and other things that have had all kinds of impacts on so many different aspects of our lives. And that includes impacts on what’s happening with home insurance.”

Just about everyone is getting a higher bill than they used five years ago, and one of the main reasons is because of the climate, according to Bhatt. The National Centers for Environmental Information tracks billion-dollar storms, like hurricanes, hail storms and wildfires.

“And so in the 2010s, Texas on average saw six $1 billion climate-related storms or climate-related disasters a year, and over the past three years Texas has seen 12 a year, so that’s double what was just happening a decade ago,” Bhatt said. These events impact insurance because when these disasters happen, it requires insurance companies to pay money to rebuild homes.

“And when the insurance companies’ costs go up, unfortunately, they turn around and increase our costs, the customers, the homeowners rates for homeowners insurance.”

Some insurance companies have been pulling out of covering homes in disaster areas like Texas. It’s also happening in California and parts of Florida, Bhatt said.

“When insurance companies get into a situation where they’re not profitable or they’re losing money, they have to take some of the, in industry speak, they say they need to take some of the risks off their books so that they could be fiscally solvent,” Bhatt said. “These are things that impact their financial strength ratings.”

High-risk areas also impact insurance companies’ ability to buy reinsurance, which is like insurance for insurance companies.

“So that if they have a lot of claims that there’s a big disaster and they need help, they’ll go to their reinsurance company to back them up,” he said. “And the reinsurance companies aren’t going to accept an insurance company that has too much risk on its books. So yeah, there is a lot of pressure on insurance companies just to reduce the amount of risk they have.”

There are things consumers can do to minimize rate increases.

“Bundling is usually at the top of the list because most companies are going to give you a pretty significant and generous discount if you get your home and auto insurance from them,” Bhatt said. “They see a customer who bundles as someone who’s going to stick with them longer. And so they want to incentivize that.”

Bhatt also suggested increasing deductibles and shopping around.

“The only way to really find the company that has the lowest rate for you is to shop around and get quotes from multiple companies,” Bhatt said. “Quotes are free, so that’s good. You don’t want to be underinsured, but definitely choosing a higher deductible will bring your rates down a little bit.”