Texas Home and Auto Insurance in 2024: Lessons from 2023

As we enter the second half of 2024, we can see how tumultuous the Texas insurance industry was during 2023. Both industry professionals and consumers are gaining a better understanding of the current state of affairs and what to anticipate in the coming months.

Here is a brief overview of the events of 2023 and what to expect as we close out the year:

Home and Auto Rate Hikes Doubled National Averages 

2023 set a precedent with homeowner insurance rates skyrocketing 22%, double the national average of 11%. Similarly, the Texas Department of Insurance reported an average rate hike of 25.5% in the auto insurance industry, the largest yearly spike in over ten years and an increase more than twice the national average.

Despite the fact that each region is affected differently, severe weather events, inflation, and their aftereffects contribute to rate increases.

The Weather Wildcard

With 16 billion-dollar disasters striking Texas in 2023 —none of which were hurricanes—Lone Star residents got a crash course in the unpredictable nature and severity of weather patterns in 2023.

Drought, wildfires, floods, and record heat waves plagued the state. The summer of 2023 was the second hottest in Texas history, with an average temperature of 85.3 degrees.

Extreme heat waves set new records in cities across the state:

• August 2023 in San Antonio was declared the city’s hottest on record, as temperatures reached triple digits on 29 of the month’s 31 days.
• El Paso faced 44 days straight where the thermometer soared to 100 degrees Fahrenheit or more during June and July. The streak shattered the previous record of 23 consecutive days in 1994.
• Lubbock set a new daily high-temperature record on July 12, when the mercury hit 110 degrees Fahrenheit. On September 8, Lubbock reached 107 degrees once more, marking the hottest day ever recorded for the month.
• The DFW metroplex saw the second-most days of 105 degrees or more. Dallas residents endured 23 such days, behind 1980, which had 28.

Inflation and the Rising Costs of Recovery

In addition to weather-related challenges, inflation continues to impact Texas insurance. Despite a drop in the national inflation rate to 3%, the inflation rate in DFW is one of the highest in the nation, hovering around 5%.

As a result, everything from everyday items to labor and construction materials remains expensive. Costs for materials and labor are 38% higher than pre-pandemic levels. This means insurers faced increased expenses for repairing and rebuilding homes after Texas disasters, which resulted in $20 billion in shared losses by 2023. Similar challenges faced the auto insurance industry as insurers faced high repair and replacement costs due to supply chain issues, inflation, and advanced vehicle technology

Unfortunately, whenever insurers incur additional costs, these costs are inevitably passed along to consumers, resulting in higher rates.

The 2024 Landscape

For Texas consumers, unpredictable weather, inflation, and supply chain issues mean ongoing home and auto insurance issues. In fact, Texas homeowners pay an average of $5,137 for homeowners insurance and $2,205 for comprehensive auto in 2024.

A Look Ahead

That said, experts say several key factors will shape the Texas home and auto insurance industry in the coming months. :

Rates may stabilize: Rates are expected to remain firm throughout 2024 and likely into 2025. However, the pace of increase is anticipated to gradually slow down, with optimism that price easing may be on the horizon.

Reinsurance (insurance for insurers) capacity may increase: Stability is returning to the reinsurance market, with increased capacity expected. This could result in broader coverage terms, higher limits, and lower premiums in 2025.

Other Factors to Watch: Several other factors will influence how quickly rates level out, including inflation, the development and implementation of resilient construction methods, and adjustments in reinsurance practices.

While Texas is not a stranger to challenges, our adaptability to such adversity paves the way for a more secure and insurable future. If you have questions about your home and auto insurance policies and what you can do to keep your family’s costs low, please don’t hesitate to reach out. That’s why we’re here.”