Harris County, other areas prone to hurricanes will bear the brunt if hikes are approved

The cost of insurance for thousands of Texas homeowners insured by State Farm is about to go up.

And if you live near the coast, it's going to soar.

The state's largest home insurer filed rate hikes Wednesday with the Texas Department of Insurance that will boost premiums for all of its Texas consumers an average 10.7 percent to cover anticipated expenses and an additional average 9.1 percent to cover the cost of reinsurance.

Reinsurance, the coverage an insurance company buys as a backup to pay for its losses after a catastrophe, is becoming more expensive in the wake of last year's hurricanes, tripling in some cases.

Just last month, Allstate indicated it also plans to raise rates because of rising reinsurance costs.

The pain of State Farm's hikes will fall hardest on counties closer to the Gulf of Mexico, such as Galveston, Harris and Fort Bend, because of the area's hurricane exposure, the company said.

Counties further inland, such as Travis and Dallas, don't face as much threat from hurricanes and therefore not as much risk to the insurance company.

The hike related to reinsurance alone could be as much as an average 39 percent in Harris County and an average 36 percent in Galveston County, State Farm spokeswoman Sophie Harbert said.

She couldn't say how much the company's reinsurance costs rose, but said the cost is being directly passed on to consumers.

Harbert also wouldn't release the average dollar increase each customer would experience because rates will vary depending on where the homeowners live, the deductibles chosen, how much coverage they have, and what discounts they qualify for.

For instance, the company also announced Wednesday that it would boost a discount for customers that have their home and car insured by State Farm to 12 percent from 5 percent. About 80 percent of the company's homeowners customers also have auto insurance with the company.

The rates will be implemented Aug. 1 for new customers and upon renewal for existing customers starting Oct.1. Auto customers will see a statewide average rate cut of 2.6 percent beginning July 17.

The state Insurance Department will review the rates and has the power to challenge them if it deems them excessive, unreasonable or discriminatory, said Jerry Hagins, a department spokesman.

"It will undergo a strict review, and we will begin right away," he said.

Consumer groups were displeased the company filed for a rate hike in the midst of a 2-year-old court battle over a state order to reduce its rates 12 percent. The company has defended its rates as fair and competitive.

"Before they start asking to increase their rates, State Farm needs to pay back the money they already owe," said Alex Winslow, executive director of the consumer group Texas Watch. "I hope Insurance Commissioner (Mike) Geeslin will see this rate increase for what it is and send it back to the scrap heap it came from."

Allstate, the state's second-largest insurer, dropped rates 4.8 percent earlier this year as part of a court case but plans to file a rate increase this summer to cover rising reinsurance costs, said spokesman Joe McCormick.

Allstate also recently said it was dropping windstorm coverage for coastal residents and no longer taking new customers in some Texas counties as it seeks to lower its exposure to hurricane losses in the wake of hurricanes Rita and Katrina.

Reinsurance for companies selling insurance to homeowners has increased 100 to 300 percent, said Jerry Johns, president for the industry trade group Southwestern Insurance Information Service.

"Insurers in Texas are literally at the mercy of reinsurers and must charge higher rates to offset these rising costs," Johns said.

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By PURVA PATEL

purva.patel@chron.com

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