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What's a poor Texas homeowner to do?

By Maxine Shapiro, KERA 90.1 business commentator

Dallas, TX – Can someone please come to the rescue of the Texas Homeowner? Insurance prices have doubled, policies are dropping like flies and the state legislature doesn't reconvene until the middle of January. Even the fact that the State Attorney General's office announced yesterday that Texas is suing a leading insurance company won't change the current calamity. I'm Maxine Shapiro with KERA Marketplace Middays.

The state is suing the parent company of Farmers Insurance Exchange for "deceptive, misleading, and discriminatory homeowners-insurance practices." Allegedly, they've been using credit scoring to deny or accept new policy holders, pricing their policy based on the age of the home, and raising prices based on catastrophes in other states while not disclosing any of this criteria to the consumer.

I had to get the skinny on this so I called Texas Watch, a consumer advocacy and research organization. Stacy Pogue told me that really, most insurance companies do the same thing - Farmers took it a couple of steps further. Pogue went on to enlighten me how things have gotten so out of hand.

We'll use Farmers as an example. You have a homeowner policy with Farmers Insurance Exchange, a regulated company. That means the state has set up a limit on what the company can charge. It's called the benchmark rate. They can charge 30% above or below that rate. But that's it. Now, Farmers Insurance has a subsidiary Fire Insurance Exchange and they're not regulated. And at the time of renewal, you get a little notice that your policyholder has changed to Fire Insurance. And now it's not regulated and they can charge what ever they want.

These companies were originally established for the legitimate high-risk homeowner. In 1985, only 19% of all policies were unregulated. Today in Texas, 95% are unregulated. Which means by law, regulators can't do a thing about the price gouging. The law needs to be changed, but the governor won't call a special session. The economic effects are widespread. Think of the housing market alone. And January's a long way away. For KERA Marketplace Middays, I'm Maxine Shapiro.

Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 p.m. To contact Maxine Shapiro, please send emails to mshapiro@kera.org.