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Some to pay less for car insurance

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  • Some to pay less for car insurance

    June 8, 2005, 9:36PM

    Some to pay less for car insurance
    Higher-risk drivers will be getting a break

    Copyright 2005 Houston Chronicle

    Thousands of drivers covered through the state's auto insurer of last resort will see their rates drop in September.

    The number of drivers covered through the Texas Automobile Insurance Plan Association is also near record lows, signaling the auto insurance market may be heating up as a result of reforms passed two years ago.

    "It's good news for policyholders and for auto insurance customers in general because the voluntary market seems to be highly competitive," said Jerry Johns, a spokesman for the association.

    Policyholders will see their rates fall an average 5.3 percent as their policies come up for renewal. Changes vary by county, and the cut doesn't apply to commercial vehicles.

    The order issued by the Texas Department of Insurance comes despite the association's request for a decrease of less than half a percent and the Office of Public Insurance Counsel's suggestion that the rates be slashed 29.8 percent.

    The association raised rates an average 27.7 percent last year.

    Also known as the "assigned auto insurance market," the association places drivers who can't find companies to voluntarily insure them. Most drivers assigned to insurance companies through the association are considered high risk because of poor driving records or high claims rates.

    The association assigns drivers to companies that provide coverage at the rates the department approves, although the rates are usually above those in the standard market.

    If too many drivers seek coverage through the association, insurers forced to take on the riskier policies may have to raise rates for everyone else to cover losses.

    The association has also shrunk, meaning more companies are taking on policyholders in the regular market and even competing for them with new discounts and policy plans.

    The number of assignments made by the association dropped to 47,434 in 2004 from 74,506 the year before, signaling the number of policyholders has also dropped.

    No one tracks the number of association policyholders, although most are in Harris and Dallas counties.

    "The drop is an indication the voluntary market is more competitive and that's something that we hope to see as regulators," said Jerry Hagins, a spokesman for the insurance department. "That's a good thing."

    The state's largest auto insurer, State Farm, had about 16,300 association policies in force as of April 15, spokeswoman Sophie Harbert said. That's down from 26,000 last year. Allstate has about 4,500.

    State lawmakers deregulated auto insurance in the 2003 session. But consumers are just starting to see the results because the new rules — allowing companies to use new types of policies and change rates upon filing them with the department — didn't go into effect until December.

    State Farm increased the discount it offers auto customers who have another qualifying State Farm policy, such as a homeowners policy, to 15 percent from 10 percent. The company also added more lines of insurance that help qualify auto consumers for the cuts.

    Farmers has expanded some discounts and plans to introduce two more in July, spokeswoman Michelle Levy said.

    The insurers offer discounts of up to 10 percent for auto policyholders who also have renter's, mobile home, life or home insurance with Farmers.

    The company is also seeking state approval for a 10 percent discount for consumers who pay premiums through an automatic withdrawal and a 10 percent to 15 percent discount for those who opt for higher deductibles.

    Allstate rolled out new discount packages and auto insurance plans in Texas last month. For an extra premium of up to 15 percent, consumers can buy packages that keep accidents from raising rates and provide replacement value for a new car if it is totaled in a covered loss, while earning credits toward their next premium for having a safe driving record.

    Chubb now lets Texas consumers buy policies that lock in the amount they will receive if their vehicle is stolen or totaled during the policy term.

    Source: Houston Chronicle
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