Community Impact spoke with Rick Tinker, owner of Rick Tinker Insurance in Pearland, about what residents should do and what questions they should ask their insurance companies to keep their homeowners insurance premiums low amid statewide trends.
The conversation has been edited for length and clarity.
What is causing home insurance premiums to rise across Texas, particularly in southeast Houston?
The premiums in our area have been, in many cases, going up 50% to pushing 100%. I’m talking about south Houston, Pearland and Friendswood, but they’re going up in other areas as well.
This area down here on the coast has become so heavily populated that if a [Category 5 hurricane] came up the Gulf Freeway and the insurance companies had to buy every roof south of I-10, that's a lot of roofs. So, the population has been a concern. Obviously, inflation has been going up on goods, services and labor, almost faster than they can raise rates.
All the companies have what they call reinsurance—this is where a large company, like All State, State Farm or Farmers Insurance, might have a $500 million deductible for any one event, and then they have insurance that picks up after that. The smaller companies have a much lower deductible because they can only handle that.
In the reinsurance market, there's only a few players big enough to do that, and when they're getting killed by fires in Hawaii or mudslides in Japan or fires in California, they get tapped. Between all the catastrophes they've had, if these companies have all of this exposure on the books, and the reinsurance companies come in and say, we’re jumping rates 30% for your additional coverage, there's nothing they can do to [reduce] these rates because all the exposure is already on the books.
What can homeowners do to keep their premiums down?
There are several factors that they have a little bit of control over that affect the rate. First of all, if they're buying a house, the newer the roof, the better the rate. The roof is the single most significant factor. But now and then, companies are taking on factors that affect a lot of people in this area. For instance, some either offer limited coverage or no coverage [based on certain factors].
When we insure a house, we insure for its replacement costs—over the last 20 years, a lot of our houses’ replacement costs have almost tripled, and we're required to insure them for that amount, but the one thing we're trying to do is lower things like the contents [of a home]. Because, when they first bought the house, the amount of contents was maybe worth 50% of what the building was, and now we're finding people are happier with 30% because while the value to rebuild their house has gone up fast, the value of their contents has not. So lowering the value [of the contents] is a good idea.
What conversations should homeowners who are submitting a claim due to flood, wind or hail damage have with their agent?
On wind insurance, the worst mistake we see people make is when they get ready to make the repairs, particularly on a big event—they get the job either from somebody cheap or they get a friend to do it, and if they aren't certified by the [Texas Department of Insurance], which can make the house uninsurable. It doesn’t cost anything [to get certified].
Next year, I will have been doing this for 40 years. When we started out, if there'd been a storm in the area, the first person you wanted to look at your roof was the insurance. That's not the case anymore. You want your contractor to look at the damage and decide two things. One, is there damage, and two, is it going to exceed their deductible? Because, what you don't want to do is have the company come out and not pay you money, because a zero-paid claim goes against your claim record. I don't think it should, but they don't ask me. You want to be sure that you’ve got a claim before you invite the insurance agency out to look.
