Texas drivers who get their auto insurance through the state’s insurer of last resort are going to pay more for coverage very soon. Earlier this month, Texas Insurance Commissioner Cassie Brown approved a proposal from the Texas Automobile Insurance Plan Association (TAIPA) to increase rates by 15% for passenger vehicles and by 12.7% for commercial vehicles.
The changes will be effective Oct. 1 and will affect all new and renewed policies from that date on.
Rates climbing for drivers with few options
TAIPA serves as the state’s residual market for auto insurance. To be eligible to buy coverage through TAIPA, drivers must have been previously denied by at least two other Texas-authorized insurers.
“Typically, drivers faced with steep rate increases have the best chance of finding cheaper coverage by comparing quotes from multiple companies,” said Cassie Sheets, a data journalist with digital insurance agency Insurify. “But TAIPA policyholders really can’t save through comparison shopping. TAIPA coverage really is their last resort, so these rate increases will affect consumers who likely have nowhere else to go for insurance.”
Total approved TAIPA rate increases break down as follows:
Dramatic increases to match the voluntary market
TAIPA rate increases are generally an annual event, but this year’s increases are far more dramatic.
From 2016 to 2020, rates increased annually between 3.5% and 4.9%. TAIPA generally tries to cap rate increases at 5% or less. The insurer paused any increases in the wake of the COVID-19 pandemic before requesting and receiving a 5% increase in 2023.
This year’s increases are three times the 2023 increase. The hikes are necessary to match TAIPA’s goal in the broader Texas auto insurance market, according to the Texas Department of Insurance (TDI).
“In order for the voluntary market to function effectively, the rates of the assigned risk market should not be overly competitive with the rates available to consumers in the voluntary market,” TDI said in a statement regarding the rate increase.
Texas private car insurance rates rose 23.8% last year, according to TDI. TAIPA rates must increase to keep pace with spiraling car insurance costs and ensure TAIPA rates don’t fall too far below market figures, the department said.
What’s next? Rates climbing for policyholders everywhere
TAIPA isn’t the only government-backed insurer seeking a dramatic increase in rates to match market conditions. In June, Florida’s home insurer of last resort, Citizens Property Insurance, announced it was seeking a 14% rate increase effective January 2025. Like TAIPA, Citizens stated its goal in seeking such a dramatic increase was to bring its rates in line with market conditions.
“Income growth isn’t keeping pace with the double-digit rate hikes we’re seeing from private home and auto insurance companies,” Sheets said. “People turn to state-run insurers like TAIPA and Citizens when they’re out of options, but these programs are also requesting double-digit increases.”
Escalating prices from last-resort insurers may force some consumers to make difficult and ultimately risky choices, Sheets said.
“People will buy food and pay their rent or mortgages before they buy insurance. So, these rate hikes might depopulate programs and keep state-run insurers solvent, but we should expect to see more people making that choice and sacrificing their insurance.”
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