Insurance is not priced the way other products and services are priced. The premiums collected today are not used to pay for losses that have already happened. Doing so is prohibited in Texas. Instead, premiums you pay today go to help pay for losses that will occur in the future.
Texas has experienced billion-dollar-plus losses from catastrophes in nine of the past 27 years, and the average annual catastrophe losses are $940 million.
Insurance is a business not unlike other forms of commerce, where a reasonable return on investment is fundamental to the principle of a market-based economy. A considerable investment is needed to start, run and grow insurance companies, with no guarantee of success.
No one would be willing to take on those kinds of risks unless there was a reasonable expectation of earning a return on investment commensurate with the risk of a catastrophic loss.
Jerry Johns, President, Southwestern Insurance Information Service, Austin
Your recent comments on the high cost of home insurance have been interesting. Just taking into consideration the cost of this type of insurance, without the value of a specific house, the insurance increase is a big thorn in the side of the average homeowner.
My annual premium was going to increase in 2002 from $1,479 to $2,225. By increasing the deductible from $250 to $1,000, the premium was lowered to $1,673. For 2009, the premium is back to $1,972. It would be higher, but in 2004, the insurance company eliminated the cost and coverage for itemized personal property from the house policy to a separate policy with an additional $262 premium. The only coverage which has been added has been identity theft, backup sewer and the usual increase in maximum amount of coverage, which has been declined at times to keep the premium cost down.
The premium would be higher if I did not get credit for multiple coverage with the same company.The increase problem is not limited to the house, but it also applies to car and property tax.
The Legislature representatives are representing their own interests and not those of the people.
Ralph Williams, Dallas
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