State Farm says that this calculation factor is justified in the northern part of the state.
The largest Texas insurance company, State Farm, has responded to concerns regarding the calculation of its rates, as there are disparities in premiums charged depending on the ZIP codes in which the policyholders live.
An analysis was performed in Dallas regarding homeowners rates and found significant discrepancies.
In fact, when comparing homes of similar values, claims histories, and coverage, Texas insurance rates charged by State Farm based exclusively on ZIP codes could mean a difference of hundreds of dollars. The analysis was based on data from the Texas insurance department, including data from the thirty biggest homeowners coverage providers in the north part of the state.
This Texas insurance practice was not exclusive to State Farm.
Other insurers all used ZIP codes as an important factor in calculating the premiums that they would charge. State Farm spokesperson, Patti Kelly, said that this practice is common because the location of the insured home has a great deal to do with its associated risk.
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Kelly said that “Homeowner rates in a particular ZIP code reflect the expected costs for all types of insured losses, such as fire, water damage, wind, hail, theft and liability.” She also went on to add that “Even if a homeowner hasn’t filed a claim, their rates will reflect the expected costs of these types of losses in their particular ZIP code.”
Other Texas insurance companies also offered quite similar justifications for this practice. However, Consumer Watch, a top consumers group in the state, is voicing extreme dissatisfaction with the argument. It says that the majority of property losses in the north part of the state are from destructive weather, especially hail storms. If this is the case, then this would mean that charging different premiums to homes that are only a few miles apart would not make sense based on the arguments being made by the insurers.
According to Alex Winslow of the consumers group, hail storms are just as likely to strike Plano as they are to hit Arlington, which are only a few miles away of the metropolitan area. That said, Arlington sees Texas insurance rates that are an average of 37 percent higher than homeowners in Plano.