Texas FAIR Plan Association (TFPA) rates (the cost of insurance per unit of exposure) determine the amount of premium charged to each TFPA policyholder. Rates are proposed by the TFPA Governing Committee and are subject to review and approval by the Texas Department of Insurance (TDI) prior to use. Premiums are calculated based on standard industry rating factors, including amount of insurance, territory, fire protection, type of construction, deductible amount, and any optional additional coverages. TFPA does not use credit scoring in its rate determination.
Texas Insurance Code Chapter 2211 requires that TFPA rates be set in an amount sufficient to pay claims and to meet all expenses incurred in the writing and servicing of the business. Rates include factors for projected covered losses, operational expenses, agent commissions, and premium taxes. The Commissioner of Insurance must enter an order approving or disapproving a proposed rate change by the Association no later than 60 days after it is filed. The Commissioner may extend the period for entering an order by an additional 30 days.
Based on 2019 actuarial analysis and the overall statewide rate change, TFPA rates would need to increase by approximately +7.9% for homeowners, +9.2% for condominiums, +9.4% for tenants, and +9.5% for extended coverage policies to achieve rate adequacy.
Recent Rate Changes
On March 19, 2020, the Texas Department of Insurance approved rate changes for TFPA's Homeowners, Dwelling, Tenant, and Condominium coverage forms. The rate changes were scheduled to apply to new and renewal business beginning May 1, 2020. In April, TDI issued a new order delaying implementation of the new rates. These rates went into effect August 1, 2020. The rate changes are listed in the table below.
|Central North -Greater Dallas/Ft. Worth||2, 3, 4||10.0%||-1.2%||10.0%||10.0%||10.0%|
|Central North - Remainder||16C, 16S, 17, 19C||10.0%||-1.2%||10.0%||10.0%||10.0%|
|Central South||5, 6, 7, 12, 13, 14, 15C||10.0%||-1.2%||10.0%||2.6%||10.0%|
|North/Northwest||15N, 16N, 18, 19N, 20||10.0%||-1.2%||10.0%||5.6%||2.9%|
|Seacoast - Tier 1||8, 9, 10||10.0%||-1.2%||-10.0%||10.0%||4.5%|
|Seacoast - Tier 2||1, 11||7.3%||-1.2%||10.0%||10.0%||10.0%|