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Rate Increases Averaging 17.3% Requested by Old American County Mutual Fire Insurance Company in Texas for 2017-2018

Old American County Mutual Fire Insurance Company, the underwriter for Direct General Insurance Agency, submitted a request to the Texas Bureau of Insurance in August 2017 to increase the premiums for its auto insurance customers in the state by an average of 17.3%.

The filing is still pending but, if approved, the proposed changes would be effective for policies written for new customers on or after August 30, 2017. The rate impact would be enacted for current policyholders on or after September 29, 2017.

Proposed Direct General rate changes

In their rate change filing, Direct General states that the company's losses have "...continued to deteriorate in 2016, which is why we Direct General are proposing such a large rate increase. To achieve this adjustment, we are adjusting base rates."

With the increase in premiums, the company has decided to remove the rate level cap, which means that individual policy rate increases may now exceed 15%. However, individual policyholders may have a change in rates that is greater or less than that percentage

The 10% discount tOld American policyholders formerly received from directly visiting the Direct General website no longer applies. According to the filing, website visitors may be offered a discount but they should no longer expect one.

Old American Mutual Fire Insurance Company proposed rate impact

If the rate changes are approved, premiums are estimated to increase for 1,136 Old American policyholders in Texas by an average of $507 per policy. However, as is the norm with rate changes, , the impact will be spread unevenly, with some policyholders receiving increases lower than that figure and other receiving a hike that may exceed it. In percentage terms, the company reports the proposed rate increases will range from 14.6% to 35.4%.

As of 2016, Old American ranked 13th among auto insurance carriers who are active in Texas. The company moved up a couple of spots in the rankings compared with 2015, when they ranked 16th among companies for market share in the state. The Texas auto insurance market is not heavily concentrated. State Farm Group, while commanding more of the market than any other carrier, still holds only 16% of all policies.

How these increases compare

Assuming these hikes are approved, they would be among the highest rate increases to go into effect for auto insurance in Texas in 2017. As of August, 12 of the largest companies in the state have been approved for rate changes by regulators. The average increase in premiums arising from those decisions is 5.7%. Within the approved list, the largest hikes were for Liberty Mutual Group (with an average increase of 14.1%); Nationwide Corporation Group (11.3% on average); and American Family Insurance Group (10.3% on average).

When compared to the rest of the U.S., car owners in Texas face more expensive premiums for auto insurance. Premiums are 8% more expensive than the average premiums for car owners in the country as a whole, with Texas policyholders facing an average annual fee of $1,620 to insure their cars.

That annual tab translates into an average monthly cost of $135, which makes Texas the 14th most expensive state for auto insurance in the U.S. Texas’s neighbors, New Mexico and Oklahoma, are on the cheaper end of the spectrum, paying an average of $114 and $131 respectively. However, just to the east of Texas lies Louisiana, where car owners pay the 7th most expensive premiums in the nation, at $164 per month on average.

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