Texas Market forces, legal reforms are key to insurance availability

For years, the State of California suppressed the price of home insurance with artificially low rates, rather than allowing insurers to set prices that accurately reflected risk. When wildfires devastated Los Angeles in early 2025, many homes were uninsured, or barely insured, because the state’s heavy-handed regulations had made it impossible for many insurers to operate. Texas leaders who are concerned about rising insurance costs should resist market manipulation and instead pursue reforms that will invite more insurers to compete for Texans’ business.

Insurance rates are going up. Here’s why:

• Inflation has driven up all costs, including repairs for damaged homes and cars.
• Our legal system is being exploited. Texas had 130 “nuclear verdicts” with awards of $10 million or more between 2013 and 2022 — more than any other state but three. Texas families pay $4,594 per year in higher costs that are due to tort lawsuits, according to the U.S. Chamber of Commerce Institute for Legal Reform. 
• More homes are in harm’s way. Nationally, almost 1 in 5 new homes built between 2019 and 2023 were built in high-risk flood areas, including 63,000 in Texas, according to The Wall Street Journal. New construction has also boomed in areas at high risk for wildfires.
• Storms are more severe and more frequent.  Texas suffered 20 separate Billion-Dollar Disasters (BDDs), more than any year on record since 1980.

Here’s how to address rising rates:

1. Prevent the rate distortion caused by lawsuit abuse by capping non-economic damages and curtailing “phantom damages,” restricting misleading trial lawyer ads, and making lawsuits’ funding sources more transparent.
2. Focus regulations on the long-term well-being of consumers by encouraging rate adequacy that will ensure that costs reflect the risk of loss. Texas should also maintain file-and-use form regulations that allow insurers to adjust rates to reflect risk.
3. Fortify our buildings and infrastructure by incentivizing the building of storm-resistant communities and infrastructure, as well as stronger mitigation measures against wildfires.