Customers of the state's largest auto insurers are seeing rates jump this year an average of 1.8 percent to 12.4 percent.

Farmers, State Farm and Allstate began notifying state regulators about the increases in late December.

"For a few years now we've seen auto rates either flat or decreasing, but there is a cyclical nature to insurance rates, so it's not unusual to see some upward movement," said Jerry Hagins, a spokesman for the Texas Department of Insurance. "But we're reviewing these rates to make sure they're justified."

Under the file-and-use system adopted in 2003, insurers can implement rates immediately after filing them with the department, which can then challenge them upon review and demand refunds.

The hikes are necessary because of higher anticipated losses, the insurance companies say in documents filed with the department and released to the Chronicle.

State Farm County Mutual Insurance Co.'s 5.5 percent statewide average hike affects 6 percent of State Farm's 3 million auto customers in Texas.

The increase is being implemented on all new and renewing customers effective Dec. 31.

Customers of State Farm's other larger unit, State Farm Mutual Automobile Insurance Co., will not see a rate increase.

Farmers Texas County Mutual Insurance Co. is imposing a 9.9 percent statewide average hike, and Mid-Century Insurance Co. of Texas, a Farmers' unit, is raising its rates an average 4.5 percent. Both went into effect Friday for existing and new customers.

Allstate's statewide average 12.4 percent increase goes into effect March 7 for existing customers of the company's subsidiary Allstate Fire and Casualty Insurance Co., which insures about 420,0000 policyholders and is the only Allstate unit in Texas taking new auto customers.

Allstate Indemnity customers, which insures many of the company's 1.9 million other customers, will see an average 1.8 percent increase.

"We're taking a look at the losses, but we're basing that on historical trends," said Bill Mellander, an Allstate spokesman.

Allstate last increased rates 3 percent in July 2007.

This year, the company also increased a discount to 5 percent from 2 percent for customers who have their payments automatically deducted from their checking or savings account.

Rod Bordelon, head of the Office of Public Insurance Counsel, said he's still reviewing all of the filings and will ask Allstate for more supporting data. At first blush, he thinks Allstate's 12.4 percent increase is unsubstantiated.

The counsel's office is a state agency set up to advocate on behalf of insurance customers.

He pointed to the company's profit provision of 10-to-12 percent, which he said was high compared with the 3-to-5 percent it has historically used. A profit provision includes what's left of the premiums it collects after covering losses and expenses and does not include its investment return.

"For that reason alone, if not any other, their rate filing will lead to excessive rates," Bordelon said. "We have to take a closer look, and nothing seems to indicate it's really warranted."

Mellander said the company's targeted profit margins are competitive.

"We want to continue growing and are committed to this process. But we're not going to do it if we can't do it profitably," Mellander said.

The state's insurance department took issue with Allstate's profit provision and rate-making methods in its home insurance rates last year.

"The company is using the same procedure in this filing," Hagins said. "We thought it was high in its homeowner filings and we challenged them on it."

A hearing in that case is set for June.

AT A GLANCE
• Company/Statewide average rate increase
• Allstate Fire and Casualty Insurance Co.: 12.4 percent
• Allstate Indemnity: 1.8 percent
• Farmers Texas County Mutual Insurance Co.: 9.9 percent
• Mid-Century Insurance Co. of Texas: 5.9 percent
• State Farm County Mutual Insurance Co. of Texas: 5.5
• Source: Texas Department of Insurance Department and the companies

LOAD-DATE: February 5, 2008
LANGUAGE: ENGLISH
NOTES: purva.patel@chron.com
PUBLICATION-TYPE: Newspaper