Zapped because of his ZIP code
By Janet Elliott: Houston Chronicle
The answer surprised him: State Farm said the 18 percent increase was due to the U.S. Postal Service switching his neighborhood in unincorporated northern Bexar County to a different ZIP code.
“I just couldn't believe it. My house is in the same location it has been the last 14 years,” Arredondo said.
State Farm said it can't lower Arredondo's premium, because that would violate the company's rating rules on file with the Insurance Department.
Those filings, obtained by the Houston Chronicle through the Texas Public Information Act, reveal how ZIP codes are assigned to 10 “subzones” in urban counties, including Bexar and Harris.
Insurers must justify variations of more than 15 percent within a county to state regulators.
“There has to be some semblance of actuarial justification for what they do,” Insurance Commissioner Mike Geeslin said.
“The risk profiles are radically different,” said Beaman Floyd, director of an industry lobby group.
“Just because you live on Avenue A doesn't mean that you have a higher likelihood of filing a claim than your neighbor on Avenue B,” Winslow said. “It makes sense to use boundaries that are fixed, such as county boundaries, to ensure predictability for policyholders that have similar risks.
He said there is a fire hydrant across the street from his house and crime has not been a problem.
In 2006, Arredondo paid $2,184 for his coverage, with a $500 deductible. The bill due last November was for $2,571.
Arredondo said he is willing to pay a little more every year to make sure that his coverage keeps up with inflation but was caught off guard by last year's bill.
His State Farm agent blamed the Postal Service, which switched about 2,000 customers to a different ZIP code because of population growth.
The company said fire accounts for less than one-third of claims and that the ZIP code system looks at all types of insured losses, including wind, hail, water damage, theft and liability.
Rep. Garnet Coleman, D-Houston, would like to see ZIP code ratings banned. He said the system penalizes poorer neighborhoods where homeowners carry lower deductibles and file more claims because they can't afford to pay for minor property damage out of their own pockets.