Texas · How insurer results work
How to read a headline about what Texas insurers made
Premium minus claims is not profit. A story about what insurers made in 2020 is a snapshot of that year: less driving during the pandemic, a particular storm season, and an investment market that is not this year’s. A strong industry year does not automatically cheapen your renewal, and a rough year does not prove your carrier overcharged you.
Related reading: Texas homeowners, Texas auto, policy forms, and TWIA wind coverage.
The lines people skip in the earnings story
| Line | What it is |
|---|---|
| Written vs earned premium | Written is what was billed. Earned is the share that belongs to this accounting period. A policy sold in December is not all “this year’s” premium. |
| Paid vs incurred losses | Paid is checks already cut. Incurred adds the change in reserves, the money set aside for claims that are still open. A hail year can look calm on paid losses and ugly on incurred losses. |
| Loss ratio | Incurred losses divided by earned premium, before most operating costs. It is not profit. |
| Expense ratio | Commissions, staff, premium tax, and the cost of adjusting claims. Those dollars are real. Premium minus paid claims ignores them. |
| Combined ratio | Losses plus expenses, sometimes with policyholder dividends, against premium. Under 100 means underwriting covered losses and expenses before anyone counts investment income. Over 100 means underwriting lost money even if the company still reported a profit. |
| Investment income | Insurers hold premium before claims are paid. Returns on that float, and on surplus, are a separate result. A company can make money investing and lose money insuring, or the reverse. |
| Reinsurance | The carrier buys its own insurance for a bad storm year. The premium it pays a reinsurer, and what the reinsurer pays back after a catastrophe, moves the result you see. A coastal wind year and a North Texas hail year do not hit the same reinsurance layer. |
Saying “they made money” without saying underwriting or investment is how a headline gets the year backward.
Why that number is not your renewal
Your premium is prospective. The carrier files a rate for a class of risk: territory, roof, claims, coverage, and credit-based insurance score where the rules allow it. The filing looks forward at expected claims and expenses. It is not a rebate of last year’s statewide profit, and it is not a surcharge equal to last year’s statewide loss. A good year in one line of business can sit next to a bad hail year in another. Statewide is not your street. A coastal wind tier, a Dallas hail corridor, and a West Texas auto book are different ledgers.
TWIA, the Texas windstorm pool for designated coastal areas, is not the same company as your inland homeowners carrier. A story about “Texas insurers” that mixes them together is mixing two systems. Limits and deductibles on your own policy are the numbers that pay a claim: insurance limits. Hail timing, separate from any profit chart: hail season in Texas.
How to use a market story
- Ask which year, which line (home, auto, or both), and whether the figure is underwriting or net income after investments.
- Ignore a dollar total that does not cite a filing or a TDI exhibit.
- Check your declarations: dwelling limit, hail deductible, and liability limits. Those decide a loss. A five-year-old profit article does not.
- If a renewal jumped, ask the agent what changed on your risk or in the filed rate. The answer is local. It is not “because insurers made money in 2020.”
Reserves, in one picture
A hail storm in May does not finish paying in May. Roofs are inspected for months. The carrier sets a reserve, an estimate of what it still expects to pay, and changes that estimate as claims close. Incurred losses move when the reserve moves, even if no new check is mailed that week. Incurred but not reported is the reserve for claims that already happened and have not been called in yet. That is why a profit figure published in July can be revised after the storm season is fully counted. A headline that uses only checks cashed before Labor Day undercounts a hail year.
Reinsurance is the carrier’s own policy. In a simple picture, the carrier keeps losses up to a threshold and buys cover above it. A quiet year means the carrier paid reinsurance premium and collected little back. A catastrophe year means the reinsurer pays part of the excess. Either way, the premium you paid is not sitting in a drawer labeled profit. Part of it bought that protection, part of it is reserved for open claims, and part of it pays the expense of running the company.
