Governor Abbott Directs TDI to Target Texas Home Insurance Costs

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Texas homeowners have watched the cost of insuring their property climb dramatically in recent years, turning homeowners insurance into another major component of the state's broader affordability debate.

On Monday, Texas Gov. Greg Abbott (R) directed the Texas Department of Insurance (TDI) to take several actions intended to reduce property insurance costs, including requiring insurers to account for a home's 'FORTIFIED' roof status when setting rates, restricting certain underwriting decisions based on property age, banning "price optimization," creating an insurance fraud task force, and studying inflated claims costs.

Gov. Abbott's letter points to the scale of the problem. According to the Governor, the average annual homeowners insurance premium in Texas has increased 79 percent in six years, rising from less than $2,000 in 2020 to more than $3,500 in 2026.

The directive follows Abbott's July proposal for a taxpayer-funded Texas Roof Fortification Program, which would provide grants to homeowners for improvements intended to reduce wind and hail damage.

Together, the proposals make clear that homeowners insurance affordability is likely to become a significant issue when the 90th Texas Legislature convenes in January. They also present lawmakers with a more fundamental policy question: should Texas respond to rising insurance costs by giving government a larger role in directing how insurers price and underwrite risk, or should policymakers focus on reducing regulatory barriers and strengthening competition?

Abbott's TDI Directive Targets Texas Homeowners Insurance Rates

Gov. Abbott's August 24 letter directs TDI to pursue five specific actions.

Insurers would be required to incorporate a home's 'FORTIFIED' roof status into rate calculations. They would also be prohibited from refusing to write or renew residential property coverage based on the age of a property or individual components such as its roof.

TDI is additionally directed to issue a bulletin prohibiting "price optimization," which Abbott describes as the use of personal information unrelated to insured risk to determine prices. The agency must create an Insurance Fraud Task Force and study the effects of what the Governor calls "excessive, unnecessary, and inflated claims costs" across homeowners, personal automobile, and commercial automobile insurance markets.

Abbott also instructed TDI to identify other administrative actions it can take immediately and recommend any statutory changes needed to address affordability. Those recommendations are due to the Governor by September 14.

The directive builds on insurance legislation enacted during the most recent legislative session. Abbott noted that lawmakers required insurers to explain why policies are declined or canceled, prohibited mandatory bundling of residential and personal automobile policies, eliminated what he called the "widow penalty," and required updated credit information when credit is used in calculating premiums.

Texas Home Insurance Affordability Is a Real Problem

There is little dispute that homeowners insurance has become increasingly expensive for Texans. TDI's preliminary 2025 figures put the statewide average annual homeowners premium at $3,506. Texas insurers collected approximately $19.75 billion in direct written homeowners premiums that year across more than 8.2 million active policies.

But premiums cannot be examined independently of losses.

TDI reports that insurers paid approximately $8.74 billion in Texas homeowners losses during 2025 for wind and hail, water, fire, theft, liability, and vandalism. Wind and hail alone have represented an average of 62 percent of homeowners losses since 2019. That matters because an insurance premium is fundamentally a price for risk. If the expected cost of covering that risk increases, premiums will face upward pressure as well.

The affordability debate therefore should not begin and end with the price Texans see on their renewal notices. Policymakers should examine the underlying cost of claims, weather exposure, construction and repair costs, litigation and fraud, regulatory costs, reinsurance, and the degree of competition available to consumers.

Abbott's directive recognizes at least part of this reality by asking TDI to study claims costs and insurance fraud rather than treating premiums themselves as the only problem.

FORTIFIED Roofs vs. Taxpayer-Funded Grants

One of the more consequential pieces of Abbott's directive is the treatment of 'FORTIFIED' roofs.

There is an intuitive economic argument for allowing resilience improvements to affect insurance premiums. If a particular improvement demonstrably reduces the expected cost of insured losses, an insurer has a reason to recognize that reduced risk when pricing coverage. TDI itself has previously studied FORTIFIED programs in other states. Its research found examples in which insurers provide significant premium discounts for qualifying fortified properties.

That is materially different, however, from having taxpayers pay homeowners to make those improvements. Abbott's reelection campaign proposed a Texas Roof Fortification Program in July that would provide grants for homeowners to strengthen roofs against wind and hail damage. The concept closely resembles legislation considered but not enacted during the 89th Legislature.

House Bill 1576 (HB 1576), authored by State Rep. Tom Oliverson (R-Cypress), would have established a TDI-administered hurricane and windstorm mitigation grant program. Texas Policy Research (TPR) opposed the legislation because it would have created a new government program, exposed taxpayers to potentially substantial future appropriations, and subsidized improvements to privately owned property rather than relying on private incentives to encourage risk reduction.

The Legislative Budget Board (LBB) could not determine the program's ultimate fiscal impact because funding would depend on future appropriations and participation. TDI estimated that a hypothetical $240 million appropriation funding approximately 24,000 grants could require about 48 additional employees and millions of dollars in recurring administrative expenses.

Allowing homeowners to capture the economic benefit of voluntarily reducing the risk associated with their property can reinforce personal responsibility and market incentives. Having government collect taxpayer money, build a new bureaucracy, and distribute grants for those improvements is something else entirely.

Texas Insurance Regulation Should Not Replace Risk-Based Pricing

Other elements of Abbott's directive deserve closer scrutiny.

Preventing insurers from using information unrelated to insured risk to determine rates is easier to justify than prohibiting them from considering information that may actually predict losses. Texas law already establishes boundaries around insurance rates. The state operates primarily under a file-and-use system, meaning insurers file rates with TDI and generally may begin using them without waiting for prior approval. State law nevertheless requires those rates to be adequate, not excessive, based on sound actuarial principles, reasonably related to expected costs, and not unfairly discriminatory.

That framework recognizes an important balance.

Government has a legitimate role in enforcing contracts, preventing fraud, ensuring insurers remain solvent, protecting consumers against unlawful discrimination, and requiring transparency. That does not necessarily mean government should determine which legitimate risk factors private insurers may consider when deciding whether to assume a risk or what price to charge for it.

The prohibition on refusing coverage based on the age of a property or roof illustrates the tension.

A blanket refusal based solely on age may be overly simplistic if the actual condition of a roof demonstrates that it remains a sound risk. But if age is actuarially relevant to the probability or cost of a future claim, preventing insurers from considering it could separate the price of insurance from the underlying risk being insured.

The cost does not simply disappear. Insurers may respond through other underwriting criteria, higher rates elsewhere, reduced availability, or withdrawal from portions of the market.

Affordability cannot be sustainably achieved by requiring private companies to ignore real costs.

Competition Could Lower Texas Insurance Costs

The broader policy debate should therefore move beyond asking how Texas government can force insurance premiums lower. A better question is how Texas can make it easier for insurers to compete for Texans' business.

Texas already describes its homeowners market as competitive, with approximately 157 companies and 81 insurance groups selling coverage. TDI also reports that recently filed rate activity has moderated. The average filed homeowners rate request for July 2026 was a 2.8 percent decrease, while the average across May through July was an increase of just 0.4 percent.

Those figures do not erase the enormous increases homeowners have experienced over the preceding several years. They do demonstrate why policymakers should be cautious about assuming that another layer of price or underwriting regulation will necessarily produce lasting affordability.

Competition disciplines prices differently than government mandates do.

When insurers are free to enter the market, develop products, price risk, reward loss mitigation, and compete for customers, companies have an incentive to identify lower-risk homeowners and offer better prices. Consumers, in turn, have more opportunities to shop among competing carriers. TDI itself advises Texans facing rising premiums that shopping among insurers is one of the best ways to find coverage that fits their needs and budget.

Texas policymakers should examine whether existing statutes, regulations, filing requirements, mandates, and barriers to market entry unnecessarily increase the cost of providing insurance or discourage additional insurers from competing in the state.

That does not mean eliminating basic consumer protections or abandoning oversight of insurer solvency. Deregulation should not be confused with the absence of rules. It means determining whether regulations actually address fraud, solvency, transparency, or another legitimate public concern rather than merely substituting the judgment of regulators for that of consumers and insurers.

The objective should be a market in which insurers compete aggressively for Texans rather than one in which regulators increasingly decide how insurers must construct their products.

The Texas Liberty Compact and Insurance Reform

The debate over homeowners insurance also illustrates a broader question at the heart of the Texas Liberty Compact: when Texans face a genuine affordability problem, should government's first response be another subsidy, mandate, regulation, or government program?

The Compact provides TPR's framework for evaluating legislation and public policy through the principles of individual liberty, personal responsibility, free enterprise, private property rights, and limited government. Those principles are particularly relevant as state leaders consider how to respond to rising insurance premiums.

Texas should distinguish between government protecting a functioning marketplace and government attempting to manage its outcomes. Enforcing contracts, policing fraud, requiring transparency, and preventing genuinely deceptive or discriminatory practices are different from directing how private insurers must price legitimate risks or using taxpayer dollars to subsidize improvements to privately owned homes.

The latter approaches can create unintended consequences while leaving the underlying causes of higher insurance costs untouched. Subsidies shift costs to taxpayers. Restrictions on risk-based underwriting can shift costs among policyholders. Additional regulation can make it more difficult or expensive for insurers to compete in Texas.

A liberty-oriented approach to insurance affordability should instead ask whether government itself is contributing to the cost of coverage and whether unnecessary regulatory barriers can be removed. It should encourage competition, allow insurers to innovate and price legitimate risk, preserve consumers' ability to choose among competing products, and leave homeowners responsible for decisions involving their own property.

That does not guarantee that insurance will become inexpensive. Texas remains exposed to costly weather events and other risks that cannot be legislated away. But it would keep the state's response focused on expanding choice and competition rather than attempting to manufacture affordability through government intervention.

Texas Home Insurance Reform Should Focus on the Cost of Risk

Gov. Abbott is right to focus attention on homeowners insurance affordability. A 79 percent premium increase over six years represents a significant strain on family budgets, particularly when combined with rising property taxes, housing prices, utilities, and other costs of homeownership. But affordability is an outcome, not a policy.

Government can attempt to influence that outcome through subsidies, mandates, restrictions, and increasingly detailed regulation of insurance pricing. Or Texas can address the underlying forces making coverage expensive while encouraging competition among insurers.

Some parts of Gov. Abbott's directive may fit comfortably within the state's existing role. Combating insurance fraud, investigating inflated claims, increasing transparency, and ensuring insurers do not base prices on information unrelated to actual risk can help preserve a functioning insurance market. Other provisions require greater caution, particularly where government begins dictating which legitimate underwriting factors private insurers may consider.

And Gov. Abbott's proposed roof grant program goes further still by asking taxpayers to subsidize improvements to private homes in an effort to reduce future insurance losses.

Texas lawmakers should resist the temptation to treat every affordability problem as requiring a new government program or another regulatory mandate. Consistent with the principles of the Texas Liberty Compact, the Legislature should examine what is driving losses, remove unnecessary regulatory barriers, encourage greater competition, allow prices to reflect legitimate differences in risk, and give insurers greater reason to compete for Texans' business.

The measure of successful Texas insurance reform should not be how much more authority government acquires over the market. It should be whether Texans have more choices, stronger competition, and a better opportunity to find affordable coverage without shifting the cost of risk onto their neighbors or taxpayers.

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