After Hurricane Andrew devastated Florida in 1992, 11 insurance companies with policies in the state went bankrupt. Others stopped insuring property in Florida. To manage their risk, the firms that remained raised premiums and deductibles. The state formed its own insurance company for those who couldn't get coverage elsewhere. This was somewhat of a political sop by then Republican Gov. Charlie Crist, acting in the wake of outrage over insurance company practices. But even clients of this “government” insurer face premium increases in order to keep the company actuarially sound.
In 2011, State Farm lost $4.5 billion nationwide on its property and casualty lines. This was largely due to just five catastrophic events that the company said were among the 25 largest in its history. Like other insurers, State Farm can't lose $4.5 billion a year for underwriting property and casualty policies. It must either raise premiums or quit the business. Last year, State Farm handled 47,000 claims for hail damage in Texas alone.
Every season of gasoline price hikes and every positive earnings report released by an insurer revives the price gouging outcry. Price gouging isn't a myth. When illegal gouging takes place, it should be prosecuted.
But the gas price differential between Oklahoma and Texas doesn't qualify as price gouging. Neither will the insurance premium and deductible increases that are sure to happen in coming months.