Another Texas auto insurer is dumping its higher-risk drivers into its unregulated subsidiary: USAA is switching 144,000 of its Texas auto insurance policyholders to USAA County Mutual Insurance Co., a business unit that is not subject to state rate regulation.

Allstate Insurance Co. announced earlier this year it would move 264,000 of its auto insurance customers into its county mutual. Farmers Insurance Group is also beginning to move some Texas customers into its county mutual and the state expects other auto insurers to follow suit.

According to USAA spokesperson Paul Berry, the move actually began in 2001 and was initiated because the company's "better drivers were subsidizing the higher-risk drivers and our good drivers deserve to pay lower premiums." Under the present Texas insurance code, USAA couldn't lower the better drivers' premiums enough, he says. By removing the higher-risk drivers, the USAA company with the better drivers will suffer fewer claims losses and theoretically will be able to charge them less.

USAA is unable at this time to provide information on how much the good drivers will save or how much more the bad drivers will have to pay.

Growing trend

The trend of transferring higher-risk auto insurance policyholders to county mutuals has slowly built steam over the past five years, according to the Texas Department of Insurance. It is also happening to home insurance customers. Complaints of exorbitant rate hikes (some as high as 300 percent in the Texas home insurance market) are driving consumers to demand that Texas Insurance Commissioner Jose Montemayor step in and force insurers to lower their prices.

But many policyholders don't realize that the commissioner's hands are tied by unique insurance company structures that exempt Texas auto and home insurers from rate regulation.