Insurers were given greater freedom a few years ago to set prices and policy terms. With flexibility, the theory goes, competition for business would give consumers more coverage options and better prices.

In this light, State Farm's request for a 23 percent homeowners rate increase in Dallas County and 11 percent hike statewide is bewildering indeed. The company already is fighting state accusations that it is overcharging Texas homeowners by about 12 percent, which could force State Farm to refund more than $350 million plus interest.

State Farm attributes its latest increase request to rising construction costs and to the threat of hurricanes along the Gulf Coast and hailstorms in North Texas.

Maybe so, but consumer groups and regulators are right to ask whether the insurer is playing fast and loose with its numbers. Both have suspected that some insurers exaggerate Texas' history of violent weather as a reason to raise rates beyond what can be justified actuarially.

That's certainly not in the spirit of market competition - or politically savvy. State Farm's lingering battles with state regulators are precisely what consumer groups had argued would happen if regulators eased their grip on the industry. Its action could embolden Austin lawmakers to tighten insurance regulation, something insurers and consumers should resist.

The basic theory of competition is right. The insurance market in Texas had begun to stabilize after expensive mold and damage claims rocked the industry a few years ago. The most serious exception is in South Texas, where several insurers have curtailed coverage in the aftermath of Hurricanes Katrina and Rita.

Homeowners can't simply do without insurance, and that reality hands insurers great power in the marketplace. Consequently, insurance regulators are obliged to do everything in their power to make sure the Texas market is affordable, including questioning any action by State Farm or others that might threaten vibrant competition. This text is invisible on the page, but this text is affected by the invisible item's flow. This text is invisible on the page, but this text is affected by the invisible item's flow. More headlines...

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