Lemonade to Stop Selling Home Insurance in More Texas Counties as State Faces High Climate Risks

Lemonade has announced it won’t renew or sell new home insurance policies in several Texas counties, including Collin and Denton in the Dallas area and Abilene and Lubbock in West Texas.

Lemonade’s business in Texas makes up nearly 13% of the insurer’s gross written premiums, according to the company’s most recent filing with the Securities and Exchange Commission. Only California accounts for more of Lemonade’s business.

The newest coverage rollback marks the second time this year that Lemonade has stopped writing home insurance policies in some regions of Texas. In May, the insurer stopped selling new home and condo insurance policies in Angelina, Brazos, Ellis, Grayson, Gregg, Johnson, Lubbock, Potter, Randall, Tom Green, Travis, and Williamson counties.

Insurer points to weather risks

One Texas policyholder shared a non-renewal letter with local ABC affiliate station WFAA. In the letter, Lemonade indicated it would no longer insure the particular home due to weather risks.

“We are required to follow our underwriting guidelines when it comes to determining which properties we can or cannot insure,” the letter said. “One of those guidelines prevents us from covering homes in areas with significant exposure to weather-related catastrophes. Our team determined that your address doesn’t meet our weather exposure guidelines, so unfortunately, we won’t be able to renew your policy.”

Lemonade hasn’t officially commented on the most recent coverage discontinuation, nor has it responded to Insurify’s request for comment.

But a page on Lemonade’s website titled “Why We Sometimes Decline” explains how the company views insurance catastrophe risks:

“If we insure a lot of homes that could all potentially get damaged by the same event at the same time, it might be too risky for us at our stage and size. That means we currently limit coverage in areas with significant exposure to wildfire, hurricanes, and so on.”

What’s next? Climate risks make Texas a tricky insurance market

The catastrophic flooding of the Guadalupe River earlier this month is the most recent example of climate risks impacting the Texas insurance market. Since 1980, Texas has experienced 190 climate disasters that caused $1 billion in damages or more. These included droughts, floods, wildfires, hurricanes, and more.

Disaster-prone states like Texas, California, and Florida present hefty financial risks for insurance companies. As a result, some insurers roll back coverage in high-risk areas or leave the state altogether.

Other Texas insurers, including Farmers and Progressive, have also recently reduced coverage offerings in Texas.

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