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Lemonade Insurance Leads in Claim Denials
Lemonade Insurance Co. closed more than 65% of its claims with no payment to the homeowner — the highest rate among insurers operating in Texas. However, a spokesperson for Lemonade Insurance Co. said the figures "don't align with our data," and the majority of the company's claims were for renter policies, which represent very different risk profiles and claim behaviors.
Texas Has Alarmingly High Non-Payment Rates
Out of about 2.6 million claims received and closed by home insurers in Texas in 2024, 47% were closed without payment. Texas has a higher rate than the U.S. as a whole. Nationally, about 42% of claims were closed with no payment in 2024. According to a 2024 analysis by Weiss Ratings, in Texas alone, the average no-payment rate across the top 10 insurers was 47%—a dramatic increase from 35% in 2016.
Major Insurers With High Denial Rates
The report revealed that major companies like State Farm, Allstate, and USAA routinely left homeowners without compensation, even after catastrophic damage events. Hearst contacted the insurance companies that closed more than 50% of claims without payment. Many disputed the data, including State Farm and Allstate, and pointed to the many factors that affect claim payouts.
Contributing Factors to High Denial Rates
A 2017 Texas law—House Bill 1774—limited the penalties insurers face for delaying or underpaying valid claims. It also reduced policyholders' ability to recover attorney's fees in bad faith lawsuits and imposed stricter notice requirements. Many homeowners simply can't afford the rising deductible thresholds now imposed on standard policies, often 2% to 3% of the home's value for wind and hail damage.
Industry-Wide Denial Strategies
Insurers increasingly rely on policy exclusions to justify non-payment. Common reasons include categorizing damage as "wear and tear," "pre-existing," or secondary to mold or smoke, regardless of whether these were caused by a covered event. Many reports reveal that adjusters perform brief, surface-level inspections and rely on flawed estimation software that undercalculates repair costs.
Expert Analysis
"There always has been some percentage of the claims that are not valid claims," said Martin Weiss, who founded Weiss Ratings in 1971. "That's just the nature of the business. But 40 percent? 50 percent? No, that's never been the case." The data shows insurers are scaling back the types of damage they cover and raising deductibles, while homeowners are less likely to challenge denials.
Conclusion
While Lemonade Insurance shows the highest denial rate at over 65%, the problem is systemic across Texas insurers, with nearly half of all homeowner claims closed without payment. The trend represents a significant shift from historical norms, leaving many Texas homeowners vulnerable despite paying premiums for coverage they expect to receive.