Homeowners Insurance Rate Increases Announced

Mar 11, 2013

Public Radio East's Jared Brumbaugh speaks with North Carolina Insurance Commissioner Wayne Goodwin about the homeowners rate increases that will take affect July 1st.

On Tuesday, North Carolina insurance commissioner Wayne Goodwin signed a settlement agreement with homeowners’ insurance companies, allowing an average rate increase of seven percent across the state. It could have been worse. According to a press release, the North Carolina Rate Bureau requested an overall statewide average rate increase of 17.7 percent. The difference between the requested and the settled rates amounts to $237 million in savings to policyholders.  Some Eastern North Carolina counties will see about a 20 percent hike in their insurance rates. Less than 24 hours after the rates were released, I spoke with insurance commissioner Goodwin about when the new rates will take effect and how they compiled the numbers.

“In every state, insurance companies have differing ways to request that their insurance rates be approved, and in these states, there’s a system where the insurance companies will submit them for approval before they go into effect, and here in North Carolina, the rate requests were consolidated in just one filing, instead of there being hundreds of filings from all the insurance companies.”

You worked with the North Carolina Rate Bureau, which represents the insurance companies. The goal was to come up with a list of homeowners’ insurance increases that both the rate bureau and the insurance commission could agree on. But of course, it didn’t happen on the first try. Tell me about the process of reaching an agreement.

“My experts recommended and stated that the requests were excessive in nature and otherwise conflicted with what was allowed. I agreed. I ruled that there needed to be a public hearing. In addition to that, I ordered a public comment period. We had about 8,000 members of the (public) mostly from the coast who had input. In the course of the next several months after that, the state and the insurance industry ferociously navigated and, through various proposals, were able to negotiate a settlement that is a fraction of what the insurance industry had wanted.”

On Tuesday, you signed a settlement agreement that would raise the overall statewide average home insurance rate to seven percent. Are those rates spread out across North Carolina, or are there pockets where the rates are higher?

“The lowest rate increases were actually in nine of the coastal counties. Nine of the coastal counties had one percent increase, compared to Charlotte, which had an 8.4 percent increase. And then you had another four or five coastal counties that had 3.4 percent, including a good part of Dare County, as well as some other counties along the coast, Currituck, Hyde and Pamlico. And then, along the southeastern part of the state, Wilmington and some other areas had 8.6 percent.”

Carteret and Onslow counties have a rate increase of 19.8 percent, and then I noticed that neighboring Craven County only had a one percent increase. Why is there such a difference for some areas?

“Because, North Carolina, like other states, the state is broken down by territories, and these territories are divided based upon criteria the state and the insurance industry determine. Obviously, the closer one is to the water, then that affects the rate and also the number of claims. The claims history and the storm history affect the rates. And one of the reasons that I’m glad you pointed that out is that there was a split of the territories not too long ago, and the reason was that people in the western part of the counties you mentioned were upset that they were being treated the same as folks in the eastern parts of those counties whenever the damage and the impact record was greater in the eastern part than in the western part of those individual counties.”

And Territory 8, which includes Brunswick, Carteret, New Hanover, Onslow and Pender counties, they experienced a 19.8 percent increase. How does that translate in terms of money?

“Well, before I answer that question, let me tell you this. As that document shows, the insurance industry, they said their data supported an increase in those counties of 119.2 percent. I said, ‘that’s excessive, that’s unlawful, it’s not allowed.’ And of course they capped their request with that territory at 30 percent, and even once we’ve scrutinized and reviewed it so long, we still were able to reduce that to the 19.8 percent. But that’s a cap. Most people won’t see that. The actual dollar amount is that under the current rate, you would have your typical policy for a house would be $2,342. The impact would raise it to $2,806, so you’re looking at an impact of about $450 in that particular instance, on average.”

Have you had any feedback from county officials about what they think about these rate increases?

“I’ve had some. I mean, no one likes to have any type of increase or anything. I mean, if folks could get our milk and eggs and gas for free, we want it for free.”

Now, what happens if people can’t afford these rate increases?

“Well, that’s why we have competition. Companies say they won’t write here unless they can charge enough for the risk. We need to have enough insurance companies here so people can choose and have a competitive market. If the rates are artificially low, then companies won’t write here, and their only options then would either be to go to the surplus lines market, which is unregulated by the state, or go to the Beach Plan, which is the market of last resort, or to go uninsured at all, and those are not good options respectively. So the best thing is to try to have as many companies as you can that will write and they will not write unless there is a range of states that they can charge. They can discount downwards for the homeowner if they mitigate and if they do other things to lessen their risk.”

The last rate increase was in 2009. If you could explain to me though, why are the insurance rates increasing, and is this something that’s going to happen every couple years?

“Well, as the Department of Insurance experts spent months studying the requests from the insurance companies that operate and cover homeowners’ insurance here, it became apparent that some sort of increase was justified largely due to the steadily rising cost of reinsurance related to hurricane risks, and also to the costs related to the ongoing series of storms we’ve had all across the state. And also, the concern about availability. There had been a number of insurance companies who had testified to the legislative committees recently that they were going to have to pull out from covering North Carolina. And my job, by law, is that I’m supposed to have a balance to ensure that rates are not excessive, but also, if some sort of rates adjustments were warranted, that they only be enough to help keep the market competitive and viable here. But it’s a very complex issue. If we had not done this settlement, I fear that a court case would have led to a much worse result, and that would not be good for homeowners.”

And lastly, when will the rate increases take effect?

“It’s July 1. By law, the insurance companies make the rate request every year. It’s been four years since they last did it for homeowners’ insurance. They make a rate request every year on car insurance. We have the lowest car insurance rates in the South. Homeowners, they’ve chosen about four years.”

I’m speaking with North Carolina insurance commissioner Wayne Goodwin. Thank you very much for your time.

"Yes Sir."

To see a chart with the homeowners rate revisions by territory, click here: http://www.ncdoi.com/media/Documents/3-5%202013%20HO%20Rates%20by%20Territory.pdf