A nonprofit agency that represents North Carolina’s insurance industry has filed a request for a statewide rate increase in homeowners insurance that could reach as high as 35 percent in Scotland and Richmond counties.
The North Carolina Rate Bureau filed the request earlier this month with the North Carolina Department of Insurance. Commissioner Wayne Goodwin responded in a statement that he was “appalled” at the request that came just six months after a previous increase, which went into effect in July after negotiations between Goodwin and the bureau.
“I believe the insurance companies should withdraw this rate filing immediately,” Goodwin’s statement said. “If they do not, the insurance companies should expect a full hearing on this matter; I will not entertain any settlement negotiations.”
A public hearing is set for Friday in Raleigh. More than 3,000 written comments had been received at the Insurance Department by Thursday and written comments can flow in through Jan. 31.
Coastal residents like Buck Lineberger of the Brunswick County town of Ocean Isle Beach are especially critical of the possible hikes. He says if they are implemented, premiums will have more than doubled since 2005.
“This repeated pattern of significant rate increases represents an undue financial burden for our homeowners, and this burden has a negative impact on our budget, the regional tourism industry, and local real estate market,” he said in a written statement. “These increases are unfair and unreasonable.”
Scotland and Richmond, along with the coastal communities of Brunswick, Carteret, Currituck, Dare, Hyde, New Hanover, Onslow and Pender counties as well as counties further inland — Cabarrus, Columbus, Duplin, Edgecombe, Granville, Greene, Halifax, Harnett, Hoke, Lenoir, Person, Rowan, Warren, Wilson and Vance — were included in a proposed increase of 35 percent that, if approved, would go into effect on Aug. 1.
The bureau’s request is based on previous fire claims as well as computer models that show increased impact on the North Carolina coast from hurricane-force winds, according to Ray Evans, the bureau’s general manager. Evans says the cost of claims have been outpacing insurance premiums paid for the last 15 years.
Two weeks before Goodwin’s re-election in 2012, the Rate Bureau filed a request to raise prices by almost 18 percent. The companies and Goodwin settled on 7 percent. Before that, the last homeowner’s insurance rate increase took effect in 2009, when insurers sought a 19.5 percent statewide average increase but settled for 4 percent.
That’s how it’s gone ever since the late 1990s, Evans said. Companies propose a rate increase and try to back it up with hundreds of pages of data explaining their rationale, Evans said. The commissioner usually negotiates a much lower amount, but over time the result has been “inadequate” premium levels, he said.
The counties are looped by the rate bureau into an insurance territory — Territory 106 — that includes Bladen and Robeson counties, which according to the bureau suffered more than $1 million in losses from hurricane damage in 2011; about $40,000 in losses in 2010 and $30,000 in 2009. No data was provided on claims due to lightning or fire, but Evans said those numbers were also significant in the bureau’s recommendation.
“The first thing that’s striking is there appear to be more fire and lightning claims than other territories. In 2011, there were almost 2,000 wind storm claims. That stands out as a pretty significant difference.”
From the data the bureau had received on Territory 106, Evans said the “frequency and severity of claims, not including modeling ahead, are higher than the rest of the state.”
But while Robeson and Bladen are in the same territory as Scotland, those counties were only recommended for an increase of 18.3 percent.
Following a public hearing, the bureau’s recommendation will be heard before Goodwin and his staff.
The next step could be handled in court through a potentially costly and lengthy litigation, but Evans said that would be a last resort.
Before it gets to that point though, both Evans and Goodwin can expect to hear from some unhappy insurance customers.
Tom Thompson, chairman of the group NC-20, a partnership of residents and businesses of the 20 coastal North Carolina counties, is leading the push to have a “well-attended” public hearing on Friday. He has charged that the bureau is a “state-created monopoly” that works through “back-room” meetings to set rates.
“Nobody knows how they set rates or ask for rates,” he said, adding that information they provide is “based on whatever their computer models show.”
Thompson said his organization has collected data from as far back as 50 years to show that there is no justification for the rates, but that models used by the bureau rely more on improbability.
“They say you can’t just trust history … ,” he said. “Had they used data from the previous 10 years they couldn’t have predicted Katrina.”
Thompson said that homeowners should pay for rates based on actuarial data. He alleged that insurance companies are trying to compensate themselves for the price they pay for re-insurance, which insures them against having to pay out large claims.
“Your people in your county will be paying not only insurance on the actuarial rate but also to insure the insurance company,” he said. “We are paying their insurance. If they think the risk is that great, let them pay it themselves.”
The public hearing will be held at the Jim Long Hearing Room of the Dobbs Building, at 430 N. Salisbury St. in Raleigh. Written comments can be emailed to email@example.com until Jan. 31.
The Associated Press contributed to this story.