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NC Senate committee approves two auto insurance bills

A day after the House Insurance Committee rejected a bill that called for a sweeping overhaul of the way North Carolina regulates auto insurance rates, its Senate counterpart endorsed a pair of competing bills that would tweak the regulatory system.

Both bills were unanimously endorsed by the Senate Insurance Committee without debate, a sure sign of their noncontroversial nature.

The legislation with the greatest impact, Senate Bill 180, would make it easier for individual auto insurers to offer special discount programs to North Carolina motorists. Many discount programs featured in national TV commercials aren’t available in North Carolina because of the state’s one-size-fits-all regulatory system.

“This isn’t as drastic a bill as what we saw fail yesterday in the House,” Sen. Tom Apodaca, a Hendersonville Republican and committee co-chairman, said at Wednesday’s committee session. That rejected bill, which split the insurance industry and was opposed by Insurance Commissioner Wayne Goodwin, would have allowed insurers to opt out of the current system in which the N.C. Rate Bureau submits an overall rate request for all insurers that requires the approval of the commissioner.

Apodaca, who sponsored both auto insurance bills taken up by the committee, added that the bill would permit discount packages “without damaging the system we have in place.”

The Property Casualty Insurers Association of America, a member of the industry coalition that backed the failed attempt to revamp the state’s regulatory system, isn’t opposed to the bill, said George Teague, a lobbyist for the group.

“It’s a minor step,” he said. “We think more needs to be done to open up the market.”

The second measure, Senate Bill 181, would clarify the law to prevent drivers 19 and older from having to pay higher rates if they lack proof that they’ve been driving at least three years.

The current law prohibits setting rates based on age but allows insurers to charge more for inexperienced drivers – a provision that was aimed at riskier teenage drivers but ends up affecting older motorists who move here from elsewhere and can’t prove they’re experienced drivers. The bill would eliminate higher charges for inexperienced drivers and would instead allow insurers to consider whether drivers are under age 19 when setting rates.

Rose Vaughn Williams, legislative counsel for the state Insurance Department, said the bill shouldn’t increase rates for teen drivers because they already pay higher rates based on their inexperience.

The committee’s endorsement sends both bills to the Senate floor. Apodaca said the bills could come up for a vote in the next couple of weeks.

A third bill, Senate Bill 476, also was unanimously endorsed by the committee on Wednesday. It was forwarded to the Finance Committee.

The legislation would permit businesses that want to self-insure to establish a “captive insurance company” that is based in North Carolina. They are called captive insurance companies because they only serve the employees of the organization that establishes it.

Currently, state law doesn’t permit captive insurance companies. So North Carolina businesses that want to self-insure themselves against a variety of risks, including workers’ compensation claims, end up creating a captive insurance company elsewhere if they want to take advantage of the tax benefits of such a structure.

Williams told the committee members that the current scenario means that jobs stemming from running a captive insurance company and tax dollars end up going to other states. Companies pay premiums to their captive insurance company just as they would any other insurer, and they also pay state taxes on those premium dollars.

“I think it is something that will create jobs and also revenue for the state,” said Sen. Wesley Meredith, a Fayetteville Republican and one of the bill’s sponsors.

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