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Insurers look, again, to pad bottom line

A new study by Insure.com finds that North Carolina has the third-cheapest car insurance in the nation, higher than only Maine and Iowa. North Carolina’s average rates are just 40 percent of those in the highest state, Louisiana.

North Carolina’s drivers could zoom up the rankings in a hurry, though, if a coalition of insurance companies gets its way with the legislature. A group of insurers that includes State Farm, Allstate and Geico wants to change the way car insurance rates are set in this state. Get a tight grip on your wallets.

This coalition – which goes by the name FAIR NC – is nothing if not persistent. It has been pushing similar changes for years. The latest effort seemed to die in April when the insurers’ bill was sent to the Senate Rules Committee to rot.

The proposal is being resurrected, though. FAIR NC hopes legislators will overhaul a related bill that passed the Senate unanimously and now sits in a House committee. Insurance Commissioner Wayne Goodwin says this version is even worse than the one that died this spring.

Right now, car insurance companies have to agree to an industry-wide rate adjustment each year with the N.C. Rate Bureau. The insurance commissioner then approves that change or seeks a smaller hike, or even a decrease. That system gets a lot of the credit for North Carolina’s rates being so low.

The bill that died in the Senate would have let individual insurance companies skip that system and generally set their own rates. They could increase their overall rates 12 percent per year without the commissioner’s interference. Goodwin says the new plan would let insurers raise their rates as much and as often as they like, the N&O’s David Ranii reports. The insurance commissioner’s authority would basically vanish.

Why shouldn’t companies be able to set rates where they want in a free market? They should. But this isn’t a free market. N.C. drivers are required to buy insurance. Without regulation, the industry could charge almost anything it wanted to coerced customers.

Bill supporters, which include 14 insurance companies, say consumers would win under a free-market approach because companies could compete on price, driving down rates. But they can do that now. The rate bureau method sets a ceiling, not a floor; insurers are free to charge less to attract customers, and often do.

AAA Carolinas, which calls itself the “motorist’s champion,” says the bill would raise insurance rates and increase the number of uninsured drivers.

Maybe the insurance companies are bracing for more claims that could result if the legislature votes today to allow speed limits of 75 mph on some highways. Republican Rep. Nelson Dollar of Cary has it right: “Everybody knows the reality is that on a 70, you go 80,” Dollar said. “… You’re bumping it up to everybody saying ‘OK, if it’s 75, we can go right at 84, 85 and be pretty well comfortable.’”

We figure enough legislators drive long distances to Raleigh that that bill will pass. But if they want their – and your – car insurance premiums to stay low, they’ll keep North Carolina’s rate-setting system the way it is.

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