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Should N.C. insurers set own auto rates? YES

More competition, choice is good for N.C. consumers

By Bill Whitney
Special to the Observer

As an insurance executive with responsibility for agency operations in North Carolina, I am disheartened by the recent mischaracterization of an amendment to modernize the way auto rates are set in this state.

Opponents to change suggest that the proposed amendment will raise rates and strip the insurance commissioner of his authority to regulate rates when, in fact, the amendment does neither of these things. It is time to set the record straight.

The citizens of North Carolina deserve more than what the current system provides. Today, insurance rates in North Carolina are set through a collaborative process by the insurance companies! I think it would surprise most people to learn that North Carolina is the only state in the country that requires insurance companies to collaborate in setting rates.

The language in the amendment is simple and clear. It permits individual insurance companies to decide whether they wish to establish rates collectively through the Rate Bureau or file their own rates independently of one another. The proposed amendment would allow insurance companies to opt out of the Rate Bureau. Contrary to what opponents have suggested, this change will not raise rates. Rather, it will give insurers the flexibility to more freely compete for business by letting them develop their own rates, instead of jointly with their competitors. The benefits to the citizens of North Carolina are clear: more competition for auto insurance business and more choice for consumers.

It is apparent that those insurance companies opposed to the proposed amendment believe that maintaining the status quo, operating in the current system of guaranteed profits, hidden surcharges and subsidies, is preferable to a system that promotes healthy competition and choice for auto insurance consumers.

Opponents to the proposed amendment also suggest that it would cut into the insurance commissioner’s authority. This is completely false and inaccurate. In fact, the insurance commissioner will retain complete authority over each insurance company’s rate request. Under the proposed amendment, rate requests cannot be implemented unless and until they are approved by the commissioner. The amendment could not be clearer: If the commissioner does nothing within 90 days of a rate filing, or approves it, then an insurance company can use it. If the commissioner objects, the company can do nothing. It is difficult to see where the confusion and controversy lie.

In truth, no one believes the current system is working. The commissioner himself has acknowledged on numerous occasions that “the system isn’t perfect.” The truth is, it is far from perfect. The fact that several different bills have been introduced this very year demonstrates recognition that the current system needs to be changed. North Carolina needs an insurance system in place to ensure consumers have the opportunity to choose among competitive and affordable insurance products.

Simply put, North Carolina is the only state in the country that does not utilize free market competition for car insurance rates. It is high time that N.C. auto insurance customers have the benefit of rates that reflect fierce competition for their business. Auto insurance consumers deserve the opportunity to take advantage of programs and discounts that are being enjoyed by customers in other states, but are not available here. In order to bring more competition and innovation to the N.C. auto insurance market, change must be enacted. The proposed amendment provides the necessary change to benefit North Carolina drivers.

Bill Whitney is vice president – agency for State Farm, overseeing operations in North Carolina. He lives in Mooresville.
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