April 25, 2014

NC auto insurers propose yet another rate-making shift

A coalition of automobile insurance companies that are unhappy with the way that North Carolina regulates rates is taking yet another crack at changing the system.

A coalition of automobile insurance companies that are unhappy with the way that North Carolina regulates rates is taking yet another crack at changing the system.

Spokesmen for FAIR NC, a group that includes State Farm, Allstate and Geico, say they have concocted a less ambitious proposal that they hope will gain more traction than their unsuccessful efforts over the past few years. The changes they propose, they say, would give consumers more choice and more discounts for good drivers.

“We listened to some of the concerns that were raised last year and tried to come up with something much simpler and much more straightforward,” said FAIR NC spokesman Robert Brown.

In the past, the group’s efforts have been derailed by opposition from Insurance Commissioner Wayne Goodwin as well as a coalition of consumer groups and auto insurers, including Nationwide and the N.C. Farm Bureau, that calls itself Low Rates NC. That same cast of characters has lined up against the new initiative.

FAIR NC has been hamstrung by a lack of a hue and cry for change emanating from motorists. The latest study by the National Association of Insurance Commissioners lists North Carolina’s average auto insurance rates as sixth-lowest in the nation.

FAIR NC is working with lawmakers to get its proposal before the legislature in one way or another, taking into account the restrictions the General Assembly places on introducing new bills during the short session that begins May 14.

FAIR NC’s proposal would enable auto insurers to opt out of North Carolina’s collective rate-making system, which is unique in the nation. Today, the N.C. Rate Bureau collects data from all the auto insurers and files an overall rate request that must be approved by the insurance commissioner.

The FAIR NC proposal “maintains the commissioner’s oversight of the process,” including the ability to reject rate requests deemed excessive, said George Teague, a lobbyist for the Property Casualty Insurers Association of America, a FAIR NC member.

Unlike earlier proposals backed by FAIR NC, there’s no provision that calls for proposed rate hikes below a specified percentage to automatically be considered reasonable and therefore, in the view of critics, beyond the commissioner’s purview. The final version of a bill rejected by the House Insurance Committee last year would have allowed insurers to set their own rates as long as the average increase was no more than 7 percent per year.

Nor does the new proposal address the surcharge that policyholders pay to subsidize the cost of providing liability coverage for “risky drivers.” That surcharge, which FAIR NC made a centerpiece of earlier campaigns to change the law, amounts to 4.7 percent of annual liability premiums, or about $21 for the average auto policy.

Under this latest proposal, insurers could choose to remain part of the collective rate-making process. But opting out would enable companies to offer discounts to North Carolina motorists that currently are available elsewhere but don’t fit into the state’s one-size-fits-all regulatory system. Insurers that opt out also wouldn’t be required to automatically raise the rates of motorists who have had points assessed against their licenses.

Goodwin, the insurance commissioner, issued a statement contending that FAIR NC is trying to dismantle a system that has enabled some of the lowest car insurance rates in the country. He said the companies are trying “to squeeze more dollars out of North Carolinians.”

“Under our present system, companies are free to charge people less than the state-approved rates,” Goodwin stated. “The only reason they would need a change in law is to charge people more. My staff and I are monitoring this issue closely, and I will continue to fight for North Carolina drivers and oppose any changes that would lead to higher car insurance rates.”

Nationwide served up similar arguments explaining why it opposes the proposal.

“The proposed legislation would push auto rates higher for more than one million North Carolinians, hurt consumers, and favor bad drivers over good drivers,” spokeswoman Elizabeth Stelzer said in an email. “We can’t support that.”

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