NC bill would abolish consent-to-rate process

Sen. Michael Lee wants to stop homeowners insurance companies from charging more than the state-approved maximum rates.

The Wilmington Republican has sponsored Senate Bill, which would prohibit homeowners insurance companies from skirting the state’s regulatory process by getting policyholders to sign a “consent to rate” form that agrees to higher rates.

“What you’ve got is an exception that has become the rule,” Lee said.

That’s a bit of an overstatement, but data from the state Insurance Department shows that the popularity of the consent-to-rate process is soaring.

Last year 40 percent of homeowners policies statewide charged higher than the maximum rates thanks to consent to rate, up from 23 percent in 2010. Insurers that send a policyholder a consent to rate form typically won’t renew the policy unless the homeowner agrees to the higher rate.

Those higher rates can be significantly more.

Two years ago The News & Observer wrote about a Fayetteville woman whose insurer asked her to agree to a premium that would have been 53 percent above the state-approved maximum. She switched insurers instead and ended up saving more than $500.

The insurance industry, which says it is turning to consent to rate because of inadequate rates foisted upon it by the state insurance commissioner, opposes the bill.

Chris Hackett of the Property Casualty Insurers Association of America said consent to rate “is an important tool for insurers” that offers an alternative to refusing to renew policies at rates deemed insufficient.

“It promotes consumer choice,” Hackett said.

Insurance Commissioner Wayne Goodwin also opposes abolishing consent to rate.

“Though well-intentioned, the bill is too broad,” Goodwin said in a prepared statement. “There are valid uses for consent to rate for homeowners insurance when it is applied in special circumstances as intended under the current law. My concern is the increased use of consent to rate to skirt the cap on homeowners rates I set.”

Instead, Goodwin supports companions Senate Bill 208 and House Bill 182, which would put new restrictions on consent to rate.

Under current law, once a homeowner signs a consent to rate form an insurer can raise rates in subsequent years without obtaining the policyholder’s approval. But the bill calls for homeowners to receive a new consent to rate form if the rate is upped again.

“Citizens must know how much they are consenting to,” Rep. Chris Millis, a Hampstead Republican who is a primary sponsor of the House bill, wrote in an email.

Cady Thomas, chief lobbyist for the N.C. Association of Realtors, sees abolishing consent to rate as the best option but views the solution offered by the companion bills as a definite improvement.

“What we have been trying to do with consent to rate is educate the average homeowner that just because you get this piece of paper, that doesn’t mean you have to sign it,” she said.