N.C. Rate Bureau does its job, again

It seemed inevitable last month when N.C. commissioner of insurance Wayne Goodwin rejected a proposed 25.6 percent hike in N.C. homeowners’ insurance rates. Goodwin has been sharply critical of the increase, saying at one point last year that he was “appalled” insurance companies had even proposed it after receiving a rate hike in 2013.

It’s just as inevitable that the industry will appeal Goodwin’s decision, perhaps has soon as next week. It’s a choreography we’ve become familiar with in North Carolina: Insurance companies, through the N.C. Rate Bureau, propose a huge increase, get rejected, then try for something smaller.

The result is often a “compromise” increase, and although no one likes to see any kind of rate hike, North Carolinians as a whole understand that insurance rates here are low.

In other words, the system is working. Which leads us to one more inevitability: Someone will try to change it.

When the 2015 legislative session begins later this month, you can count on an attempt by N.C. Republicans to dismantle the Rate Bureau. It happened last year with the failed Good Driver Discount Bill, which offered N.C. drivers the bad deal of new discounts in exchange for changing how auto insurance rates were set. Lawmakers have also tried to gut the Rate Bureau in previous years.

Each time, legislators and lobbyists argue that moving to a free-market insurance approach would force insurers to compete on price, resulting in better deals for consumers. But insurers are already free to compete on price – the Rate Bureau structure only provides a cap on rates.

As for the other common Rate Bureau criticism – that it’s government price-fixing – remember that government regulates commerce in many ways. Some regulations protect business and some protect consumers. Most try to find a balance.

That’s what the Rate Bureau does in North Carolina. Goodwin’s job is to protect homeowners and drivers against excessive rates while giving insurance companies the opportunity to earn a reasonable profit. His rejection of the 25 percent homeowners’ insurance rate hike is consistent with that goal.

As Goodwin noted, there have been no catastrophic weather events since the 2013 rate increase – and therefore little reason to hike rates across the state. Insurers want the increase so they can pad the bottom line against some future catastrophe, but consumers shouldn’t be responsible for insuring the insurers.

Is another rate “compromise” ahead? Perhaps not. Goodwin, who was elected insurance commissioner in 2008, was especially harsh in criticizing the 25.6 percent proposal. But compromise or not, North Carolinians will still have reasonable insurance rates, and insurers will continue to make money here. The grumbling might be inevitable, but the outcomes are undeniable. The Rate Bureau is working, still.