Allow discounts but keep N.C. auto insurance system

Correction: Due to an editorial board editing error, an earlier version of this Feedback erroneously said Appalachian State University Prof. David Marlett advocates legislation similar to a bill passed in South Carolina. Marlett did not advocate for any legislation in his For the Record on Wednesday .

From Jim McCafferty, president, Members Insurance Company, in response to “N.C. auto insurance price controls stifle innovation” (May 28 For the Record):

The current controversy and legislative struggle over North Carolina’s low-cost auto insurance laws is rife with misleading information. Exhibit A: Appalachian State University Professor David C. Marlett’s May 28 For the Record.

In this day and age, technology’s promise often urges throwing out the old for the new. However, North Carolina’s auto insurance system is not broken – far from it.

We have the sixth lowest rate in the nation, and the lowest in the Southeast. Change for change’s sake can be disastrous, especially when it comes from several huge out-of-state insurance companies who want North Carolina insurance’s laws to parallel legislation in the 44 states where auto insurance costs consumers more – and insurance profits are much higher.

Those companies argue that technology can identify bad drivers and charge them more and identify good drivers and charge them less. North Carolina’s current system, using a Rate Bureau, works on averages, which allows some bad drivers to get cheaper insurance. Curiously, State Farm and other insurers pushing to dismantle North Carolina’s current system say that one of their plan’s virtues is that it would offer lower rates to risky drivers, which would be poor public policy.

Raising rates more broadly, which is the real aim of those seeking a big change, would lead to more uninsured motorists on N.C. highways, thus raising uninsured costs for every driver who obeys the law and gets auto insurance. North Carolina already has about 17 percent of the driving population unlicensed – either revoked, suspended, expired or never obtained.

What can be done?

The biggest issue centers around a desire for more auto insurance discounts and enhancements like those offered in other states. Allowing that type of pricing would benefit consumers and insurance companies but has stalled in the legislature, hung up by the outside insurance companies that want the whole pie, not just a piece of it.

Senate Bill 180 passed the Senate unanimously last year but has been blocked in the House. SB 180 would allow companies to offer additional insurance products and features for N.C. drivers. This law would invite more product diversity for insurance companies and more choices by consumers. It is a boon to all 157 companies selling auto insurance in the state.

FAIR NC has a catchy name. But when a similar bill passed in the late 1990s in South Carolina, insurance rates dropped only briefly before quickly surging 23 percent. Today, South Carolina’s typical annual auto insurance rates are $138 higher than North Carolina’s, according to the Insurance Information Institute.

The General Assembly should allow the product diversity and discounts in SB 180, which would help insurers and consumers alike. But we should keep the rest of our competitive, low-cost insurance system so N.C. drivers can keep more money in their pockets.