Auto insurance rates to change

Maximum insurance premiums fall an average of 2.5 percent, but most drivers will see little or no change

Some drivers will see their auto insurance rates drop 2.5 percent May 15.

Companies selling auto insurance in North Carolina had requested a 9.4 percent increase in the maximum rates, but state Insurance Commissioner Jim Long said the increase was unjustified and, after months of hearings, ordered a decrease.

"I didn't think they proved the case ... [rates] should be going up," Long said. He said the decision potentially saves drivers nearly $404 million in annual premiums.

Most of the state's 6.2 million drivers pay discounted rates and will either see only a small decrease in premiums or no change at all, said Ray Evans, general manager of the N.C. Rate Bureau, which represents the 144 auto insurers selling policies in the state. Rates probably will rise for high-risk drivers who carry only liability insurance.

And any changes are likely to be temporary. Shortly after the settlement was announced, the Rate Bureau requested a 6.7 percent increase for 2006. Those rates would go into effect Oct. 1, if approved.

Long typically opposes such rate increases but said his department hadn't taken a position on the latest request, which was made late Wednesday afternoon.

The Rate Bureau proposes adjustments each February. Insurance Department officials review the numbers and negotiate. If an agreement can't be reached, Long holds hearings and determines the proper rate. If the Rate Bureau disagrees, it can appeal through the state courts. The bureau is not going to appeal.

In North Carolina, only the maximum rates insurers can charge are regulated. Market forces set the rest of the rates, and more than half the state's drivers pay premiums that are discounted an average of 10 percent, Evans said.

The 2.5 percent decrease is an average of changes made to different types of coverage in the settlement.

For example, rates for liability insurance, required of all drivers, were allowed to go up 5 percent, while maximums for comprehensive and collision insurance, which aren't required, were reduced 10 percent.

Since many of the state's high-risk drivers carry only liability insurance, their rates are expected to go up at least 3 percent, Evans said.

Getting higher liability rates and avoiding years in litigation were reasons the industry decided to settle with the Department of Insurance, he said.

Long's order also cut motorcycle liability rates by 6 percent.

Long said motorists benefitted from the overall reduction agreement.

"What you have held down is the ceiling," Long said. "Companies can still charge the maximum, but most companies will be trying to be below that and keep the competition going. They can't stand losing market share."