Change pushed by insurers

A Senate bill seeks to strip insurance commissioner's authority to set rates

A bill introduced in the state Senate calls for stripping the North Carolina insurance commissioner's authority to set rates on auto, homeowners and workers' compensation insurance.

Under the measure, sponsored by Senate Majority Leader Tony Rand at the urging of the insurance industry, a Superior Court judge would rule on rate disputes after conducting a hearing. Currently, the insurance commissioner presides over such hearings and determines the maximum rates that insurers can charge.

Joe Stewart, executive director of the Insurance Federation of North Carolina, which represents property and casualty insurers, argued that, as an elected official, the insurance commissioner is destined to be an "advocate for the consumer."

But Insurance Commissioner Jim Long said that changing the system would lead to higher rates for consumers -- and that's why the industry is pushing for the measure. Insurers, he said, are frustrated by his efforts to keep a lid on rates. Long said he acts as an impartial arbiter in rate cases, as required by law. The system works for consumers and insurers, he said.

Auto insurance rates in North Carolina were the fifth-lowest in the nation in 2005. Homeowners' insurance rates ranked 20th-lowest nationwide in 2004, the most recent yearly data available, Long said.

Long said he didn't have a recent ranking of the state's workers' compensation insurance rates.

Insurance companies are thriving in the state, Long said, adding that this year, the state's auto insurers chose not to seek a rate increase. "Probably, they're making too much money," he said.

Under the current system, the N.C. Rate Bureau, which represents insurers, proposes adjustments to the maximum rates that companies can charge for auto, homeowners and workers' compensation insurance. Insurance department staffers review the data filed by the bureau and negotiate. If no agreement is reached, the insurance commissioner holds hearings and decides the rate. The Rate Bureau has the right to appeal the decision in the state courts.

Only a handful of states have similar systems.

Besides putting the authority to set rates in the hands of a judge, the bill would require the commissioner to prove that the rate request sought by insurers is "excessive, inadequate, or unfairly discriminatory."

Long contends that that would give the N.C. Rate Bureau an advantage in the courtroom that it doesn't have now. When the Rate Bureau appeals the commissioner's decision under the current system, the Rate Bureau -- because it instigated the appeal -- has the burden of proving that the rates it seeks are justified, Long said.

When Long has presided over rate hearings, he invariably has set rates below the amount the insurers sought. The Rate Bureau has appealed Long's decisions six times since he took office in 1985. All the decisions were upheld in court.

Rand said he doesn't have a beef with Long's decisions. "I'm not critical of anything that has gone before," he said. "I think this is just a better way to do it from now on."

Under the bill, Rand said, the commissioner could "act as an advocate" at hearings presided over by a judge.

The bill is "not about this particular commissioner," Stewart said. "It's about whoever sits in the commissioner's seat." He said his organization suggested the bill to Rand and is seeking a legislator to sponsor a House bill.

Raymond Evans, general manager of the Rate Bureau, isn't taking a stand on the bill. "We don't lobby," he said. "We really don't advocate one way or another."

If the bill becomes law, Rand said he would be willing to let the rates fall or rise where they may. "If it does mean higher rates [approved by] an impartial judge, that means higher rates are indicated," he said. "It might mean lower rates."

Rand said he has not gauged how much support the bill might get from other legislators, but that he wouldn't have introduced it unless he thought it had "a pretty good chance" of becoming law.

Long predicted the bill will be unpopular with consumers. "The reaction we are getting from senators right now is: 'What?' " he said.