On purpose or not, Marc Basnight has fired a shot across the bow of North Carolina's singular system of setting property insurance rates. Legislators and the state insurance commissioner, Wayne Goodwin, should heed the warning but carry on.
It's not that Basnight, the Senate president pro tem, hasn't identified a legitimate beef. He hails from Manteo, and insurance rates in Dare and other coastal-area counties are seeing significant increases. Adding to residents' frustration, last month the state Court of Appeals turned aside a lawsuit that sought a review of rate hikes put in place by Goodwin's predecessor, the late Jim Long.
In North Carolina's insurance rate-setting system, said to be one of a kind, the elected insurance commissioner's staff considers rate requests from insurance companies, which are represented by the Rate Bureau, but the commissioner can set the final rates himself. A three-judge panel of the appeals court said the coastal counties basically have no remedy.
Stormy weather
The commissioner's job is a balancing act, weighing the interest of consumers in low rates against insurers' need to make a profit. The task took on added import after East Coast hurricanes in the 1990s. Particularly in Florida, storms caused enormous losses, with coastal areas deemed particularly vulnerable. Meanwhile, rapid development along our coast and just inland was vastly enlarging the potential risk for property insurers.
It was largely to keep insurers from fleeing the state that the General Assembly last year shored up the Beach Plan, which is intended to serve as a backup insurer for coastal-area residents who can't otherwise obtain coverage. Separately, just before retiring as commissioner, Long had approved the rate hikes in question - some of them approaching 30 percent.
The coast's frustration with all this surfaced Tuesday in the details of the Senate's proposed budget. A provision that Basnight insists wasn't meant to be there - but which his office had inserted - would have stripped Goodwin of his authority to set property insurance rates along the coast. (It would be easier to credit Basnight's denial if Senate Democratic leaders didn't have a bad habit of using the budget, rather than specific bills, as a tool for making big changes.)
The insurance commissioner sounded the alarm, and by day's end the offending clause had gone away. But Basnight, whose power is legendary, vowed to press for structural change in the system later, in a separate bill. He appears to favor a new commission that would review rates for just the coastal counties.
Staying the course
That would be bad public policy. The last thing we need is a fragmented rate-setting system. And having an elected official in charge is probably the best protection policyholders can expect, provided the commissioner answers to voters and not to insurance companies (Goodwin, to his credit, took public financing in his 2008 election campaign).
Finally, while coastal residents say their rates are unfairly high - claiming that inland areas are at as much risk from hurricanes as they are - equally plausible arguments go in the opposite direction. There's a strong feeling in the Piedmont and out west that coastal property, much of it built on sand, should not be subsidized in any way. Then too, if a (politically) appointed commission were to cut coastal rates significantly, insurers might simply sail away.
Rate hikes should be granted only when absolutely necessary, and those affecting coastal areas certainly bear watching. As yet, however, there's no convincing case for scuttling a system that has kept most premiums in the reasonable range.
