Top auto insurer opposes rate bills

Nationwide: 'No crisis to address'

Staff WriterApril 13, 2011 

North Carolina's largest auto insurer, Nationwide, isn't in favor of dismantling the way the state regulates car insurance rates.

"Nationwide believes the rate system in North Carolina works well and that there is simply no crisis to address," Lee Morton, the insurer's regional vice president for North Carolina, said in a statement issued Tuesday.

Nationwide announced its position a day after Insurance Commissioner Wayne Goodwin conducted a news conference in which he denounced legislation in the state House and Senate that would limit his ability to regulate auto insurance premiums. Goodwin said the bills would push auto insurance premiums higher.

Insurance Department spokeswoman Kerry Hall said Nationwide's statement is further evidence of "what the commissioner of insurance and the department have been saying all along, that we have a system in North Carolina that works well for drivers and insurers."

The insurance industry already lacked a united front in its effort to convince legislators to change the way auto insurance rates are regulated. As a result two competing measures have emerged - one backed by Fair Automobile Rates for North Carolina, or FAIR NC, a coalition that is led by State Farm, the state's second-largest auto insurer, and includes the National Association of Mutual Insurance Companies; and another supported by the Insurance Federation of North Carolina.

The two groups agree that the current system is unfair because some drivers end up subsidizing the rates paid by others, but they're backing different approaches to changing the system.

"I believe there is a problem and I believe it needs to be looked at," said Sen. Bob Rucho, a Republican from Matthews who co-sponsored one of the bills. "I don't have a pre-conceived idea that one way is better than the other."

Jennifer Cohen, executive director of the Insurance Federation, said Nationwide's statement "doesn't mean that they disagree with the IFNC position."

Cohen said Nationwide is a founding member of IFNC and sits on the organization's board of directors - and, more important, has voted internally in favor of the legislation her group supports. But, she added, Nationwide does oppose FAIR NC's bill.

Nationwide spokeswoman Elizabeth Stelzer confirmed Cohen's account, but added that Nationwide won't push for passage of the IFNC-backed bill, which it considers "the more moderate proposal."

"We are taking a neutral lobbying stance," she said.

Liz Reynolds, state affairs manager in the Southeast for the National Association of Mutual Insurance Companies, part of the NC FAIR coalition, declined to comment on Nationwide's statement.

"I will say the marketplace in North Carolina could be much improved with the changes we are proposing," Reynolds said.

While both bills would phase out a surcharge that insured motorists pay to subsidize liability coverage for some drivers, the NC FAIR-backed bill also would eliminate the N.C. Rate Bureau, which submits an overall rate request for the industry that must be approved by the state insurance commissioner. Instead, companies would be free to raise or lower their rates as much as 15 percent a year.

The IFNC bill preserves the Rate Bureau but would give companies the latitude to charge higher rates up to the maximum permitted for high-risk drivers who are inexperienced or who have had points assessed against their licenses. That rate is 20 percent higher than the rates other drivers pay, but is scheduled to rise to 26 percent higher in October, according to the Insurance Department.

In his statement, Nationwide's Morton cautioned that "any dramatic dismantling of our current auto insurance rate-making system should be considered with great caution to assure that customers benefit and do not suffer unintended negative consequences."

He also pointed out that the state's auto insurance rates rank among the 10 lowest in the nation, according to the National Association of Insurance Commissioners.

At least one consumer-oriented group opposes the industry's efforts.

"It's very obvious to us that the insurance rates in North Carolina would be higher but for the review process the insurance commissioner goes through," said Harry Payne, senior counsel for policy and law at the N.C. Justice Center, a nonprofit advocacy group.

david.ranii@newsobserver.com or 919-829-4877

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