Bills would adjust how NC regulates homeowners insurance rates

dranii@newsobserver.comApril 4, 2013 

Legislators representing coastal counties where residents are steamed about the soaring cost of homeowners insurance have introduced bills that would tweak the way the state regulates rates and make the system more transparent.

One of the two measures filed Tuesday has bipartisan support, with both Republicans and Democrats listed as sponsors of the companion bills filed in the state House and Senate.

One provision of the companion bills specifies what the N.C. Rate Bureau, which represents the insurance industry when it seeks rate hikes, must include in computer models that estimate losses that could arise in the future from a hurricane or other catastrophe. They also require that the Rate Bureau use at least two computer models to calculate potential hurricane losses.

The specter of catastrophic damage from hurricanes has figured into recent rate hikes sought by the insurance industry for homeowners in coastal communities, with coastal critics complaining long and loud about the computer models used. Generating data from at least two models is important because “models have a lot of supposition in them,” said Rep. Paul Tine, a Democrat from Kitty Hawk and a bill co-sponsor.

A second piece of legislation is sponsored by Sen. Harry Brown, a Republican from Jacksonville who is the Senate Majority Leader. It would make more of the data used to establish rates readily available to consumers.

Brown said skyrocketing homeowners insurance rates along the coast are "the number one issue in my district. No other issue is even close."

“I have some seniors who call me every day who say, ‘I can no longer afford to pay for my homeowners insurance,’ ” Brown added. “They are pretty much being forced out of their homes.”

Last year the industry sought rate hikes on homeowners insurance that ranged from a low of 1.2 percent to as much as 30 percent along the coast. Coastal residents decried those increases as excessive, unwarranted and unfair, especially since their rates already were significantly higher than the rest of the state. In the end the industry and Insurance Commissioner Wayne Goodwin compromised on a statewide rate increase of 7 percent, ranging from as little as 1 percent to as much as 19.8 percent in some beachfront areas. That increase goes into effect July 1.

The state Insurance Department hasn’t yet staked out a position on the bills. Nor has the Property Casualty Insurers Association of America, an industry trade group.

“We’re still studying them,” said Bob Mack, deputy commissioner of property and casualty at the Insurance Department.

The companion bills – HB 519 and SB 690 – also call for a new two-tiered rate system for homeowners insurance. The first tier would be a statewide rate that applies to coverage for fire, theft and all other claims except for those stemming from wind and hail. The second tier would set rates on a regional basis for wind and hail damage. Consumers would pay the sum of the two tiers.

Tine, who owns a Nationwide Insurance agency, said the two-tier system aims to shed light on the rate-making process “and make sure that people in North Carolina are paying fair rates all across the state.”

Ray Evans, director of the Rate Bureau, said the organization would stick to its policy of not commenting on pending legislation.

Brown’s bill, SB 690, calls for insurers to submit to the Insurance Department by April 1 of each year data on the amount of claims paid and the premiums earned, broken down by territory. That data would then be aggregated and posted on the Insurance Department’s website by June 1.

The Insurance Department’s Mack said the insurance companies currently provide similar information when they file for a rate hike, but it’s not in a consumer-friendly format.

SB 690 also would give the Insurance Commissioner the authority to order lower rates after rejecting a rate hike request following a hearing. Currently, after rejecting a rate hike request the commissioner can’t order rates lower than the existing rates.

“We would not be opposed to seeing that kind of change,” Mack said. “It gives the commissioner more flexibility.”

Willo Kelly, president of N.C. 20, a coalition of 20 coastal counties that has stridently fought higher rates along the coast, applauded the efforts to take the mystery out of the rate-making process.

“We face a problem here when it comes to transparency,” she said.

Ranii: 919-829-4877

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