Amended NC auto insurance bill still faces opposition

dranii@newsobserver.comApril 10, 2013 

— A controversial bill that would overhaul the state’s regulation of auto insurance rates has been modified in response to objections raised by opponents.

But the changes, unveiled Tuesday in a legislative committee meeting, failed to win over opponents of the bill, including Insurance Commissioner Wayne Goodwin.

The original bill would allow companies to opt out of the current system in which the state-created N.C. Rate Bureau submits an overall rate request for all auto insurers, instead permitting individual companies to set their rate as long as the average increase was no more than 12 percent per year. The amended bill sets a new threshold of 7 percent annually.

“There was nothing magical about 12 percent,” Rep. Tom Murry, a Morrisville Republican and one of the primary sponsors of House Bill 265, said following a House Insurance Committee meeting. “I’m trying to build a consensus.”

Rep. Jerry Dockham, a Republican from Davidson County and chair of the Insurance Committee, said committee members would vote on the bill at next Tuesday’s meeting after hearing testimony from groups on both sides of the issue.

The amended bill also would give the state Insurance Commissioner 60 days to challenge a rate increase set by an insurer before it takes effect.

“We’re not taking the commissioner of insurance out of the process,” said Rep. Jeff Collins, a Republican from Rocky Mount, who’s also a primary sponsor.

That’s not how Goodwin sees it. Insurance Department spokeswoman Kerry Hall said that the changes outlined at the hearing aren’t sufficient for Goodwin to withdraw his opposition.

The bill “could still amount to automatic increases year after year for drivers,” Hall said.

The commissioner contends that because the bill presumes that increases of 7 percent or less aren’t excessive, it would be impossible, practically speaking, for him to successfully challenge a rate increases below that threshold.

Collins disputed that notion, contending that in a hypothetical year in which insurers’ costs declined 10 percent the commissioner “could show good cause that that would be excessive.” Collins also said competitive pressures would prevent insurers from raising rates 7 percent again and again.

“If a company does that, they would lose my business, and they would lose the business of the consumer,” Collins said. “If they want to abuse the system and lose business – I don’t see that happening.”

Supporters of the bill say it would eliminate “a hidden tax” motorists pay, under the current system, to subsidize the cost of providing liability insurance for drivers that insurers see as riskier to insure.

They also contend the new system would encourage insurers to offer innovative discount programs that motorists see advertised on TV but aren’t available in North Carolina.

The annual subsidy, which is in the form of a surcharge, amounts to roughly $10 or $12 for the average policy, as of April 1. But over a five-year period the subsidy added up to $900 million to motorists’ bills in the aggregate, according to an industry group supporting the bill that calls itself FAIR NC.

The bill has split the industry. FAIR NC includes some of the state’s largest auto insurers, including State Farm, Allstate and Geico, as well as the Independent Insurance Agents of North Carolina, which represents more than 6,000 agents at nearly 1,000 agencies.

“At today’s Insurance Committee hearing, we were encouraged to see legislators address concerns that have been expressed and work to reach middle ground towards a reasonable result that will benefit NC consumers,” Fair NC said in a statement after the hearing.

Opponents also include some of the state’s largest insurers, including Nationwide and N.C. Farm Bureau, as well as a smaller agents’ organization, the Professional Insurance Agents of North Carolina, AARP and AAA Carolinas. They contend that the state’s low rates show the system is working.

Jim McCafferty, president of insurance for AAA, said his organization hasn’t changed its stance in spite of the amendments but added that AAA would like the surcharge paid by the state’s motorists to become “transparent.”

Under current state law, insurers are barred from itemizing the surcharge on the bills they send to consumers.

The issue of whether the surcharge was considered by the National Association of Insurance Commissioners when it ranked North Carolina’s rates seventh-lowest in the nation also was raised Tuesday, with some supporters of the bill contending it wasn’t part of the calculation. But the Insurance Department said afterwards that the subsidy is included.

“I think it’s irrelevant because it’s only $12,” McCafferty said.

Ranii: 919-829-4877

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