There's no need to tinker with NC's auto insurance rate system

May 4, 2014 

Look out below. That’s the caution for the innocent bystanders in a coming fight from auto insurance companies to change North Carolina’s method of regulating rates. The companies have tried this before, probably figuring that “business-friendly” Republicans now in charge of the General Assembly would take their side against consumers’ best interests.

That effort fell short, without any indication that policy-holders were dissatisfied with the way Insurance Commissioner Wayne Goodwin and his office have continued to maintain a system that has North Carolina’s rates among the lowest in the country, the sixth lowest in fact.

North Carolina’s system – the only one of its kind in the country – is called a “collective” system, in which the N.C. Rate Bureau gathers data from all insurance companies and then presents any rate change request to the commissioner, who can approve or deny.

The commissioner’s office traditionally has not been overbearing. It weighs any rate request against claims and expenses and trends and then approves a rate increase or negotiates.

Evidenced by the state’s low rates, the system has worked splendidly for the people.

The insurers, who fly under the banner of a group called FAIR NC, want another system. They want insurers to have the option to bail out of the collective system. They say the commissioner still could reject rate hikes he deemed excessive. But if any insurer could opt out of a system that works, that system would be weakened and so would the commissioner’s authority.

The companies – not all companies are on board – say their proposal would give consumers more choice and could reward good drivers. Goodwin says it would open up the possibility that the companies could actually charge more, as the current system allows them to charge less than the state-approved rates.

“The only reason they would need a change in law is to charge people more,” Goodwin said.

That’s one reason the companies’ motivation is suspect. Another is what they’ve tried to do in the past with regard to changing the system.

The companies have tried to push through a change that would have allowed rate increases under 7 percent to be put into effect without the commissioner’s approval. That failed in the legislature.

Nationwide is one of the companies not supporting this effort. A spokesperson for that company estimated the proposed change could raise rates for perhaps a million drivers in North Carolina.

This is a common-sense issue for lawmakers, and it should be an easy one. No system is perfect, but North Carolina’s way of regulating auto insurance makes it possible for people to get it, punishes with higher rates those with points on their licenses and provides for strict oversight of an industry that needs it.

Goodwin had this effort analyzed exactly right: There is no reason to make a change in a system that is working just fine and has drawn few complaints from consumers.

The companies aren’t consumer advocates, they’re industry advocates – just as foxes aren’t out to lead an effort to better protect chicken coops. And this industry wants change for one reason and one reason only: to make it possible for insurers to make more profits.

In the spirit of allowing every viewpoint to be heard, representatives of insurers are welcome to make their case to lawmakers. But it is the commissioner who is charged with protecting average North Carolinians, and Wayne Goodwin and his predecessors have done a good job of it. So let us hope that legislators, as they did the last time, will give due consideration and attention to the arguments of those who protect the people to whom those lawmakers ultimately report.

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