Insurers send rates tiff to court

A 12.9% increase had been sought

Drivers counting on cheaper auto insurance premiums next year, take heed: The dispute over rates has shifted to the courts.

The N.C. Rate Bureau, which represents the state's auto insurers, decided Thursday to appeal the 16 percent rate reduction that Insurance Commissioner Jim Long ordered last week. That order came after a month-long hearing in which insurers and regulators squared off.

Insurers won't necessarily ask the court for the entire 12.9 percent increase they originally sought. Instead, the Rate Bureau is considering what rate it should seek from the N.C. Court of Appeals.

"My guess is the number we end up with is going to be a whole lot closer to the 12.9 percent number rather than the minus 16 percent," said Ray Evans, the bureau's general manager.

Under state law, whatever number is chosen will be the rate that insurers can charge beginning Jan. 1. But insurers will have to escrow premiums collected above the rate Long ordered.

If they lost their appeal, they would have to refund that money plus interest -- prime rate plus 3 percent -- to shareholders. With the prime rate at 5 percent, that amounts to 8 percent interest today.

The state estimates that the difference between the increase the bureau originally sought and the rate cut that Long ordered exceeds $1 billion.

No surprise

"We're not surprised at all about their decision to appeal," Insurance Department spokeswoman Kristin Milam said. "They are certainly within their rights to do so."

The rates the state regulates cover the maximum rate insurers can charge. Thanks to competition, insurers charge many drivers less than the top rate.

Rates also vary by region and types of coverage. A typical policyholder in Raleigh who is an experienced driver, has no points on his license and owns a 2008 Taurus could save $118 a year; a typical Durham policyholder could save $160.

The bureau has 30 days from the date of Long's order to appeal, but Evans said it plans to seek an extension.