Homeowner insurance rates rising

Homeowners' insurance premiums will rise an average of about 4 percent across the state -- not the 19.5 percent hike requested by insurers earlier this month -- thanks to a settlement announced today by state regulators.

As expected, however, homeowners along the coast will get hit by a much higher increase: as much as 29.8 percent in some counties. Rates in the Triangle will rise between 2 percent and 5 percent, depending on the location. Homeowners insurance rates are set by region, based on the number and type of claims and repair costs in the area.

The 4.05 average rate increase announced today, which takes effect May 1, follows a typical scenario: The industry's request is scaled back after negotiations with the state.

But this time there was speculation that controversy surrounding the Beach Plan, a government-created insurance provider that provides coverage along the coast, might trigger a different outcome. In fact, so many homeowners contacted regulators earlier this month thinking that the 19.5 percent increase was a done deal that the Department of Insurance issued a statement to quash that concept.

The Beach Plan, which dominates the homeowners insurance market along the coast, lacks the resources to cover losses if a hurricane wreaks havoc in the region. Under state law, insurers who do business in the state -- even if they don't write policies along the coast -- would be assessed for damages the Beach Plan couldn't cover based on the volume of business they do.

Officials at the N.C. Rate Bureau, which filed the rate hike request on behalf of insurers, said at the time that the proposal was driven by Beach Plan issues. The rate hike requested for coastal regions was as high as 70 percent.

"There has been a lot of speculation surrounding this homeowners rate filing, but I feel that we've reached a settlement that is fair to both consumers and insurance companies in North Carolina," Commissioner Jim Long said in a prepared statement. "No one likes to see their insurance rates go up, but the industry made a strong case for allowing some increases this year. The silver lining is that most consumers won't see nearly the increases that were initially proposed."

The last rate increase in homeowners insurance rates took effect in May 2007 and averaged 5.4 percent statewide -- well below the 21.9 percent hike sought by insurers. Rates in the Triangle at that time rose between 2 percent and 4 percent, while homeowners along the coast were slammed with a 25 percent increase.