Would car insurance companies increase your rates 20 percent just because they could?

Insurance companies think the idea is laughable, saying market competition would make it impossible.

N.C. Insurance Commissioner Jim Long thinks it's funny to think that for-profit companies would pass up the chance.

The two sides sparred across that philosophical divide for almost two hours Thursday as part of a study committee; Senate Majority Leader Tony Rand is co-chairman. The group is considering legislation that would give companies more flexibility in setting rates.

Rand and Long are heavyweights in state politics. Both have sparred over insurance issues since last year. You can bet your premium neither one is going down quietly.

At the end of the day Thursday, the consensus was that it was draw. The group has until the end of this month to propose legislation for the coming session of the General Assembly.

At issue is whether insurance companies should have more freedom to set rates for drivers.

Rand thinks that the current law is unfair to experienced drivers with clean records, because that group routinely pays a surcharge to cover the costs of drivers considered a bigger risk.

"All I want is for everyone to pay a fair rate," Rand said.

Long thinks that the surcharge can be eliminated without reducing the control his office has over the process.

It would be easy to pit bad drivers against good drivers in this debate, but the byzantine details of insurance regulations make that impossible.

Traditional plans cover about 75 percent of the state's 6.6 million drivers. Drivers with records so bad that no insurance company wants them are part of a state-administered pool that offers liability coverage.

Regulating the middle

But the focus of this debate is the group of North Carolina drivers who fall somewhere in between. These are drivers with at least two years' experience and no points on their records or the records of anyone who shares a policy with them.

By state law, these drivers cannot be charged rates higher than a state cap set by a commissioner.

But insurance companies often place these drivers in a special insurance pool if they think the rate dictated by the cap is not enough to cover probable claims. They can place anyone in the pool and do not need to justify the decision.

If the drivers' claims exceed the premiums charged in any given year -- and they often do -- the deficit is covered by a surcharge to all drivers.

The surcharge bumps up drivers' base rate an average of about 3 percent. But it dropped recently from highs of almost 10 percent, according to Long's office.

Joe Stewart, director of the Insurance Federation of North Carolina, told legislators that problem could be addressed if insurance companies had the flexibility to charge this group of drivers a rate higher than the cap.

The legislation, which the companies support, would allow increases of as much as 20 percent.

Rand did not specifically endorse the details of the companies' proposal, but he has tried for more than a year to overhaul the system. He was sympathetic to the industry's complaints.

Long has countered with a plan that would set a different -- and higher -- rate for the special pool of drivers. But it would require that insurance companies justify why they are placing people in that pool.

A fairer alternative?

In a room full of lobbyists, regulators and politicians, the debate routinely bogged down in details, jargon and misunderstandings.

"Isn't there a fair way to do this," asked Rep. Angela Bryant, a Democrat from Rocky Mount. "Is that possible?"

"It may be possible," Rand quickly replied, "but it isn't looking too probable at the moment."