Although it seems counter-intuitive, the massive damage that Hurricane Matthew has wreaked across eastern North Carolina isn’t expected to have much of an impact on future homeowners insurance rates.
That’s because the lion’s share of the massive damage inflicted by the hurricane appears to have been caused by flooding, which in most cases isn’t covered by homeowners insurance.
The impact “if any, will be limited” based on current assessments that the hurricane was “largely a water event, as opposed to a wind event,” said N.C. Insurance Commissioner Wayne Goodwin. Homeowners’ policies do cover wind damage.
Ray Evans, the director of the N.C. Rate Bureau, an independent organization that represents the industry when it seeks a change in homeowners insurance rates, doesn’t see eye-to-eye with Goodwin on a lot of things. But he, too, doesn’t see a big impact on rates.
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“The vast, vast majority of claims will really be flood damage,” Evans said.
The state is still assessing the amount of damage caused by Hurricane Matthew, said Melanie Jennings, a spokeswoman for the governor’s office.
In addition, Evans said, the state’s current rates already have a significant amount of damage arising from hurricanes baked into them – although not as much as the industry would like. The current rates, he said, anticipate that losses from hurricanes will average roughly $125 million a year.
He also noted that there’s a significant lag time between insurers’ claim experience and compiling the data required when seeking a rate change from state regulators. This year’s claims won’t figure into a rate request until at least 2018.
“For homeowners, there is certainly not going to be an immediate impact and my guess is that it will not have a large impact on homeowners rates,” he said.
Both Goodwin and Evans expressed concern that many of the North Carolinians whose homes were damaged by flooding didn’t have flood insurance.
“There are people that don’t have coverage at all,” Goodwin added, noting that insurance isn’t required of homeowners who don’t have a mortgage. “That is heartbreaking and troubling on every level you can imagine.”
Individuals and business owners in more than 20 North Carolina counties are eligible for federal disaster insurance, which can include funds for temporary housing, home repairs and other disaster-related expenses.
In addition, “there’s also philanthropic assistance from various organizations,” Goodwin said.
The last rate increase for homeowners insurance in North Carolina took effect in mid-2013. The industry sought a 17.7 percent average increase but ultimately settled on a statewide increase that averaged 7 percent – but went as high 19.8 percent in beach areas. Insurance rates vary by region.
More recently, the industry sought an average increase of 25.6 percent, but Goodwin rejected that proposal and instead reduced rates by an average of three-tenths of a percent.
In August a three-judge panel of the N.C. Court of Appeals affirmed Goodwin’s move. The industry has asked the N.C. Supreme Court to review that decision, arguing that Goodwin’s rate schedule doesn’t enable them to earn sufficient profits.
Even without a rate increase in the last few years, the industry has found ways to legally boost the premiums paid by many homeowners. That includes reducing or eliminating discounts they offered previously and threatening to refuse to renew a policy unless the homeowner signs a “consent to rate” form agreeing to pay more than is otherwise permissible under state law.