NC insurance commissioner denies industry's request for rate hike on homeowners

N.C. Insurance Commissioner Wayne Goodwin has denied the insurance industry’s request for an average increase of 25.6 percent on homeowners insurance rates across the state.

The ruling came after a 12-day hearing was held in October and November to discuss the request. It was the first such hearing on homeowners insurance rates in North Carolina since 1992.

In a statement, Goodwin said he found no factors that would justify the increase the industry had requested.

“The rates I have ordered are the result of the most thorough inspection of North Carolina homeowners insurance rates in more than 20 years,” Goodwin said. “After considering all of the evidence and data available, I have determined that no factors or events justified the excessive rates requested by the insurance companies.”

The state Insurance Department’s staff had earlier concluded the rate hike request wasn’t justified, which triggered the 12-day hearing.

The industry has the option to appeal Goodwin’s ruling to the N.C. Court of Appeals, refile its request or accept the commissioner’s decision. Ray Evans, director of the N.C. Rate Bureau, which represents the industry, said his members only received the 356-page ruling late Thursday and are still reading and analyzing it.

The bureau’s governing committee is expected to meet early next week to determine what strategy it will take going forward.

But Evans said the industry believes it presented a host of reasons and supporting data showing that the current premiums for homeowners are inadequate. He said there appears to be a disconnect between what the industry and the commissioner believe is the appropriate way to set rates.

“Part of the problem that we have is that the rate product – which is paying claims – is some future event that we really don’t have a good handle on how much it costs. We’re trying to predict what that would be three or four years down the road,” he said. “And it appears the commissioner is more interested in the historical perspective – which is a part of what we do – and is not interested in what we think is the right way to promulgate rates, which is forward-looking.”

In an interview, Goodwin said with insurance rate-making there’s a constant struggle between what weight to give historical catastrophic events and those that are projected using statistical models.

He noted that the industry had received a statewide increase last year. The industry had sought an average increase of 17.7 percent but ultimately settled on a statewide increase that averaged 7.7 percent but went as high as 19.8 percent in beach areas.

In the intervening period since that increase went into effect, Goodwin said, no catastrophic events have hit the state.

“If we continue to have no storm activity going forward and if there had been dramatic increases allowed, then policy holders do not get that money back,” Goodwin said. “I have to strike a balance that the insurance companies do not. The insurance companies have a profit motive and I have a combination of allowing a reasonable profit but not allowing excessive rates.”

Goodwin’s ruling means that, effective June 1, homeowners insurance rates will, on average, decrease .3 percent across the state, while renter’s insurance rates will rise 11.2 percent, and condominium insurances will increase 8.1 percent.

In the Triangle, rates will fall 4.1 percent in Durham and Wake counties, and decline 14.2 percent in Chatham and Orange counties. The six-county territory that includes Johnston County will see rates rise 2.6 percent.

The rate hike requested by the industry would have varied by territory and ranged from a decrease of 2.7 percent to a hike of as much as 35 percent in some beach areas. The industry sought a 24.4 percent increase for homeowners in Raleigh and Durham, and a 32.6 percent increase in the rest of Wake and Durham counties; Chatham and Orange counties would have seen a 17.7 percent increase. The Johnston territory would have gone up 35 percent.

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