Personal Finance

Auto insurance bill fails in House committee

A bill to remake the way the state regulates auto insurance rates that was stridently opposed by Insurance Commissioner Wayne Goodwin was voted down by members of the House Insurance Committee on Tuesday.

The bill failed 18-11 after opponents and supporters presented their views. The legislation split the insurance industry, with some companies and industry groups hitting the gas pedal – including State Farm, Allstate and Geico. Others, such as Nationwide and the N.C. Farm Bureau as well as consumer groups, slammed on the brakes.

“Any time you have a divided industry, it makes it hard to enact legislation,” John McMillan, a lobbyist who spoke in support of the bill, said following the vote. McMillan was lobbying on behalf of Allstate and two industry groups, the American Insurance Association and the Insurance Federation of North Carolina.

Goodwin praised committee members “for listening to all points of view and ultimately considering what’s in the best interests of consumers.”

The bill, HB 265, permitted insurance companies to opt out of the current system in which the state-created N.C. Rate Bureau submits an overall rate request for all insurers that needs the insurance commissioner’s approval. Instead, the bill allowed companies to set their own rates as long as the average increase was no more than 7 percent per year.

Supporters of the bill said its passage would create a fairer rate system, eliminate a hidden surcharge that motorists currently pay and encourage innovative discount programs that are available elsewhere – but not in North Carolina.

“Who is going to complain if they don’t know they are paying it?” David Stoller of State Farm said of the “secret surcharge” that insurers are forbidden by law to disclose on their bills. “Perhaps that’s why we keep it a secret.”

The surcharge, which subsidizes the cost of providing liability insurance for so-called risky drivers, amounts to roughly $10 to $12 for the average policyholder.

Supporters also denied that the measure would lead to higher rates.

“We contend the premiums for most people will go down,” McMillan told the committee.

Opponents, meanwhile, argued that North Carolina’s auto insurance rates are among the lowest in the nation and would inevitably rise if the bill became law.

“If it ain’t broke, why fix it?” asked Tom Crosby of AAA Carolinas.

Doug Dickerson, AARP’s state director, cautioned legislators that motorists would be outraged when they saw their rates rise “year after year after year” if the bill passed.

“Some will ask why the state’s insurance commissioner isn’t stopping these rate hikes, unaware that the commissioner no longer has the legal teeth and bite to challenge rate increases,” he said.

The bill was voted on without debate at the insistence of Rep. Jerry Dockham, a Davidson County Republican and chairman of the committee. Dockham rejected a motion made by Rep. Tom Murry, a Morrisville Republican and one of the primary sponsors of the bill, to postpone considering the measure.

Tuesday’s vote isn’t the last word on new legislation regulating auto insurers, however.

On Wednesday, the Senate Insurance Committee is scheduled to address competing bills that would, among other things, clear the way for insurers to introduce discount programs that are available elsewhere. A similar bill in the House includes both Dockham and Murry among its primary sponsors.

Goodwin said he’s all for these bills because they involve reforms that “will have very positive results for consumers without raising rates.”