North Carolina Home Insurers Press Appeal of Rate Hike Denial, While Insurers Press ‘Consent to Rate’ Agreements

Insurance companies aren’t giving up on their quest to raise premiums on North Carolina homeowners by an average of 25 percent, according to an industry spokesman.

The group representing nearly 100 companies selling homeowners policies in North Carolina is appealing its rate-increase request after it was rejected by the state’s insurance regulator late last year, Rate Bureau General Manager Ray Evans said. The group filed notice that it is taking the case to the state Court of Appeals.

The industry group expects it could take a year before the court renders a decision on whether the increases of about $500 million are justified, Evans said. Alternatively, insurers may file a new rate increase request with the state Insurance Department, he said.

“In the meantime, we still feel the rates are inadequate,” Evans said.

Insurance Commissioner Wayne Goodwin’s office had no immediate comment.

Goodwin ruled in December after a hearing on the requested rate increase that “no factors or events justified the excessive costs requested by the insurance companies.”

Instead, Goodwin ordered a collection of regional rate hikes and decreases that added up to near zero average change on the statewide cost of policies taking effect in June. North Carolina homeowners saw a statewide average seven percent increase last year. The new rates vary by geographic territory and type of insurance.

Homeowners in coastal counties that have seen years of rapid premium increases can anticipate reductions under Goodwin’s order. Insurers have warned that homes along the coast are under threat from hurricanes.

The Rate Bureau said it sought the increase to cover expectations of a sharp rise in projected repair and replacement costs and the growing risk of catastrophic losses from hurricanes and other severe storms.

Insurers are responding to premiums they think are inadequate by increasingly refusing to issue policies unless homeowners sign an agreement accepting rates higher than those set by Goodwin’s office.

North Carolina law allows companies to charge more than approved rates as long as they get their customer’s approval.

Consent to Rate

Such “consent to rate” policies increased last year to 30 percent of North Carolina’s $2.4 billion homeowners market, up from 23 percent in 2010, according to state Insurance Department data.

Sen. Michael Lee, R-New Hanover, a member of the Senate Insurance Committee, said legislators need to look at the consent to rate law. “It’s a big concern for a lot of folks in our area,” Lee said.

Terry Wilkerson of Wilmington said his insurer, Travelers, gave him 10 days to decide whether to accept an increase of 120 percent. Travelers had provided his coverage for 15 years, he said.

“Our use of consent to rate is fully compliant with North Carolina law,” Travelers said in a statement. “There are instances when we charge more than the state’s approved rate to reflect the risks customers are facing and to keep up with the increasing costs to repair, replace and rebuild property.”

A Travelers spokesman also said that the proposed increase for Wilkerson was not typical.

Insurance companies are within their rights under North Carolina law, said Kerry Hall, spokeswoman for the state Department of Insurance. Insurance companies can increase premiums by up to 250 percent if the customer agrees, she said.

Rep. Susi Hamilton, D-New Hanover, said she recommended that people who receive a consent to rate letter contact the Insurance Department and “look into more customer-friendly insurers.”