Insurance Increase Affects North Carolina Home Renters and Condominium Rental Investors

North Carolina will not allow the insurance industry to raise homeowners’ rates as sought, according to an order Friday that followed one of recent history’s most contentious dialogues between the state’s insurance commissioner and the group representing private insurers. Instead, Commissioner Wayne Goodwin ordered a statewide average decrease of 0.3 percent in homeowners’ insurance rates — far from the 25 percent increase the N.C. Rate Bureau requested this year. “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,” said Goodwin in a statement.

He’d slammed the Rate Bureau’s request when it landed in January. “New homeowner insurance rates went into effect in July 2013. I am appalled that the insurance companies would request another increase just six months later,” he said at the time, later ordering a hearing that took place over October and November in Raleigh. The Department of Insurance’s public staff, representing the people, argued the insurance industry was out for “excess,” though Rate Bureau General Manager Ray Evans said policy writers’ coffers need better protection against risk. “We thought we had presented a good case supported by lots of data and experts that supported our position,” he said Friday. “The industry is convinced that the homeowners’ premiums as they stand are generally inadequate.”

While Goodwin is allowing renters’ insurance to rise 11.2 percent and condo owners’ insurance by 8.1 percent, they’re still far from the respective 55 percent and 50 percent increases for which the Rate Bureau filed. The changes will take effect for new or renewed policies as of June 1. Averaged, the overall increases and decreases come out to 0 percent change. Homeowners’ insurance represents nearly all of the $2.33 billion premium volume in North Carolina. Renters’ insurance represents a minuscule $45 million of that total, while condo insurance is $22.6 million, according to DOI.

Rate changes will vary across the state, and some areas will see homeowners’ insurance rates increase. Avery and Mitchell counties are down for a 21.4 percent surge. Cabarrus and Rowan counties will see 19 percent higher rates. Harnett, Hoke and Scotland counties are marked for 13.3 percent. Those are all areas where the Rate Bureau requested increases of 33 to 35 percent. Beaches — often marked for the state’s highest increases — will be celebrating ordered decreases of 9 percent on the northern coast and more than 5 percent on the southern end. The western mainland of Brunswick, Carteret, New Hanover, Onslow and Pender counties will see an 18 percent decrease. Parts of the eastern mainland there will see a 1 percent dip. Durham and Wake counties will see 4.1 percent decreases. Charlotte will nudge upward 0.2 percent.

The last round of rate adjustments saw an average statewide increase of 7 percent, while individual areas like the southeast barrier islands saw a 20 percent escalation. The Rate Bureau initially requested more to balance coffers with storm risk and payouts. What Goodwin approved at that time, effective July 2013, was worth $237 million less in premiums than what the industry requested. The Rate Bureau’s latest case for increases was worth $600 million in new premiums. It argued the realities and risks of the market today dictate a need for a roughly 40 percent average increase, though it requested much less. On the coast, it said its models indicated rate increases of 120 to 138 percent, where it only filed for 35 percent. Evans said rates need to bring stability to the industry, whose products are like any other in that they need to be appropriately priced for demand. “We in the insurance business are selling a product that, really, the pricing is not known until three or four years down the line,” he said.(Benjamin Brown, THE INSIDER, 12/22/14).