Insurance commissioner, companies, agree on rate increases

Mar. 05, 2013 @ 06:19 PM

A settlement agreement signed Tuesday by the state’s insurance commissioner will allow a 2.8 percent increase in homeowners insurance rates in Durham and Raleigh starting in July.

The agreement allows for a lower increase than what was originally requested by the N.C. Rate Bureau, a Raleigh-based group that represents insurance companies in the state.

The bureau had initially requested an overall, statewide average increase of 17.7 percent. According to Tuesday’s release, the settlement agreement signed by Insurance Commissioner Wayne Goodwin allows for a statewide average rate increase of 7 percent, varying by territory and form, beginning July 1.

The initial request had sparked thousands of opposing comments to the department.

“We face a great challenge in making sure that (homeowners insurance) is not only affordable, but available, to consumers across the state,” Goodwin said in a prepared statement in Tuesday’s release. “I feel this settlement helps strike that balance, and I am pleased that the increase will be significantly smaller than what insurers originally requested.”

For the area that includes Durham and Raleigh, the original request was to allow for a homeowners insurance rate increase of 11.8 percent.

The settlement agreement allows for an increase of 2.8 percent.

For a territory that includes Chatham and Orange counties as well as parts of Durham and Wake, the original requested increase was for 11.1 percent for homeowners insurance. The agreement allows for a 2.7 percent increase.

Coastal counties will see a steeper increase. The settlement agreement would allow for homeowners in Brunswick, Carteret, New Hanover, Onslow and Pender counties to see an increase of 19.8 percent.

Goodwin’s office said in Tuesday’s release that insurance department officials found some increase was justified due to the rising cost of reinsurance related to hurricane risks, and concerns regarding availability.

Kerry Hall, a spokeswoman for the insurance department, said in an email that in the past several years, insurance companies have been constricting the amount of homeowners insurance they’re writing, particularly along the coast.

“We don’t want to experience insurers pulling out of the state altogether because they consider the risk of doing business in North Carolina too high,” she said.

Hall also added the claims history for an individual territory influences its rates. If there is a history of losses in one territory versus another, that territory is likely to have higher rates, she said.

Hall said in the email that hurricanes are the predominant reason insurance costs are higher on the coast. She said insurance companies purchase reinsurance to insure themselves so that they’re not “wiped out” in the case of a catastrophic event. She said the use of reinsurance became “very widespread” after Hurricane Andrew.

Sue Taylor, director of insurance operations for the N.C. Rate Bureau, also said the cost of reinsurance, which she said taken out by insurance companies in the case of severe losses has gone up “significantly “in the past several years. She also said it costs more to repair a damaged home today.

“I think we see that in anything we buy. The cost of building supplies, labor costs are going up,” she said. “We just want to make sure that insurance carriers can make a profit on the business that they’re writing so that they don’t take a loss,” she also said.

The last request for a homeowners insurance rate increase request in North Carolina was in 2008, when insurance companies requested a 19.5 percent statewide average increase. A settlement agreement was reached allowing for a 4.05 percent statewide average increase. That went into effect in May 2009.