SOUTHEASTERN N.C. — Homeowners in the Cape Fear region will almost certainly experience insurance rate increases in coming years but involved parties anticipate they will not spike to the degree represented by a recent proposal.
On Jan. 4, the North Carolina Rate Bureau requested an average statewide homeowners’ insurance rate increase of 42.2%, with hikes as high as 99.4% in coastal counties, including New Hanover, Brunswick, and Pender. The bureau asked for the rates to become effective Aug. 1, 2024.
North Carolina Department of Insurance Communications Director Jason Tyson told Port City Daily Wednesday the department has received hundreds of concerned and opposed comments from homeowners. He emphasized the DOI negotiated down the bureau’s 2020 request for an average increase of 24.5% to a settlement of 7.9% — less than a third of what was originally requested. Tyson anticipates the next agreement will be significantly lower than the bureau’s request. The 2020 settlement required the bureau to wait until 2024 to request another increase.
The DOI will hold a public comment forum at 325 N. Salisbury St. in Raleigh on Jan. 22; Tyson said the department encourages public feedback and will negotiate with the bureau in coming months.
North Carolina has a unique arrangement for setting insurance rate increases. The North Carolina Rate Bureau represents the insurance industry to make policy suggestions to the Department of Insurance, which then negotiates with the state government.
NCRB Chief Operating Officer Jared Chappell told PCD the DOI commissioner generally negotiates settlements after the bureau proposes increases rather than litigating the matter.
“In most cases, the cost of going to a hearing is so high that we don’t want to pass those costs along to the consumer,” he said. “So it’s better for everybody to find a number that’s agreeable and settle on it. And then the rate bureau is free to put in another filing.”
Chappell noted the state’s home insurance rate serves as a baseline and individual providers can deviate from it. He added any increases since 2020 are the result of firms changing their prices.
The DOI said it would compile data on total home insurance increases in the Cape Fear region over the last 10 years, but PCD did not receive the information by press.
Chappell said the insurance rate increase request included input from around 197 property insurance companies; he said every licensed insurance business in the state is required to be a member of the bureau.
In 1977, the General Assembly established the NCRB, which combined the functions of the North Carolina Fire Insurance Rating Bureau, the North Carolina Automobile Rate Administrative Office, and the Compensation Rating and Inspection Bureau of North Carolina into a single organization. It administers the state’s Workers Compensation Insurance Plan and serves as a hearing officer for the Safe Driver Insurance Plan.
As a nonprofit, NCRB is funded by member companies and its budget is split proportionately by market share.
“If carrier A provides 10% of the property policies in North Carolina then they pay 10% of our property budget,” Chappell said. “And same thing with auto and workers compensation.”
Chappell and Tyson said storm risk is a leading cost for higher insurance on the coast. NCRB uses storm and climate modeling from Moody’s and Verisk credit services to inform their calculations on catastrophic storm risk, which he said is trending upward. PCD reached out to both firms to ask for details on their quantitative methods but did not receive a response by press.
“I think partly due to climate change and partly also due to greater exposure at the coast,” Chappell said. “We’ve seen more and more — especially after Covid — more and more people move into the coastal areas.”
New Hanover County’s population increased from 225,705 in April 2020 to 234,921 in July 2022; it increased in Brunswick from 136,694 to 153,064 over the same period and grew from 60,208 to 65,737 in Pender.
Regional economist Mouhcine Guettabi told PCD he was concerned about the long-term impacts of climate change on insurance costs in the Cape Fear region.
“Do these increases potentially change the demographics of who buys these homes?” he asked. “If you can’t insure it, you probably can’t get a mortgage. Does it mean that people who can buy them all cash, can buy them? What happens to prices? I think there are more questions than answers at this point.”
Chappell said he could not provide details on recent revenue and profit trends for the North Carolina homeowners insurance industry. He said members do not share information on profits, but submit data on the frequency and severity of insurance claims, which have increased in recent years.
“If claims, frequency, and severity goes up but premium rates do not, that clearly means that the carriers, at least in some cases, are not as profitable,” he said.
Chappell said he would consult with legal counsel before providing information regarding which home insurance companies are most prominent in the Cape Fear region. However, Brent Lascara of Wilmington-based insurance provider Huneycutt Group estimates State Farm is the biggest local provider, followed by North Carolina Farm Bureau and Allstate.
The most recent available statistics from the DOI in 2022 show State Farm as the biggest home insurance provider in North Carolina, with 16.1% of state market share, or $600.7 million in premiums.
North Carolina Farm Bureau is the second largest with 12.2%, or $457 million in premiums.
Lascara estimates Huneycutt insures more than 10,000 homes throughout the tri-county region. He said Huneycutt doesn’t have much contact with the NCRB beyond providing input.
The insurance industry has struggled in the Cape Fear region in recent years due to storms and catastrophes, according to Lascara. Five hurricanes of varying intensity hit the coast since 2016. However, he views inflation as the biggest contributing factor to insurance increases.
“They’re catching up to inflation,” he said. “Because inflation is going on and it’s not until the end of the year that they realize how much that actually impacted them.”
Port City Daily also reached out to the local representatives of State Farm, Allstate, Geico, George Chadwick Insurance, and Brad Sizemore Insurance but did not hear back by press.
The public comment forum will take place at the North Carolina Department of Insurance’s Jim Long Hearing Room on Jan. 22 from 10 a.m. to 4:30 p.m. The Jim Long Hearing Room is in the Albemarle Building, 325 N. Salisbury St., Raleigh, N.C. 27603.
A virtual public comment forum will be held simultaneously and will be accessible at this link.
Emailed public comments should be sent by Feb. 2 to: 2024Homeowners@ncdoi.gov. Written public comments must be addressed to 1201 Mail Service Center, Raleigh, N.C. 27699-1201 and must be received by Kimberly W. Pearce, Paralegal III by Feb 2.
All public comments will be shared with the NCRB. If a settlement cannot be reached in 50 days, NCDOI commissioner Mike Causey will call for a hearing.
Tips or comments? Email journalist Peter Castagno at peter@localdailymedia.com.
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