NEW HANOVER COUNTY — A North Carolina Rate Bureau proposed insurance increase could hit coastal homeowners especially hard.
The N.C. Rate Bureau is requesting an average of 18.7 percent increase in homeowners insurance statewide, and as much as 25 percent in coastal areas.
Homeowners in New Hanover, Pender, Onslow and Brunswick Counties could all see up to a 25 percent increase.
Filed in November, homeowners in the state have until Dec. 29 to submit their concerns to be considered by North Carolina insurance commissioner Mike Causey. Causey will make a decision during the first week of January on whether the NC Rate Bureau’s filing is excessive, inadequate or discriminatory.
The highest rates proposed are all in “areas closer to the coast,” said Barry Smith, communications specialist for the N.C. Department of Insurance.
Divided by territory, some areas would actually see a decrease in homeowners insurance, particularly in western areas of the state. Territories designated with the highest potential rate increase fall within multiple counties in the Cape Fear region.
New Hanover, Pender, Onslow and Brunswick Counties are considered in the NC Rate Bureau’s “120” territory at 25 percent increase, “140” territory at 25 percent and “160” category at 23.7 percent.
North Carolina Representative Bob Muller oversees Pender and Onslow Counties, areas that may feel the N.C. Rate Bureau’s highest rate suggested.
“It’s an extremely high rate increase that they’re asking for,” Muller said. “I think what the insurance companies are looking at are the devastation of the coast, the Gulf Coast.”
A homeowners insurance rate increase has not taken place since 2012 when the N.C. Rate Bureau and the N.C. Department of Insurance settled on a 7 percent increase.
“They’re betting on a big storm hitting here,” Muller said.
According to Muller, public representatives in Pender and Onslow County have already made moves to oppose NC Rate Bureau’s filing.
The Pender County Board of Commissioners, the Topsail Island Board of Commissioners and Surf City Town Council have all passed resolutions objecting to the proposed rate increase and the Brunswick County Board of Commissioners has penned a letter in opposition.
The N.C. Rate Bureau runs predictive models of every scenario possible to arrive at its proposed insurance rates.
“We’ll take the storms that will hit Wilmington, manipulate the data, plug in what we envision what the potential damage might be and do all kinds of things to come up with 100,000 or so iterations and we average all of those,” said Ray Evans, general manager for the NC Rate Bureau.
Evans says when insurance rate increases have been proposed in the past, the N.C. Rate Bureau and the N.C. Department of Insurance have ultimately settled on an agreed upon rate in lengthy litigation.
“If the past is a prologue, we have had not much success in these filings,” Evans said. “Getting them to agree on a number is a real challenge.”
The entities must agree on variables including predictive and historical weather data, inflation rates and the percent of profit that insurance companies are entitled to.
In New Hanover County, Evans said the rate bureau was gracious in its 25 percent request.
“The real number ought to be about 65,” he said. “It is not popular, but it is our obligation to do this.”
Shane Johnson, Chief Operating Officer for Cape Fear Realtors, says the N.C. Rate Bureau is not accurately calculating risk.
“We just see that as being nonsensical,” Johnson said.
For some coastal homeowners, the potential rate increase would be required in addition to flood insurance and wind and hail insurance; all designated as separate insurance requirements.
“That really creates an extreme burden on the coastal homeowner,” Johnson said. “Ironically in the last hurricane, 60 percent of the damage incurred inland.”
The last rate bureau left in the United States, the N.C. Rate Bureau submitted its 2,000-page filing to the N.C. Department of Insurance on Nov. 20.
“They’re either trying to be thorough or they’re trying to overwhelm the public or the commissioner,” Johnson said. “It’s a paper tiger, insurance companies ultimately set the rates.”
The N.C. Department of Insurance is requesting public comments on the proposed increase up until Dec. 29, when it will begin legal negotiations with the N.C. Rate Bureau.
“It’s a massive amount of paper to read,” Smith said. “Our experts will be going through that (the filing) and our experts are going through the comments.”
A settlement between the two agencies could be reached at any time according to Smith.
Consent to Rate
Regardless of the rate the N.C. Rate Bureau and the N.C. Department of Insurance will ultimately settle on, Johnson says insurers use aggressive means to obtain high payments on high-risk properties.
“Insurance companies can circumvent the law by sending out consent to rate letters,” Johnson said.
Consent to rate letters, letters sent by insurers to particularly high-risk properties, permit insurers to charge rates much higher than what homeowners would otherwise be used to paying.
The rate is “presumed reasonable” if it is less than or equal to a 250 percent increase according to the N.C. Department of Insurance.
North Carolina Senator Michael Lee’s Senate Bill 99 seeks to improve the transparency between insurers and the public regarding consent to rate letters.
Confident in the region’s legislative delegation, Johnson is hoping that Lee’s work will help mitigate costs which especially effect coastal homeowners.
With no action taken since June 29, Senate Bill 99 has not yet passed.
Update: This article has been updated with corrected quotes by Shane Johnson
Johanna Ferebee can be reached at firstname.lastname@example.org or @j__ferebee on Twitter