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Coastal Homeowners Insurance Rates To Rise Almost 20%; Insurance

North Carolina Insurance Commissioner Wayne Goodwin signed a settlement agreement permitting homeowners insurance rates to rise as much as 19.8% in coastal areas.

Managing Editor

CAROLINA BEACH - A decision wasn't expected until later this summer, but on Tuesday March 5th, North Carolina Insurance Commissioner Wayne Goodwin signed a settlement agreement with homeowners insurance companies allowing an overall statewide average rate increase of 7 percent, varying by territory and form, beginning July 1, 2013.
While the overall statewide average increase is 7 percent, it is much higher for coastal counties with the highest increase of 19.8% in New Hanover, Brunswick, Carteret, Onslow and Pender counties in areas nearest to the ocean. Areas within those counties farther inland will see an increase up to 8.6%.
 According to a press release issued by Goodwin's office on Tuesday, "The insurance companies, represented by the North Carolina Rate Bureau, had requested an overall statewide average rate increase of 17.7 percent on Oct. 1, 2012. The difference between the requested and settled rates amounts to $237 million in savings to policyholders."
In October 2012, the North Carolina Rate Bureau filed a request with the North Carolina Department of Insurance for insurance rate adjustments calling for a 30% increase for coastal homeowners insurance rates. That initial  request called for an average statewide increase of 17.7%, with increases as high as 30% in New Hanover, Brunswick, Pender Counties and other coastal counties.
On Tuesday October 23, Goodwin issued a statement saying, "Initial review raises concerns that the rate increases requested by the insurance companies may be excessive and unfairly discriminatory."
A public hearing was scheduled to begin on June 3, 2013, at 10 a.m. at 430 N. Salisbury St. in Raleigh. Goodwin was to serve as the hearing officer and listen to experts from the Department of Insurance and the Rate Bureau to decide what rate changes, if any, were warranted.
According to the NCDOI,  the Department's role is to represent the interests of the public. After an initial review of the filing and comments submitted by the public, Department experts believed the requested rate increases were not justified based on the data submitted.
The following concerns, among others, were to be raised at the June hearing:
• Old data: In the ratemaking process, data typically runs two years behind the date of the rate filing. The filing is based on data from 2005 to 2009; however, data from at least as recently as 2010 was available at the time this filing was compiled.
• Risk factors: The filing includes various risk factors used to calculate the indicated rate changes. The Rate Bureau claims these factors (such as the net cost of reinsurance and compensation for assessment risk) are a necessary cost of doing business in North Carolina. The concern is that the factors do not appear to be justified and result in a substantial increase in rates.
• Profit methodology: The Rate Bureau uses a methodology that is not allowed in North Carolina and has been successfully challenged in the 2001 auto insurance case, which was decided by the N.C. Supreme Court. This methodology results in excessive profit factors of 10.5 percent.
• Deviations: The Rate Bureau includes a factor for deviations (discounts that some insurers give some of their policyholders) in the filing that, in effect, charges discounts back to consumers. The inclusion of a specific factor for deviations has been previously disallowed numerous times in auto filings litigated in the N.C. Supreme Court.
• Hurricane model: The hurricane losses are derived using a hurricane model that does not appear to be adequately documented or justified.
A public comment period on the rate filing was held from October 3-19 to engage the public in the ratemaking process. NCDOI received approximately 8,800 emailed or mailed comments, and approximately 35 people made comments in-person during a public comment session held October 17.
The Town of Kure Beach organized a bus trip for elected officials and residents to attend the public hearing in Raleigh to voice their opinion to DOI officials. The Wilmington City Council adopted a firm resolution opposing the requested rate hikes calling for a more equitable process to determine insurance rates across the entire state.
According to the release issued by NCDOI on Tuesday March 5th, "As Department of Insurance experts spent months studying the insurance companies’ request, it became apparent that some increase was justified, largely due to the steadily rising cost of reinsurance related to hurricane risks and ongoing concerns regarding availability. In order to minimize the increase, the Department of Insurance elected to settle on rates, eliminating the need for the hearing scheduled for June 3."
"Homeowners insurance is a very complex issue. We face a great challenge in making sure that it is not only affordable, but available, to consumers across the state,” said Goodwin. “I feel this settlement helps strike that balance, and I am pleased that the increase will be significantly smaller than what insurers originally requested."
The last homeowners insurance rate filing occurred in 2008 when the insurance companies requested a 19.5 percent statewide average increase. A settlement agreement allowed for a 4.05 percent statewide average increase to go into effect in May 2009.
Other counties will see increases across the state much lower than the Cape Fear Region. For example, Currituck, Dare and Hyde counties where homes are closest to the ocean, the increase is 17% while farther inland in those counties the increase is 3.4%.
For counties in the western part of the state, the increase is 7.7%. Coastal counties located in the inland eastern part of the state  including Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrrell and Washington will see a 1% increase.
For New Hanover, NCDOI offered an example based on a frame home valued at $150,000 and insured under the HO-3 policy, Protection Classes 1 - 6. Currently the cost would be $2,342. With the 19.8% increase that would rise to $2,806.
For more information, visit

Homeowners insurance settlement agreement

Homeowners rate revisions by territory

North Carolina territory map