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Carolina Beach Council Hears Update On Coastal Homeowners Insurance

Managing Editor

CAROLINA BEACH - The Carolina Beach Town Council received an update from Kathleen Riely, Governmental Affairs Director for the Wilmington Regional Association of Realtors during their June 11, meeting regarding legislation to amend how homeowners insurance rate increases are determined.
Riely explained, "In 2008, as you well know there was a consent order approved by the NC Department of Insurance to raise rates on the coast approximately 30%. This shocked not only a lot of property owners, but lobbying for the real estate industry, it really, really hurt our industry. The more I looked into it and learned about the process... I realized this was a pattern and was able to go back and get data from 1986. You had been getting hit with these high rates continually since 1986 with absolutely no say in the process."
Riely explained, "Here you are folks working really hard trying to support your families and homes and this is totally out of your control."
She explained, "Dare County filed a lawsuit and I think New Hanover County joined it and they were challenging the increases basically saying they were arbitrary and capricious and they wanted to be heard on the merits, meaning they wanted the court to hear the argument."
She explained, "It stopped on what's called a procedural basis. In other words, a decision was made not to even here it. Basically what the court said was, as the statutes were written, the negotiation between the North Carolina Rate Bureau and the Department of Insurance are involved in what’s called the rate making process. And because the public, the people, the homeowners, the county, were not part of that process, they do not have a right to be heard. That's basically what they said and threw it back to the NC General Assembly."
Riely said, "That's what's been going on. The way the statutes are written, you have all of the insurance companies that are part of the Rate Bureau negotiating with an elected department of insurance commissioner. I thought about this and it doesn't pass the smell test. Guess who most of the donors and contributors are to the Department of Insurance? The insurers. Guess who sits on the board of the Rate Bureau? The three major insurers in this state. This is the only state that has a Rate Bureau. You cannot sell insurance in the state of North Carolina without being part of the Rate Bureau."
She explained, "When they make a decision to raise your rates you don't have a say in the process. We couldn't even get heard in the courts because procedurally it was stopped."
She explained, "What we did first was to make sure the public had some type of input into the process. After fighting for about two years there was a senate bill passed last year, and this is really important for the people to know, giving them the right to be heard during the rate making process. So as of now the public is part of the rate making process and I believe has right to standing to be heard in a court but we won't know unless that's challenged."
She explained, "The Department of Insurance received over 8,000 comments from people on the coast. If you look at the population of people on the coast its miniscule. I don't know if people didn't know about it or were fed up. A lot of people I spoke to felt helpless."
Riely explained, "We were hit again, not as much as before, but were still hit again." She said, "It's so important to get people and public in the process because if you don't they are going to continue to do it again and again."
She said when the rates were raised by 30% on the coast; Charlotte got a decrease in insurance rates. She explained, "More was paid in Charlotte than on the coast in a five year period" for insurance claims from storms.
She said, "Its an antiquated and albeit corrupt system and has to be addressed."
Riely said the Rate Bureau use a model to justify proposed rate increases. She said models project future events with no attention to historical events. She said, "North Carolina used one model called the air-model and that model is highly prejudicial to raising rates on the coast."
She said other states use a blended or combined model that is more equitable across a state. She said in NC, the air-model focuses primarily on damage along the coast which is misleading.
Riely said proposed House Bill 519, requires the Rate Bureau to submit data from more than one model if modeled losses are used and requires supporting data specific to North Carolina be included in a rate filing when a catastrophe model is used. Each filing would have to include annual historical loss data by territory from years since 1987.
The bill also requires property insurers to designate that portion of a premium based on fire and non-wind hail perils and that portion based on wind and hail perils in all premium communications with policy holders.
Riely said the bill would hold the Rate Bureau's feet to the fire when justifying proposed rate increases.
Riely urged the public and the Council to contact their local delegation in the General Assembly to express support for the legislation.
Earlier this year NC Department of Insurance Commissioner Wayne Goodwin reached a settlement agreement with the NC Rate Bureau on the Homeowners Insurance Rate Filing that was submitted in October 2012. A public comment period was held on the filing shortly thereafter and over 9,000 comments were submitted. The NC Department of Insurance, upon reviewing of the filing and consideration of the comments, issued a Notice of Hearing on the filing to begin June 3, 2013.
The Hearing would have been the first on a Homeowners Insurance Rate Filing since 1993 and would have given NCDOI the opportunity to further scrutinize the filing through testimony and evidence submitted by the NC Rate Bureau.
Ultimately the June hearing was never held and instead Insurance Commissioner Wayne Goodwin approved an agreement.
The NC Rate Bureau's filing represented a 30% rate increase for eighteen NC coastal counties. Based on filing data however, indicated rates - those the Rate Bureau concluded were the actuarial sound rates needed - were as high as 119% more than current rates. The NC Rate Bureau capped the increase request at 30%.
This settlement agreement represented an overall statewide increase of 7% with the largest increases impacting coastal counties. The beach areas of the coast will see increases as of July 1, 2013 as high as almost 20%; inland coastal areas will see much lower increases.
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%.