After a five-week hearing on proposed changes to NC homeowners insurance rates, the first since 1992, NC Department of Insurance Commissioner Wayne Goodwin announced his ruling last week, 10 days before the ruling deadline.
The new ordered rates came as a surprise to many, especially since ordered rates are lower than current rates in many eastern NC territories and the NC Rate Bureau had filed an overall statewide rate increase of 25.5%. It was assumed that legislation passed in 2012 would have prohibited the Commissioner from lowering rates. Language within that legislation stated that any rate changes ordered after the conclusion of a rate hearing would have to be “between the current rate and the filed rate.” The legislation, however, did not specifically say “by territory”. The Commissioner therefore ordered a statewide average rate that met the 2012 legislation when considering all rate changes – homeowners, condos and renters’ rates. The NC Rate Bureau may appeal the Commissioner’s decision but as revealed in hearing testimony, the NC Rate Bureau has been hard at work on another Homeowners Insurance Rate Filing which will most likely be filed after the first of the year.
"The rates I have ordered are the result of the most thorough inspection of North Carolina homeowner’s insurance rates in more than 20 years," said Goodwin. "After considering all of the evidence and data available, I have determined that no factors or events justified the excessive rates requested by the insurance companies."
BUYER BEWARE: The NC Rate Bureau, comprised of representatives of all insurance companies writing in NC, were adamant throughout the hearing process that filed rate increases were necessary for carriers to continue to be able to write coverage. They also warned that if increases were not approved, more policyholders would be asked to sign Consent to Rate (CTR) forms. Consent to Rate is a loophole for insurance carriers that allow them to bypass the rate-making process. They give carriers the authority to charge up to 250% over the NCDOI approved maximum rate as long as a policyholder’s policy is in effect. Home owners should be very wary before signing these forms and should shop around for coverage when asked to sign them. They usually come with a warning that if the form is not signed then coverage will be terminated at renewal.
With rates going down, policyholders should also be very aware of the dwelling value on their policy from year to year. This value is the amount necessary to rebuild a home within the policy year. It is not the market value of a structure and should not include land value. Policyholders should be aware that the dwelling value changes each year at renewal due to insurance carriers applying an inflation rate factor to that value. In some cases, the application of this factor may make the dwelling value higher than it should for the policy year. The dwelling value determines the premium amount and the deductible if it is a percentage amount. All other lines of coverage such as personal property, loss of use and other structures are all a percentage of the dwelling value thus making the dwelling value the most important amount to pay attention to on your policy. There have been cases where policy dwelling values have been more than three times the estimated rebuild cost that it should be. Ensuring the dwelling value accurately reflects the rebuild cost of a structure within the policy year could save a policyholder hundreds, if not thousands, of dollars in premium and deductible costs.
Given the findings reflected in the Order of the Hearing, debate and discussion on the property insurance rate making process will likely be on-going in the long session of the General Assembly next year. The fight for fair and accessible property insurance rates for coastal homeowners is far from over.
To read the full order, go to: http://www.ncdoi.com/Media/Documents/12-19-14_HO_Order_Total.pdf
The ordered rates effective June 1, 2015 impact our region as follows:
- Barrier Island portions of Currituck, Dare and Hyde Counties – 35% rate increase filed; current rate on $150,000 HO-3 coverage $2,482; order rate -9%, bringing new rate to $2,259.
- Inland/mainland areas of Currituck, Dare, Hyde and Pamlico Counties – 10% rate increase filed; current rate $1,582; ordered rate -12% making new rate $1,382.
- Inland areas of Beaufort, Camden, Chowan, Craven, Jones, Pasquotank, Perquimans, Tyrell and Washington Counties – 8.7% rate increase files; current rate $1,340; ordered rate -11% making new rate $1,193.
- Gates and Hertford Counties – 16% increase filed; current rate $916; ordered rate -12.3% making new rate $770.