Some N.C. Homeowners Paying Higher Premiums
By David Ranii, The News & Observer (Raleigh, N.C.) | |
McClatchy-Tribune Information Services |
Buckley, 84, couldn't understand why his
Buckley didn't take the increase, which he labels "excessive," lying down. He wrote both his insurance agent and the state
Nevertheless, he decided to stick with
"We can afford it," he said. "But is it really justified?"
In recent years, some
For example, the most recent rate increase, which went into effect
In Buckley's region, rates rose a relatively paltry 2.8 percent. That raises the question: How could his premium jump so much?
As it turns out, some insurance companies, including
"The industry believes that the rate level in
Meanwhile, companies have found ways to raise premiums. To understand how, you have to understand the unique regulatory process in
Disappearing discounts
When state regulators approve a rate for homeowners insurance, a maximum rate is established. But companies don't have to charge the maximum rate.
"Once the ceiling is set, companies can deviate from it," said
State regulators must approve any deviations, or discounts.
In the past, competition in the marketplace drove companies to offer discounts for all sorts of reasons. Some examples: having fire alarms or new wiring or having multiple insurance policies with the same company. Companies also can choose to offer a blanket discount by setting a "base rate" that is less than the state-approved maximum.
Some insurers offer more than two dozen different discounts. Most of those discounts apply statewide, but some are limited to certain regions.
But since 2011, which was a bad year for storm damage to homes in
"What we have seen is a movement on the part of companies to re-look at their deviations and adjust them accordingly," Mack said.
That's based on anecdotal evidence. The state doesn't have hard data on discounts that have been phased out or lowered.
What's more, any reduction or elimination of a discount is magnified by an immutable law of mathematics -- eliminating a discount triggers an increase that is larger than the discount itself.
For example, a 15 percent discount on a
Ripple effect
In Buckley's case, according to an analysis performed by the state
Eliminating that discount actually had "a ripple effect" because it was a discount
In addition, the
"That wasn't a matter of
Some consent to rate
It's a situation that creates a headache for insurance agents.
"Do car dealers like it when the prices of cars go up?" Powell asked. "If you're a middleman ... any time the price goes up, it creates aggravation."
"When you've had long-term clients, client you have had for years, and the price has been relatively stable and all of a sudden it jumps up, it oftentimes sends them out in the marketplace to find a better price," Powell added. "Sometimes they find one and sometimes they don't."
As
Charging rates that exceed the approved ceiling is permissible under state law if the homeowner signs a "consent to rate" form agreeing to the higher price. Insurers that ask consumers for such agreements invariably refuse to renew the policy unless the homeowner agrees to pay the higher rate, which in some cases has been more than 50 percent above the state-approved maximum.
In 2012, 27.6 percent of homeowners statewide agreed to consent-to-rate requests.
Mack, the state regulator, said insurance companies used to turn to consent-to-rate when they viewed a homeowners policy as especially risky for one reason or another, such as ancient wiring or a decrepit roof.
But now, he said, insurers are using it as a pricing tool in order to generate more premium dollars from their customers.
Ranii: 919-829-4877
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