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N.C. Lawmakers' Goal: A Public Peek Into Insurers' Crystal Ball

By Molly Parker, Star-News, Wilmington, N.C.
McClatchy-Tribune Information Services

March 12--Rep. Paul Tine says the short session that begins in May is time for his bill that would shed light on the process for setting homeowners insurance rates to see the light of day.

During last year's long session, the bill passed the House 106-0 but stalled in the Senate Insurance Committee. Tine said he recently held a meeting with the senators who co-chair that committee. "I had a very favorable meeting," said Tine, D-Dare.

Here's what it addresses: Insurance companies use catastrophe modeling systems to project potential future storm damage in geographic areas to support their calls for rate changes, which almost always means an increase.

That system has been referred to as "black box" because it's shrouded in secrecy. Its calculations used are private proprietary information of the modeler.

The bill would require at least two models. In addition, it would require insurance companies to include and identify certain information plugged into the models, such as the simulation year of a storm, as well as the projected state and county of first landfall and wind speed, while protecting proprietary information related to the modeling system.

The measure also would ask for historical data for losses so "we all start from the same position," said Tine. All models use historical data to try to project future impacts, beginning with a similar starting point but showing different end projections because they use different methods of calculating potential future risk.

"Once rates are set by the commissioner, DOI (the Department of Insurance) would have to put what the hurricane load is for all the territories across the state. Right now you can only see it in the coastal areas. This way we can better see who's paying for what."

Coastal lawmakers who have had residents bend their ears about rapidly upward moving insurance rates are eager for the bill to move.

"Not only does it add transparency, it uses actual figures, historical data," said Rep. Susi Hamilton, D-New Hanover, who is also a co-sponsor. "Projections can't exist without access to historical data, and it's been a real struggle to get them to use historical data because it demonstrates the eastern part of the state is shouldering the burden for insurance claims for the rest of the state. They don't want to use that data."

Hamilton said that wind and hail claims are far more frequent west of Interstate 95 than they are east of the interstate. "We're a coastal state," she said. "The entire state is affected by weather events. Anybody who lived through (Hurricane) Fran in Raleigh can't deny that."

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But coastal territories have been socked with rate increases.

Most recently, homeowner insurance rates in North Carolina could jump up to 35 percent, with coastal areas again being hit the hardest, under an industry request filed with the state Department of Insurance in January.

The N.C. Rate Bureau, which represents all companies writing homeowners insurance in the state, requested a statewide average rate increase of 25.3 percent -- varying by territory -- with a requested effective date of August.

The requested changes would range from a reduction of 2.7 percent to an increase of 35 percent, depending on the area of the state. The insurance companies also requested revisions to the current geographic rating territories.

The filing will now be reviewed by the state to determine what, if any, rate adjustments are warranted.

Insurance Commissioner Wayne Goodwin has ordered that a hearing be held in the matter of the insurance companies' request to raise homeowners' insurance rates, stating that the proposed rates appear to the Department of Insurance to be "excessive and unfairly discriminatory."

That hearing is scheduled for Aug. 6.

Cameron Moore, chief executive officer of the Business Alliance for a Sound Economy, or BASE, said the two main issues that continue to be a concern impacting the coastal counties of North Carolina are insurance availability and affordability.

"These two problems are still very significant as the gap is getting wider and wider in relation to the overall availability of insurance and the price ... a consumer must pay for coverage," Moore said.

The General Assembly has an opportunity to provide some relief, though, he said.

"Rep. Tine's bill (HB 519) as it passed the House certainly allows for more clarity and transparency as it relates to the rate-making process," Moore said.

Metro desk: 343-2389

On Twitter: @StarNewsMolly

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(c)2014 the Star-News (Wilmington, N.C.)

Visit the Star-News (Wilmington, N.C.) at www.starnewsonline.com

Distributed by MCT Information Services

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