Insurers Ask Some N.C. Homeowners To Agree To Higher Rates

May 28--Some home insurers are maneuvering around state-imposed rate limits by telling customers they must consent to pay higher rates if they want to be able to renew their policy

Customers who don't agree are dropped when their policy comes up for renewal.

The N.C. Department of Insurance says the practice is legal because the over-the-limit rates are imposed only if the customer consents to them.

Consumers who don't consent must find home coverage from a different insurer.

"An insurance policy is a contract," said Kerry Hall, a spokeswoman for the insurance department. "If you consent to pay a higher rate than the state-approved maximum, that's your choice. They can't do it without your consent. However, as they're not required to sell you coverage, they're not required to renew your coverage."

In 2010, about 22 percent of policyholders outside the state's beach and coastal areas agreed to pay rates over the state-imposed limits, according to the insurance department, which began collecting such data that year. In 2011, about 26 percent of policyholders in those areas signed what are called "consent-to-rate" forms. The numbers were higher for people with homes in beach and coastal areas.

Insurance agents said consent-to-rate requests have been rising for several years as insurers wrestle with premium limits that they consider to be too low.

"This definitely has been a very emerging trend in the industry, especially over the past few years," said Bryan Miranda, co-owner of Darden, Miranda & Associates, an independent insurance agency in Fayetteville.

Miranda said many property insurers are seeking to recover from revenue losses from high claims in the state in recent years.

"A lot of insurance companies are paying out more than they're taking in, or they see the writing on the wall," said David B. Canady, vice president of Insurance Service Center in Fayetteville.

Not every insurer is sending consent-to-rate forms to its customers. And those that do aren't sending them to every customer.

Mark W. Rice, president and CEO of independent insurance agency Callahan & Rice in Fayetteville, said it's hard to generalize why particular policy holders are targeted for consent-to-rate requests. For some, it may be past claims. For others, it may be the fact that they have their home insured through one company and their vehicles through another. Auto insurance is typically more profitable than home insurance, and some insurers have pushed customers with homeowner policies to insure their vehicles with them, as well.

Or it could be another reason entirely, Rice said.

Rice said he hears regularly from people who have received consent-to-rate letters from their insurer.

"I've had four to five calls in the last couple of weeks from people who know that I'm in the business and have been for a long time," he said recently. "They're trying to figure out what's going on because it's very odd and not something you deal with on a daily basis, and it's confusing when you sit down and read that letter."

John and Dianne Gainey, retirees who live in Hamlet, recently received such a letter and a consent-to-rate form from State Farm, their home insurer.

Dianne Gainey said the letter asked them to consent to pay 12 percent more than the maximum rate allowed by the state. That was bad enough, she said. But the actual increase was even higher -- about 19 percent -- since they weren't paying the maximum before.

Gainey said she and her husband were baffled and frustrated by the notice. She said they've been with State Farm for about 40 years and made one claim in that time -- about 20 years ago. She said they plan to shop around for new insurance but didn't want to risk losing coverage so they signed the form agreeing to the rate over the state maximum.

"It certainly hits people hard who are on a fixed income," she said.

Even if you sign a consent-to-rate form, agreeing to pay a higher rate, shop around.

Agents said you should talk first to the insurance agent who handles your homeowners policy and ask why you were sent the letter and see if there's anything you can do to get a better deal with the insurer. Perhaps you can add a higher deductible or a new security system. Or you may be able to combine your auto and home coverage with one company, which often means a discount on both policies.

Then you may want to shop around and see what else is available though other carriers.

"There are options," Miranda said. "But you may not be able to get back to where you were."

Whatever you do, don't ignore letters from your insurer. If you don't sign a consent-to-rate letter by the deadline and don't act on it, you could find your home uninsured when the policy's term is up.

And cross your fingers that there's no havoc-wreaking weather.

"Every year without a hurricane is a good year," Canady said.

Staff writer Catherine Pritchard can be reached at [email protected] or 486-3517.

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