Due to the importance of homeowner's insurance, and the fact that it is a necessity for home mortgages, there needs to be greater transparency on the part of insurance companies providing claim details so that the public better understands the justification. And, in the cases of a rate settlement such as announced last month by Commissioner Causey, there needs be more disclosure about the process and the arguments used that resulted in the new premium charges.
In mid-November of 2020, the N.C. Rate Bureau (NCRB), a legislatively created department tasked with assuring accuracy of insurance rate administration and to represent those agencies licensed to operate in the state, presented a premium increase to the state's Department of Insurance (DOI) for homeowner's insurance that averaged 24.5% statewide. In making the rate request, the rating bureau stated that because of an increased number of insurance claims over the preceding years a much high rate was justified to assure the solvency of the requesting companies. But out of the apparent concern for the financial impact of even higher rates, the NCRB and its members proposed only a 24.5% increase.
Keep in mind this was an average increase. The state is divided into 29 territories and each territory carries a specific risk rating, with the coastal region and a few mountain regions carrying the highest risk rating. Because the 20 coastal territories are considered to have the highest risk of claims due to hurricane exposure, insurance premiums for that region of the state were facing premiums increases as high as 25% while other territories were scheduled for single digit increases.
Public notice of this 2020 rate proposal was disseminated by Commissioner Causey in a two-page press release to newspapers and broadcast media. Because the notice was sent out a week before Thanksgiving, the traditional beginning of the Christmas season, most newspapers and the few broadcast media that cared enough to read the new release provided only cursory coverage.
The public notification of this proposal was extremely short on both time allotted for public comment, one month, and equally short on information about the reason for the increase. The only explanation provided in Commissioner Causey's release was "one of the drivers behind this requested increase is that North Carolina has experienced increased wind and hail losses stemming from damaging storms." There is no mention of what storms were the cause nor any indication as to the losses suffered, nor did it mention that there was an extreme disparity of rate changes, with the coastal region experiencing the highest rate increases in all categories.
Anyone interested in the details of the rate increase needed to go to the Rate Bureau's website which is not part of the state's DOI website and then attempt to comprehend the two-part, two-thousand-page filing. The NCDOI website had few details about the filing and only provided information for making comment or participating in a "virtual meeting."
Late last month, almost a year to the day after the initial rate increase request, Commissioner Causey announced that he and the rate bureau had settled on an increase that caps premium increases to 9.9% for the areas designated as high risk and 5.5% for other territories, which results in a statewide average of 7.9%
In making the announcement about the recent settlement, Mr. Causey stated, "I am happy to announce that North Carolina Homeowners will save over $751 million in premium payments compared to what the NCRB had requested. I am also glad the Department of Insurance has avoided a lengthy administrative legal battle which could have cost consumers time and money."
There is no question that homeowners, condominium owners and apartment renters in the 20 coastal counties are far better off now that Mr. Causey has negotiated the proposed 25% premium insurance increase down to only 9.9%. But still, the public has been kept in the dark about the process and reasoning behind both the original requested premium hike and now the settlement.
Considering the complexities of the insurance rate proposal and the expansive requirement of insurance for property ownership, it stands to reason that the NCDOI should do more to inform and educate the public.
Simply announcing that a rate increase has been proposed with little, very little, explanation and then to provide only one month to understand and research the facts provided is unfair to the public. It is worth noting that this proposal, like four other previous proposals, came during the holiday season when the general population was focused on the Christmas season. The 2020 requested premium increase is particularly onerous as the nation and state recover from the economic impacts of the Covid-19 pandemic and rapid out-of-control inflation.
Commissioner Causey and the legislature should establish the same procedures utilized by the N.C. Utilities Commission. Utility companies licensed to provide electricity and gas services in the state, like the insurance industry, must seek approval for all rate increases or adjustments in service. In those cases, the utility company requesting a rate or service change must present documentation for the changes to the state's Utilities Commission. The commission then conducts public witness hearings in several towns affected by the rate or service proposals. Following those meetings, the commission then conducts an expert witness hearing and from both the public forums and more comprehensive hearings, the commission's staff makes a report for the Utilities Commission's final decision.
Mr. Causey's announced rate reduction is only a partial solution. Recent news reports noting that home insurance is rising faster than inflation should cause even greater concern for homeowners, spurring Commissioner Causey and the legislature to improve public disclosure and more transparency in the process.