EDITORIAL: Proposed insurance hikes justify ‘necessary evil’

Once again, apparently in an effort to improve their bottom line to recover from a growing list of costly disasters, insurance companies licensed in the state proposed another outrageous rate increase, this time for insurance covering second homes and apartments- under the category of dwelling insurance. This followed a failed effort last year to do the same thing for primary home insurance. In both instances, N.C. Insurance Commissioner Mike Causey and his staff at the Department of Insurance (DOI) rejected the premium proposals only to negotiate a more reasonable rate.

Insurance companies are doing themselves a disservice when it comes to setting prices that are unreasonable and unacceptable at the very outset. The companies provide a valuable service- some would call it a necessary evil- an inaccurate description when considering the purpose is to provide assistance in a moment of distress. But the outrageous proposed hikes as seen recently only enhance the negative image of this very valuable industry.

Insurance is the ultimate in community support. Granted, it is a business but by making it a business structure there is accountability on the part of the providers and the users. Insurance is a community effort that provides needed financial support for those who purchase coverage while at the same time spreading both the risk and cost among many members. It is, if you get to the bottom line, a form of socialism whereby the community provides support for those who become victims of an unexpected event, such as a natural disaster or fire.

In October of last year, the N.C. Rate Bureau, which is tasked to represent insurance companies licensed in the state, sought to increase dwelling insurance rates 59.4% over a two-year period. This is insurance for rental properties such as individual homes and vacation properties, so an increase of that amount would have resulted in a subsequent increase for the renters.

Late last week, Commissioner Causey announced that after having refused the rate request, he and his staff had negotiated a rate increase of 5% each year for the next two years starting Oct. 1. In 2023, Causey likewise refused a proposed 50.6% increase, negotiating instead an 8% increase.

For Carteret County insurance is becoming a critical issue. Not only would the two-year 59.4% increase have impacted permanent renters, it would have forced a major uptick in rental costs for beach cottages - a mainstay of the county's number one industry, tourism. Because beach cottages and condominiums represent the lion's share of rooms rented throughout the year, more than all the motel rooms combined, this increase could have negatively impacted the rental market, resulting in diminishing the county's tourism tax revenues.

That uptick in rental costs would have been passed on to longer term renters as well, putting additional stress on a housing market that is fast becoming too expensive for new arrivals who are considering a longer commitment and possibly becoming permanent residents, either as renters or as homeowners.

There is more than just economics at play, there is also the greater social and cultural investment that comes with this issue. The enticement to put down roots, to invest in a community, begins with making a housing decision since that is almost always the greatest financial investment for individuals or families. Once that investment is made, the homeowners become invested in more than just the real estate, but the community writ large, participating in local cultural and social activities such as churches, schools and service organizations. All of this improves the community, be it neighborhood, town or county.

Because of taxes and now insurance premiums, there is a growing concern that the state's cost of home ownership, let alone cost of living, is getting beyond the reach of young adults, which has caught the attention of the state's elected leaders.

The state's General Assembly, responding to what is perceived to be out-of-control property tax increases, is considering several actions to slow rapidly rising ad valorem taxes. President Pro Tempore of the N.C. Senate, Phil Berger, not wanting to wait for a voter approved action, is proposing a moratorium on property revaluations which are a cause for property tax increases as well.

The insurance industry is not immune to financial difficulties and that is the justification to seek higher premiums, otherwise the companies could simply stop writing insurance in the state. Insurance companies are still reeling from costs associated with Hurricane Katrina (2005) that amounted to $201.3 billion. Over the past 25 years, hurricane damages have totaled $1.3 trillion and that excludes losses from Hurricane Helene, which are yet to be concluded, as well as numerous other natural disasters such as last year's wildfires in California.

Insurance companies can be faulted for failing to price their coverage accordingly but at the same time it is difficult to calculate inflation which is rapidly increasing to a point where insurance companies are having a hard time keeping pace. So the ability of the insurance commissioner to negotiate a two-year price structure in the current construction market is commendable.

The pricing challenges will not end, nor will the need to be vigilant. In December 2024, the Rate Bureau presented a home insurance proposal that averaged 42.2% statewide. The operative word was average, which meant that it took in a variety of rates, all determined by territories. In some territories such as the piedmont and certain mountain communities, the proposed rates were single digits but in Carteret County, all beach properties were priced to see a 99% increase.

In January of last year, Causey denied the increase forcing the Rate Bureau to justify its financial findings in a quasi-judicial hearing. After numerous meetings between the Rate Bureau and the DOI staff a much reduced proposal with a two-year schedule was presented to and approved by the commissioner. June of this year, begins the second year of the rate structure.

While it was a major reduction, from a statewide average of 42.2% to just over a total 15% for a two-year period, the coastal communities still faced the greatest cost. Homeowners insurance for the eastern region of Carteret County including Down East, sound front homes as well as inland homes, the allowed increase is 20.6% over the two-year period; 10.5% last year followed by 10.1% starting June 2026. The insurance rate originally proposed for that region of the county, starting August 2025 was 71.4% for just one year. That was a 71% reduction in the rate request.

These outrageous increases followed by radical reductions (a 64% statewide average for homeowners' insurance in 2025 and an 81% reduction on dwelling insurance this year) due to challenges, only serves to question the credibility of the industry. The result is lost time, unnecessary fears on the part of the public and a lack of trust for an industry that, in the main, provides valuable service. It's time for the insurance industry to treat the public and customers with respect by being more realistic in its pricing structures, otherwise, the term "necessary evil" will continue in use.