Home insurance is going up again in NC, but lawmakers can help slow the spike. | Opinion

Ned Barnett, The Charlotte ObserverCharlotte Observer

As big storms drive up homeowners insurance in North Carolina, state Insurance Commissioner Mike Causey is weathering a storm of consumer discontent.

An insurance industry proposal filed last year for rate hikes averaging 42% over the next two years brought a flood of more than 25,000 comments into the Insurance Department, most urging Causey to resist. He went to court to oppose the request, but in January settled for an average increase over the next two years of 15 percent statewide, though rates on the coast went up as much as 32%.

One homeowner who saw his insurance jump by 17% wasn’t happy. The commissioner said the homeowner told him, “You call this standing up for the consumer? You’re too old to be doing this job. You need to retire.”

Causey, 74, is not retiring and not apologizing. He said his negotiations saved consumers $770 million. But he said there’s no avoiding double-digit rate hikes amid climate change and inflation. Otherwise, he said, insurance companies will pull out of North Carolina.

Causey said insurance companies are paying more on homeowners’ policies than they are receiving in premiums. “It’s a problem,” he said. “It’s not a sustainable model.”

The reality is not so bleak. Many companies did experience losses in years leading up to the rate hike request, but a portion of those losses reflected high inflation that has subsided. Some major insurers reported record profits in 2024.

The problem for insurance companies and homeowners is climate change. Insurance is based on past patterns, but as hurricanes, flooding and wildfires become more frequent, insurers expect an increase in future claims and their rates reflect that.

Joel Laucher, who advocates for consumers at United Policyholders, a California-based nonprofit, said climate change has scrambled the predictability of major losses for insurance companies.

Laucher, a former chief deputy commissioner for the California Department of Insurance, said the way to curb a relentless rise in insurance rates is to increase the resilience of structures and bar new development in areas at high risk from hurricanes, flooding and wildfires.

The losses from wildfires like those in Los Angeles, he noted, could be reduced by changes as simple as outfitting homes with vents that block the entrance of embers and eliminating wooden fences between homes.

“I do think rates are going to increase. The thing we can do is have an impact on future losses by doing more to mitigate our exposure,” he said. “Building codes are going to have to change.”

Unfortunately, North Carolina is going in the opposite direction. The Republican-controlled General Assembly, under pressure from the home building industry, has for years delayed updates to the state building codes and in some instances weakened the standards.

Those actions make it cheaper to build houses, but increase damage from floods and high winds and ultimately drive up insurance rates.

Causey, a Republican, is critical of the legislature’s approach. He said Alabama, for instance, has imposed broad requirements for fortified roofs that have resulted in lower insurance premiums.

“If we had tougher building codes, especially in the coastal counties, that would go a long way to holding down the rise in homeowners insurance,” he said.

Meanwhile, few homeowners have flood insurance despite the rising risk. Causey estimates that 98% of homes in flood-prone areas are not insured against flood damage.

Homeowners can and should complain about rising insurance rates, but they can also insist that the legislature stop serving home builders and start serving homeowners.

In the face of climate change, stronger building codes, broader insurance coverage and limits on development in vulnerable areas are the best ways to slow or even roll back runaway rate hikes.