New study says typical NC homeowner will pay $243 more for insurance per year. True?

Chantal Allam, The News & Observer (Raleigh)News & Observer

New homeowners’ insurance rates kicked in across North Carolina this month, raising the average statewide base rate by about 15% over the next two years.

In published reports, Guardian Service, a Raleigh-based insurance provider, estimates the average homeowner will pay $243 more in the first year alone.

But experts and local officials say it’s not so clear cut.

Without more data cited in the report, “we cannot confirm the figure,” said Barry Smith, a spokesman for the state’s Department of Insurance (DOI). While the average base rate, or what insurers can charge customers, will increase for new or renewed policies, it will vary greatly across the state, he said.

“The highest will be 16% in some beach areas. The lowest will be zero in some mountain counties,” he said.

The rate hikes are part of a two-year settlement recently negotiated by Insurance Commissioner Mike Causey and the N.C. Rate Bureau, which represents some 100 companies in the state.

The Rate Bureau had requested an average 42.2% increase. Rising construction and labor costs, weather-related losses, and the state of the reinsurance market — the insurance that covers insurance companies — are making it harder for them to operate in the state, they argued.

But Causey rejected the request, triggering months of closed-door negotiations, a public hearing and eventual deal. “We consider this settlement a big win for both homeowners and North Carolina,” he said in a statement.

So exactly how much more will you end up paying?

It depends, experts say.

What are NC’s new homeowners’ insurance rates?

The increases are based on past payouts and future claims projections and vary greatly. DOI has released a table of the changes by territory.

In Durham and Wake counties, rates will increase by an average of 7.5% in each of the next two years.

Orange County’s average increases will be significantly lower: 3.4% in 2025 followed by an additional 3.2% in 2026.

For homeowners in Mecklenburg County, rates will increase by 9.3% in 2025, followed by an additional 9.2% in 2026.

Generally, the settlement’s highest increases will come in places that were hit hard by Hurricane Matthew in 2016 and Hurricane Florence in 2018.

Those include:

Consumers can expect rates to increase “depending on what you’re paying now,” said Brenda Wells, professor of risk and insurance at East Carolina University.

Her tip: Apply the percentage change in DOI’s table to your current premium. “That should give a fairly good estimate of what to expect,” she said.

Will every policy holder in the state see the increases in their premiums?

No. Premiums don’t automatically increase by the percentage of the finalized approved rate. That depends on the insurer’s assessed risk, said Jarred Chappell, the Rate Bureau’s chief operating officer.

That’s an individualized process, he said. Insurance companies use a “variety of deviations” to accurately price policies, he added.

“The base rate limits what carriers can charge, but the actual premiums are set on a policy-by-policy basis,” said Chappell. Changes may not affect those who are “already priced accurately.”

What about the state’s consent-to-rate threshold?

Under state law, companies writing homeowners’ insurance have the option to use “consent-to-rate” to set premiums. That allows insurers to charge as much as two and a half times above the regulatory cap.

The options remains in place as new rates go into effect, said the DOI.

How can homeowners be better prepared?

If you’re concerned about your insurance premium, the DOI offers these suggestions:

NC Reality Check is an N&O series holding those in power accountable and shining a light on public issues that affect the Triangle or North Carolina. Have a suggestion for a future story? Email realitycheck@newsobserver.com

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