Owning a home in NC could get pricier with proposed 42.2% rate hike. What to know. [The News & Observer (Raleigh)]

If insurance companies could have their way, owners of homes across North Carolina would see their insurance premiums jump by more than 40% later this year.

The N.C. Rate Bureau, which represents companies that write insurance policies in the state, this month requested an average 42.2% hike in homeowners’ insurance across the state. It’s seeking even steeper spikes for storm-prone areas along the coast.

Three years since the last rate increase — in November 2020 when the Rate Bureau asked for an overall rise of 24.5% and ultimately received 7.9% — insurers say it’s time to renegotiate. Rising construction and labor costs, weather-related losses, and the state of the reinsurance market are making it harder for them to operate in the state, they argue.

Because of mounting risks, one of the nation’s largest insurers, Nationwide, pulled out from part of the state entirely, not renewing some 10,000 insurance policies in Eastern North Carolina.

“Insurance carriers’ costs have gone up drastically since the last homeowners filing [in November 2020],” said Jarred Chappell, the Rate Bureau’s chief operating officer, in an email. After a moratorium on filings lifted in 2024, the filing was “necessary.”

What’s inside the Rate Bureau’s latest filing? And what could it mean for homeowners?

Here’s what you should know:

What’s the Rate Bureau asking for with its latest filing?

The Rate Bureau submitted a rate filing to the North Carolina Department of Insurance on Jan. 3, asking for an average statewide increase in homeowners’ insurance rates of 42.2%.

Across the Triangle, it’s slightly less. In Durham and Wake counties, it’s asking for a 39.8% increase. In Chatham and Orange counties, it’s requesting 25.1%.

Meanwhile, coastal regions — like Brunswick, Carteret, New Hanover, Onslow and Pender counties — could face the steepest increases. The Rate Bureau wants to nearly double the cost of premiums in those counties — a 99.4% jump.

The lowest — 4.3% — is proposed for Haywood, Madison, Swain and Transylvania counties, all in the mountains west of Charlotte.

The Rate Bureau has asked the rates to be become effective Aug. 1.

For a full list of the Rate Bureau’s proposed rate increases, go here.

As it evaluates risk, Nationwide won’t renew 10,000 insurance policies in Eastern NC

Why is the Rate Bureau proposing increases at his time?

Jarred Chappell, the Rate Bureau’s chief operating officer, said the request for revised rates comes amid a “worsening” economic landscape for insurance markets.

In particular, the cost of reinsurance — the insurance that covers insurance companies — has skyrocketed, he said.

Risk analysis firm Guy Carpenter recently reported that reinsurance rates on property in the United States increased between 10% and 30% for loss-impacted residents in 2023.

Climate change and the increased risk for “catastrophic losses” it causes in coastal areas is largely to blame, Chappell said.

Increased wind and hail losses from storms like 2016’s Hurricane Matthew and 2018’s Hurricane Florence prompted the Rate Bureau’s request for 24.5% in 2020.

Inflation and the rising costs of materials and labor are aggravating the situation. “It’s putting a greater strain on the cost of getting the actual repair work done,” he said.

Rate filings use historical data to develop a “fair and adequate rate” for homeowners’ insurance, he said.

There have been three changes to homeowners’ rates since 2014:

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

No. The Rate Bureau is requesting a change to the base rate, which must be approved by the state’s commissioner of insurance, Mike Causey.

That does not mean that rate trickles down to every policy holder in the state.

Chappell said insurance companies use a “variety of deviations” to accurately price homeowners’ policies based on their individual risk.

“Changing the base rate, as we have requested, may not have a direct impact on some policy holders who are already priced accurately,” he said.

What happens next?

The Department of Insurance can either agree with the requested rates as filed or negotiate a settlement with the Rate Bureau on a lower rate.

By statute, the commissioner has 50 days to respond to the filing either by accepting it as filed or by requesting a formal rate hearing to discuss the request further.

To date, Chappell said, the Rate Bureau has not received a response from the commissioner.

Does the public get a say?

Yes. A public comment period is required by law to give the public time to address the proposed rate increase. There are four ways to provide comments:

All public comments will be shared with the North Carolina Rate Bureau. If a settlement cannot be reached within 50 days, the commissioner will call for a hearing.

How can homeowners be better prepared?

Brenda Wells-Dietel, professor of risk and insurance at East Carolina University, said homeowners need to adjust their expectations.

“The days of low deductibles — like 1% for wind [damage], for instance — are over for the foreseeable future,” she said.

To keep premiums down, homeowners should consider a higher deductible.

In general, insurance is meant to be used for large losses that would create a financial burden, not as a mechanism for minor repairs.

“Take the highest deductible you can afford,” she said. “For me, 5% of my home’s value is more than I’m comfortable with, but I could definitely consider going from 1% to 2%.”

Homeowners should also “shop around” for a reputable insurance agency with the best prices.

“The last thing you want after a loss is to find out you have inferior insurance protection,” she said. “If the price sounds too good to be true, it probably is.”

Are you one of 1 million North Carolina homeowners paying extra for insurance?

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