June 15--Auto insurance rates paid by North Carolina consumers will rise an average of 2.2 percent later this year, the first rate hike in more than a decade but far less than the double-digit increase sought by insurance companies.
Insurance Commissioner Mike Causey announced Thursday that his office reached a settlement with the N.C. Rate Bureau, which in February had requested a 13.8 percent rate hike for the industry. The Rate Bureau represents all insurers doing business in the state.
As part of the settlement, the Rate Bureau has agreed not to request a rate hike next year.
According to the Department of Insurance the lower rate hike will save the state's consumers $1 billion over two years.
"It is unfortunate rates have to increase at all," Causey, a Republican who was elected in November, said in a prepared statement. "But accidents from distracted driving are up, there are more people on the road because of lower gas prices, and higher medical and automobile repair costs are forcing auto rate increases all across the country."
Auto insurance rates last rose in North Carolina in 2001 and 2002, but those hikes were erased by a rate decrease in 2003.
Settlement negotiations commenced after the Department of Insurance rejected the the industry's rate hike in March -- following a pattern that prevailed under the two previous insurance commissioners, Wayne Goodwin and Jim Long, both Democrats.
The rate hike for auto insurance policies takes effect Oct. 1. It's not, however, a good gauge of how individual policies might be affected.
The rate increase affects the maximum amount companies can charge, with the 2.2 percent increase applying to motorists who have full coverage -- both liability and coverage for physical damage. The increase also is an average that varies by geography.
Auto insurance premiums also can be impacted by the elimination of discounts that policyholders have received in the past or the availability of new discounts.
Causey said that North Carolina currently has the seventh lowest auto premiums in the country.
Ray Evans, general manager of the Rate Bureau, said insurers continue to believe that their original rate hike request was justified but decided that settling was the smart move.
Factors in that decision include the lengthy process of appealing the Insurance Department's rejection of its request and the fact that the N.C. Reinsurance Facility, created by the state in 1973, offers "a safety valve" for providing policies to a driver that an insurer feels that it can't afford to insure.
Insurers can shift liability coverage for drivers who are inexperienced or who have had points assessed against their licenses to the Reinsurance Facility, which doesn't face the same restrictions on rates. Insurers also can shift other drivers because they see them as higher-risk, or for any other reason at their discretion.
David Ranii: 919-829-4877, @dranii
(c)2017 The News & Observer (Raleigh, N.C.)
Visit The News & Observer (Raleigh, N.C.) at www.newsobserver.com
Distributed by Tribune Content Agency, LLC.