North Carolina’s automobile insurance rates are among the country’s lowest, but a special pool covering motorists for hundreds of thousands of vehicles doesn’t work very well, industry officials told lawmakers recently.
A General Assembly panel met to consider changing the way the state handles car insurance rates.
“Is the regulatory system we have in place the best system that we can have?” asked Senate Majority Leader Tony Rand, D-Cumberland, co-chairman of the Joint Study Committee on Automobile Insurance Modernization, which will make recommendations in May.
Several legislators wanted more information why a high percentage of motorists with clean records are being placed in a high-risk pool called the North Carolina Reinsurance Facility, where premiums are much higher and insurance companies share the risk.
A quarter of the state’s cars are insured through the facility. Nearly 70 percent have been sent there even though they don’t have records. Each insurance company has its own method of deciding who goes to the facility.
These so-called “clean risk” drivers are charged an amount equal to the maximum rates in the traditional insurance market. But those premiums are inadequate to pay the costs of those motorists by $139 million, according to the facility. Drivers who aren’t in the pool pay a surcharge to make up the difference. That surcharges was reduced last year from 9.8 percent to 2.8 percent.
Insurance Commissioner Jim Long suggested that “clean risk” drivers in the pool pay even higher rates to reflect their true potential risk. In exchange, Long said, the surcharge on others would be eliminated.
Long said the state should lower incentives that insurers and agents receive for sending an insured to the pool, which can reach 40 percent of a premium.
Joe Stewart, executive director of the Insurance Federation of North Carolina, representing 14 of the largest insurers in the state, welcomed Long’s surcharge elimination proposal.
Long defended the rest of the current system, pointing out that the average premium of about $600 is ranked in the top 10 of states with the lowest rates. The system is “the envy of many drivers in other states,” he said. “Many, many companies are writing auto insurance in North Carolina and more are coming in every year.”
Topics North Carolina
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